Introduction To Project Controls

PROJECT CONTROLS DEVELOPMENT PROGRAM

MODULE 1 - INTRODUCTION TO PROJECT CONTROLS

PCDP Module 1 - Introduction to Project Controls. Rev 0

This document has been prepared for the exclusive use of WorleyParsons. Copying this document without the permission of WorleyParsons is not permitted.

MODULE 1 - INTRODUCTION TO PROJECT CONTROLS Rev Description Originator Review Approved Date

0 Released for Global Implementation Humphrey Kerger

Project Controls R5 Management Team

Project Controls R5 Management Team)

Mar 2011

SPECIAL ACKNOWLEDGMENTS & THANKS:

The Project Controls R5 management team would like to thank the following persons for their continuous support and contribution to the development of this training module

Ahmed Hammad, Tony Isaac, Mark Deverell, Abkar Bannayan, James Lee, Suwit Suriyo, John Armstrong and Walt Falgout.


Module Content 1.0 Project Controls Development Program 6

1.1 Introduction to the PCDP. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

1.2 Project Controls modular training program. . . . . . . . . . . . . . . . . . . . . . . . . . 6

1.3 PCDP Competency Assessment survey. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

1.4 Coaching program. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 10

1.5 Staff Rotation program. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . 11

1.6 Project Management modular training program. . . . . . . . . . . . . . . . . . . . . . . 12

1.7 EMS/WPMP training videos. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . 12

1.8 Estimating modular training program. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

1.9 External training programs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

2.0 Introduction to WPMP / EMS 13 2.1 WPMP. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

2.2 EMS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 17

3.0 Preamble: Objectives & Assumptions 19 3.1 Methods, Philosophies & Procedures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

3.2 Project and Contract formats. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

4.0 Project Breakdown Structures 22 4.1 Major Values . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

4.2 Analysis.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

4.3 Project life-cycle.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

4.4 Coding Structures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

4.5 Project Breakdown concepts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . 25

4.6 Segregated CBS/WBS concept. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

4.7 Integrated CBS/WBS concept. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

4.8 Managing EPCM contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

4.9 Control Accounts and Cost Centres. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

4.10 Contract Administration and Cost Control. . . . . . . . . . . . . . . . . . . . . . . . . .. 33

5.0 Enterprise Coding Structures 35 5.1 Enterprise Codes and Attributes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

5.2 Attribute Codes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

6.0 Project Initiaton 41 6.1 Baselines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

6.2 Tool selection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ……………….. 41

INTRODUCTION TO PROJECT CONTROLS


7.3 Project Baseline - Control schedule.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

7.4 Project Baseline - Engineering.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52

7.5 Control schedule - Procurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

7.6 Control schedule - Construction.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

7.7 Control schedule - Commissioning.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56

8.0 Schedule Control 57 8.1 Schedule Analysis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

8.2 Schedule reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56

9.0 Progress Measurement 57 9.1 Engineering - Incremental Milestones method. . . . . . . . . . . . . . . . . . . . . . . .. 63

9.2 Procurement - Incremental Milestones method. . . . . . . . . . . . . . . . . . . . . . . . 65

9.3 Construction - Variety of methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68

9.4 Commissioning - Incremental Milestones method . . . . . . . . . . . . . . . . . . . . . . 74

9.5 Earned Value for variable budgets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75

9.6 EPCM: Consolidated progress. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81

9.7 “House with the golden doors” scenario. . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 82

10.0 Cost Control 84 10.1 Engineering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85

10.2 Procurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . 86

10.3 Construction & Commissioning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87

10.4 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88

10.5 Contingencies & Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90

11.0 Management of Project Change 92 11.1 Levels of change. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92

11.2 Prime contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92

11.3 Prime contracts: E & EPCM Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93

11.4 Prime contracts: Management & Support . . . . . . . . . . . . . . . . . . . . . . . . . . . 94

11.5 Prime contracts: Procurement & Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . 95

11.6 Prime contracts:Construction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95

11.7 Prime contracts: Seeking approvals: PVNs and PCRs . . . . . . . . . . . . . . . . . 96

11.8 Client commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97

11.9 Variances: budget and forecast impact . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98

7.2 Execute Phase.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . 46

7.1 Evaluate / Define Phase (FEED schedules). . . . . . . . . . . . . . . . . . . . . . . . . . . 44 7.0 Schedule Development 44


12.0 Cost and Schedule Performance 103 12.1 Self performing contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103

12.2 EPCM contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103

12.3 Performance indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104

12.4 Variance analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104

12.5 Forecasts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106

13.0 Project Reporting 107 14.0 Document Management & Control 109

14.1 Document Control.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109

14.2 Electronic Document/Data Management.. . . . . . . . . . . . . . . . . . . . . . . . . . . 109

14.3 Document Management Plan.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110

14.4 Distribution Matrices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110

14.5 Quality Audits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110

15.0 Capital Cost Estimating 111 15.1 Methodologies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111

15.2 Estimate build up. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112

15.3 What is Known? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112

15.4 What Experience tells us?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112 15.5 What is Unknown. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113

15.6 Estimating classes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113

15.7 Class 1 estimates: Order of Magnitude. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114

15.8 Class 2 estimates: Screening. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114

15.9 Class 3 estimates: Control. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115

15.10 Class 4 estimates: Definitive. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115

15.11 Accuracy ranges. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116

15.12 AACEI Estimating Classes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117

16.0 Cost and Schedule Risk Analysis 118 16.1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118

16.2 Cost Risk analysis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118

16.3 Schedule Risk analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121

1.1 INTRODUCTION TO THE PCDP

Whether you’re just beginning a new career, or you’re a sea-soned professional, accepting a position in any WorleyPar-sons Project Controls depart-ment across the globe means you’re making a commitment to an ongoing learning process.

Over the last 20 years, the industry has developed a gen-eral trend in the Project Man-agement / Controls workforce which has resulted in a peak age group in the mid 50s’ with the next largest in the mid 20’s.

This trend was, and still is, a major concern to the Worley-Parsons Project Controls com-munities, as without sufficient development of our younger resources, many of our offices are going to experience a knowledge - gap in the near future.

In addition to the potential skills and knowledge gap trend, most of our customers will have more stringent require-ments and higher expectations of increasing the local content (skills & knowledge) on their projects.

So where does our next gen-eration of local Project Control-lers come from?

Project Controls is a relatively young discipline that has been influenced by the use of tech-nology, creating a risk that system-skills (for instance Pri-mavera) is becoming more of an entrance pre-requisite to Project Controls rather than project delivery background.

Today, it is common to see a mix of young system literate people team-up with older, more experienced but less

computer literate personnel.

In order to accelerate the transfer of knowledge & main-tain the commonality of Tools & Methods within the group amidst staff-growth and staff-turnover, WorleyParsons has developed a program called the PCDP (Project Controls Development Program).

The PCDP is a continuous development program, tailored for our business and using our language. It consists of :

• Annual competency assess-ment, to ’baseline’ the indi-vidual skills, knowledge & experience gaps;

• individual competency im-provement targets based on the Gap analysis;

• a Development Program that can be customized to indi-vidual needs.

Generally, there are three op-tions to choose from when it comes to closing skills, knowl-edge and/or experience gaps:

1. Hands-on experience

2. Internal training

3. External training

Since external courses run by consultants often fail to meet the specific WorleyParsons requirements, WorleyParsons

opted for a combination of the following competency develop-ment tools:

1. a comprehensive coaching program;

2. a variety of modular in-house developed and selected exter-nal training programs, ad-dressing every aspect of Pro-ject Delivery;

3. Staff Rotation Plan to close experience gaps.

The flowchart on the next page will outline the Overall PCDP concept.

1.2 PROJECT CONTROLS MODULAR TRAINING PROGRAM

The Project Controls training modules are designed to provide the participants with an overall introduction to the skills & knowl-edge required by Project Control-lers when executing EPCM / PMC projects. All courses are written and delivered by Worley-Parsons personnel.

To compete in a global environ-ment, WorleyParsons needs Project Controls professionals who are equipped with the full range of Project Controls skills and knowledge, armed with a solid base of good ethical values, who have been trained to think, to question, and who are able to “learn, unlearn and re-learn” - all in the language which is un-derstood by the rest of the world.

As the external resource market-place and education system mainly produces ’one-dimensional’ Project Controls professionals (e.g. specialists in either Planning, Costing or Esti-mating), the prime focus of the PCDP will be on the develop-ment of a workforce with all-round Project Controls capability

1.0 PCDP - PROJECT CONTROLS DEVELOPMENT PROGRAM


1 2 3 4 5 INDUCTION ASSESSMENT ANALYSIS DEVELOPMENT TOOLS

• PCDP MODULE 1: “INTRODUCTION TO PROJECT CONTROLS”

• ANNUAL INDIVIDUAL COMPETENCY ASSESSMENT SURVEY

• INDIVIDUAL COMPETENCY GAP ANALYSIS

• DETERMINE COMPETENCY DEVELOPMENT TARGETS (KPI’s) — WHAT NEEDS TO BE DONE ?—

• • CUSTOMIZED INDIVIDUAL COMPETENCY DEVELOPMENT PROGRAM FOR THE COMING YEAR — HOW TO ACHIEVE THE DEVELOP-MENT TARGETS ?—

IDENTIFY & SELECT (AND / OR):

1. APPROPRIATE TRAINING PROGRAM / MODULE

2. SPECIFIC HANDS-ON EXPERIENCE / EXPOSURE (OPPORTUNITIES)

3. COACHING PROGRAM

4. EXTERNAL TRAINING PROGRAMS

TRAINING PROGRAMS

• EMS / WPMP VIDEO TRAINING

• PROJECT CONTROLS MODULAR TRAINING PROGRAM

• PROJECT MANAGEMENT MODULAR TRAINING PROGRAM

• ESTIMATING MODULAR TRAINING PROGRAM

• SELECTED EXTERNAL TRAINING PROGRAM

EXPERIENCE / EXPOSURE

• STAFF ROTATION PROGRAM

COACHING

• PCDP COACHING PROGRAM

HIGH LEVEL INTRODUCTION TO WORLEYPARSONS METHODS, SYSTEMS & PROCEDURES MANDATED INDUCTION FOR ALL NEW AND CURRENT WP PROJECT CONTROLS STAFF.

MANDATED FOR ALL PROJECT CONTROLS STAFF

IEMBEDDED IN THE ANNUAL APPRAISALS PROCESS. MANDATED PROCESS FOR ALL PC STAFF AND THEIR LINE—SUPERVISORS

SELECTION OF APPROPRIATE PRO-GRAM IS A JOINT EFFORT BY THE PROJECT CONTROLLERS AND THEIR LINE SUPERVISOR

AVAILABLE PROGRAMS TO SUPPORT CAPABILITY DEVELOPMENT TARGETS

ANNUAL APPRAISALS

FLOWDIAGRAM - PROJECT CONTROLS DEVELOPMENT PROGRAM

The first module is a general introduction to the WorleyPar-sons philosophies and method-ologies.

Completion of this Module is compulsory for all Project Controls staff, regardless of their experience and skills & knowledge level.

For new recruits, completing the Introduction Module is part of the Induction process, to-gether with the Competency Assessment Survey.

The Introduction Module is followed by 7 specialized mod-ules.

These specialist modules are designed and structured fol-lowing the same concept:

1) Each training module should provide the partici-pant with hands-on skills and knowledge for that specialized topic.

2) All modules will have the same “project theme”, so at completion of the program, the participant has covered the full range of services that are expected from a WorleyParsons Project Controls professional on one complete project.

3) The output of one module, and the deliverables gener-ated through the exercises, are to be used as input and/or reference data for the following module(s).

4) Every module consists of a manual (“back-of-fag-pack” principle) and a systems part, where the manual exercises will be repeated using the WorleyParsons preferred tool-kit.

Below is an overview of the Project Controls Training Mod-ules:

“Hard work never kills

anybody who supervises

it” ~/~

Harry Bauer


Module 1 Introduction to

Project Controls

Module 2 EPC Schedule Development

Module 3 Services

Management

Module 4 Commercial Performance

Module 5 Introduction to

TIC Cost Estimating

Module 6 TIC Management

Module 7 Schedule Risk

Analysis

Module 8 Cost Risk Analysis

1.3 PCDP COMPETENCY ASSESSMENT

SURVEY

PCDP participants are ex-pected to continuously monitor and analyse their WorleyPar-sons work experience, in terms of competency elements.

The basis for this will be the WorleyParsons Competency Assessment Survey, which every new recruit is required to complete as part of their induc-tion.

This Competency Survey (which is in essence a SWOT analysis) is the basis for moni-toring the development and progress of all Project Controls Staff.

The letters stand for Strengths; Weaknesses; Opportunities & Threats.

SWOT Analysis

The SWOT analysis template presents the 4 major catego-ries of competencies:

Qualifications / Experience (self assessment)

Technical Skills (self as-sessment)

Systems & Software Skills (self assessment)

Personal / Work scope Management & Organiza-tional Capability/Teamwork (supervisor’s assessment)

The theory of the SWOT is that Strengths & Weaknesses are internal and Opportunities & Threats are external, although the suggestion is not to be too restricted by this theory.

Similarly, items could appear in

more than one quadrant, e g. a person can consider “inexperience in EPCM sched-uling” as both a Weakness AND an Opportunity.

Competency Assessment

The participant’s competency score should be discussed with their supervisor to identify future experience and training needs.

The initial competency score (the first one) will not be taken into account during the annual appraisals; whether someone performs to their capabilities/competency level is a perform-ance assessment and not part the annual competency as-sessment.

However, achievement of fu-ture competency improvement targets will become a KPI (Key Performance Indicator) for the next year’s appraisal.

Annual Appraisal Interface

The development targets are set during the Performance Appraisals and should be a joint agreement of both staff and their line manager.

To ensure that the participants will be supported in achieving

their KPIs, they can be as-signed a personal coach.

Delivering on these KPIs will become a KPI for all parties involved in the Development Program.

By making both staff and their line manager responsible for achieving the competency targets, WorleyParsons closes the loop and insists all stake-holders take their commitments seriously … and not just … “something to be attended to, once one has a spare mo-ment”!

The PCDP Competency Sur-vey will be conducted for all Project Controls staff across WorleyParsons globally.

The Competency Survey Questionnaires were reviewed and approved by all Regional Managers of Project Controls / Project Services and are, therefore an accurate reflection of what is expected from a WorleyParsons Project Con-trols professional in terms of skills and knowledge.

The survey is conducted online around April, and can be ac-cessed via a dedicated link in the new Global Project Con-trols & Estimating Website via Link https://www.tba.com

“Rule number one is, don’t

sweat the small stuff.

Rule number two is, it’s all small stuff “

~/~ Robert Eliot


1.4 COACHING PROGRAM

Coaching is regarded as an essential feature of the Worley-Parsons Project Controls De-velopment Program.

The skills, knowledge and ex-perience that you have gained in your professional career are valuable not only to you but they are of great benefit to the growth of the department.

Coaching is a vital process in transferring this experience and knowledge to younger and/or new members of the Project Controls Department, and achieving the vision for WorleyParsons in promoting Project Controls excellence for everyone's benefit.

Coaching versus Mentoring

The PCDP coaching program is different from the WorleyPar-sons mentorship programs, and our employees may con-fuse the two programs.

In the WorleyParsons Mentor-ing program, the mentor acts as your counsellor, providing advice on career paths, devel-opment opportunities, and an overview of what it takes to become a leader in the com-pany. (in essence; a sounding board)

Typically, the mentor is a sen-ior manager, at least two levels above you in the organization.

The mentor must have broader experience in the company and the ability to place you into assignments that will help with your development.

The PCDP coach is more of a tutor, observing your work and actions, providing comments on execution, and teaching skills which may be lacking.

Coaches can come from many sources.

A coach can be a colleague, a manager, or an employee, and have to come from the same function or division in which you work.

It is critical in the coaching relationship for the coach to have opportunities to observe your work and for you to re-spect the coach and be open to feedback.

Mentoring must be viewed as long-term relationships -- a commitment of two years should be obtained before the relationship is established. Mentoring is biased in your favour.

Coaching, on the other hand, is impartial, focused on improve-ment of professional skills. A coaching relationship usually lasts only for the duration of the “gap-closure” period (quick hits).

Once the competency gaps are closed, new competency de-velopment targets will be set for the following year, and achieving these new targets could require a completely different skill-set (and coach).

In summary, the mentor pro-vides guidance and opportuni-ties for practice, while the coach observes and critiques the performance and provides you with an outside perspec-tive on your skills.

The PCDP Coaching Program hangs personal KPIs (Key Performance Indicators) of achievement of competency for both Coach and ‘student’.

Assigning these KPIs is not only done to give the partici-pants an incentive to deliver on their targets, it is also a com-mitment from their line-manager that they will support professional growth in their team.

Differences between Mentoring and Coaching

Component Mentor PCDP Coach

Driver Human Resource Group

Project Controls Group

Focus Career Path Performance / Com-petency development

Role Facilitator with no agenda

Tutor with specific agenda / Capability Targets

Relationship

Self selecting Assigned by Supervi-sor based on Compe-tency Assessment

Personal returns Career Opportunities & Development

Teamwork / Skills & Knowledge Develop-ment

Arena Life / Career Capability Improve-ment

“Inside every older person is a younger person

-- wondering what the hell happened.”

-/~ Cora Harvey Armstrong


1.5 STAFF ROTATION PROGRAM

The staff rotation program is a program designed to encour-age the temporary rotation /exchange of employees be-tween two WorleyParsons offices with the minimum of bureaucracy and cost.

It is a simple process which benefits the company and em-ployees alike, and can be con-sidered one of the tools for closing experience gaps for those employees who want an overseas assignment, but are not necessarily available to relocate on a long term basis.

How does it work?

Location Project Controls Man-ager identifies an experience / specific project exposure gap during the annual appraisals, and posts the candidate par-ticulars on the Global Project Controls & Estimating website.

There has to be a valid need for the exchange, such as clos-ing a skill or knowledge gap or it may be an opportunity for both specialists, as well as younger employees to obtain experience in other locations or overseas.

Each set of candidates will, ideally, be of a similar level in terms of experience and quali-fications.

It is envisaged that the Rota-tion/Exchange program will last a maximum of six months.

Each home office will pay the salary of its own employee.

Each home office will pay the round-trip airline ticket of its

own employee.

Each home office will pay ei-ther actual expenses or a per diem, of its own employee.

Each home office is responsi-ble for any income tax implica-tions for its own employee both from an individual and corpo-rate perspective.

Each home office will pay the visa costs incurred at that loca-tion for outgoing and/or incom-ing employee as appropriate.

Personal goals/Company ob-jectives to be pre-agreed, clearly defined and monitored.

Who is eligible?

In essence all Project Controls staff as long as the exchange

meets one of the following criteria:

1. Specialists with different skills/experience – to close a skills/knowledge gap;

2. Specialists with equal ex-perience - to obtain experi-ence in other locations/ overseas.

3. Younger employees – to obtain experience in other locations/overseas

How to participate?

Anyone interested to partici-pate in this program can apply via their line Managers during the annual appraisals

"If you really want something in life you have to work

for it. -

Now quiet, they're about to

announce the lottery numbers."

~/~ Homer Simpson


1.6 PM MODULAR TRAIN-ING PROGRAM

The Project Management train-ing program is an in-house developed entry level project management training (using 10 training modules) for personnel starting work in project man-agement at project engineer level.

The Program consists of 10 Modules:

The primary intent of this train-ing is to deliver basic training in the principles of project man-agement and explain the sys-tems and processes that WorleyParsons use to meet these principles.

The intended recipients are personnel who have enrolled to join the project management discipline and experienced project managers/engineers wanting a ‘refresh’.

It is possible that project con-trols personnel could benefit

from one or more of these modules.

These needs could be identi-fied when determining the Competency development targets during performance appraisals.

1.7 EMS/WPMP TRAINING VIDEOS

The WorleyParsons Project Controls community developed a series of 9 Induction training videos to familiarize new em-ployees with the Project Con-trols & Estimating specific con-tent of EMS / WPMP.

The following induction videos have been made available:

The training videos can be accessed via the Project Con-trols & Estimating website: www.tba.com

1.8 ESTIMATING MODULAR TRAINING PROGRAM

The Estimating Training pro-gram will have an Entry Level focus and is developed to:

• Align newly recruited experi-enced EPCm estimators;

• Train experienced construc-tion estimators in the field of EPCM estimating;

• Provide a structured EPCm estimating course for gradu-ates or new recruits.

The following 10 modules are currently developed by the Estimating community:

1.9 EXTERNAL TRAINING PROGRAMS

There are several external training courses related to Pro-ject Management & Controls. Each region has a short-list of WorleyParsons recognized external training-programs which can be used to comple-ment the existing in-house developed programs.

EMS/WPMP VIDEOS

01. Project Controls Executive Directive

02. Planning

03. Cost Management

04. Management of Project Change

05. General Project Controls Guideline

06. CTR Preparation

07. Progress Measurement

08. Contingency drawdown

09. Cost Estimation

PM TRAINING MODULES

01. Project Initiation & Scope Management

02. Project Controls & Com-mercial Management

03. Risk Management

04. Business Management Systems

05. HSE Management

06. Proposals

07. Project Quality

08. General Management & Leadership

09. Procurement & Material Control

10. Construction & Completions

ESTIMATORS TRAINING MODULES

01. Orientation

02. Introduction to Estimating

03. Estimating Components

04. Initiating an Estimate

05. Direct Cost Estimating

06. Indirect Cost Estimating

07. Owners Cost Estimating

08. Design Allowances

09. Contingency Risk Analysis

10. Review & Prepare Estimate basis


IDENTIFY EVALUATE DEFINE EXECUTE OPERATE

Determine project feasibility and align-ment with business

strategy.

Select the preferred Develop-ment Option(s) &

Execution Strategy.

Finalize scope, cost, schedule and get

project funded

Produce an operat-ing asset, consistent with scope, cost and

schedule

Start Up, operate asset to ensure per-formance specifica-

tions & return to shareholders

Key Deliverables

• Valuation Report

• Class 1 – Order of Magnitude Estimate (+ / - 50%)

• Development Plan

• Class 2 – Screen-ing Estimate (+ / - 30%)

• Business Pro-posal / Front End Engineering De-sign (FEED) Package

• Class 3 – Control Estimate (+ / - 15%)

• Level 2-3 EPC Schedule

• Functional Asset

• Class 4 – Defini-tive Estimate (+ / - 10%)

• Performance Assessment

Key Decision Approve Feasibility

Review Approve Develop-

ment Plan AFE approval

(Approved For Ex-penditure)

Operations Accep-tance

Value Enhance

1 4 3 2

2.1 WPMP

The Project Delivery process model is a process that will ensure that the value and risk is always known throughout the project life-cycle.

Most clients and contractors will have such a model and the principle, in most instances, will be identical.

The project life-cycle is usually divided into five phases.

Each phase is subdivided into detailed management process-steps/activities.

By having decision gates at the

end of each project phase, the project can be stopped, author-ized to proceed or re-cycled.

To ensure a consistent Project Delivery approach that is aligned with the various pro-ject life-cycle models utilized by our clients, WorleyParsons developed the WorleyParsons Project Management Process (WPMP) below.

The node points between each of the phases (commonly re-ferred to as gates), demarks the completion of a project-phase, and is aligned with the “Go / No-Go” decision-gates for progression into the next phase.

As the project progresses through the “phase-gates”, the level of definition in the project-scope increases.

WorleyParsons is primarily involved in the Evaluate (studies), Define (Feed), and Execute (EPC) phases. The Identify and Operate phases are typically managed by cli-ents.

WPMP aligns and interfaces with the project delivery sec-tions of WorleyParsons Enter-prise Management System (EMS) where all procedures, guidelines and forms are con-tained.

2.0 INTRODUCTION TO WPMP / EMS

“43.7 per cent of all

statistics are made up on

the spot” ~/~

Steven Wright


WPMP delivers useful guid-ance on project delivery best practise.

Once the phase and risk cate-gory is defined using a simple flow process (below), WPMP provides a list of mandatory

tasks and recommended tasks (see next page).

This helps the Project Team to quickly navigate though EMS using Task sheets and quickly identify and locate the specific Workflows, Procedures, Docu-ments, Guidelines and Tem-

plates associated with each Project Phase.

Once the task list has been selected, each task can be highlighted (see page 16) and hyperlinks take you to proce-dures, guidelines and forms in EMS.


“What you don't know

hurts you…”

~/~ David

Copperfield

2.2 EMS

EMS stands for Enterprise Management System and holds all our Procedures, Forms, Guidelines, Templates and Go-Bys, categorized in the Business Process Steps for each function.

EMS can be accessed via the WorleyParsons NOW page. (see screenshot)

By selecting the location and Project Controls in the func-tional group list on the left side of the page, the two options will appear; Planning and Cost.

By selecting one of the op-tions, the Project Controls EMS page for your chosen

option is retrieved.

Both Planning and Cost are divided in 5 process-steps. For Planning these steps are:

• Policy

• Planning

• Develop

• Schedule Control

• Planning Report

For Cost the steps are almost identical:

• Policy

• Planning

• Develop

• Cost Control

• Cost Report

The EMS page will list down all the Process-steps, the intent of each step, as well as the activi-ties and documents associated with these Process steps.

The search can be narrowed down by selecting the Work-flow, Document or Form tab on top of the page, and can be filtered by CSG (Hydrocarbons, Infrastructure & Environment, Power and Minerals & Metals)

An EMS webpage screen-shot is shown on the next page.

“If you can keep your head while all about you are

losing theirs, you haven't

understood the plan.”

~/~ Isaac Heyes

3 .0 PREAMBLE: OBJECTIVES & ASSUMPTIONS

The objectives of Project Con-trols is to provide accurate timely information to Project Management that will enable informed decisions and action to correct any possible adverse situations or trends, and to advise the Client of the true status of the project.

3.1 METHODS, PHILOSOPHIES & PROCEDURES

The methodologies & tech-niques described in this mod-ule facilitate a consistent and methodical information flow process across the project phases, and enables compila-tion of all project status report-ing / recordings in an agreed

format for:

• Development of CBS / WBS structure for the project

• Establishment of a Cost Con-trol budget from the estimate

• Expenditure and performance in relation to approved control budgets;

• EAC (Estimate At Comple-tion) and ETC (Estimate To Complete) forecasting in rela-tion to approved control budg-ets

• Change Control

• Development of the Baseline control schedule and progress control base

• Project Progress in relation to the agreed control sched-ule;

• Cost and schedule fore-casts

• Cash flow/Cash call man-agement in relation to fore-casted project expenditure.

All Schedule & Cost controls methods, philosophies and procedures described in this Introduction-module are cur-rently employed by Worley-Parsons and accepted as ’best practice’ methodologies for the Define and the Execute phases of the project and are fully supported by the suite of WorleyParsons preferred Pro-ject Management tools & sys-tems.

“Good control reveals

problems early - which only mean you'll

have longer to worry about

them.”

~/~ Author

Unknown


3.1 PROJECT & CONTRACT FORMATS

A project can be defined as an item of work that requires plan-ning, organizing, dedication of resources and expenditure of funds to produce a concept, a product or a facility.

A contract is a mutual business agreement recognized by law under which one party under-takes to do work (or provide service) for another party for a consideration.

A written contract is the docu-ment by which risk, obligations, and relationships of all parties are established.

For the client, the contract is the means by which the con-tractor can be controlled, and ensures that the work and end product meets their require-ments.

For the contractor, the contract specifies risks, liabilities, and performance criteria, and out-lines the terms and conditions of payment.

Throughout the training pro-gram references will be made to the following two contract categories:

• Prime Contracts

• Sub Contracts

Although the Contract and Project Management practices offer various, but similar defini-tions to explain the difference between these two contract categories, it is still used in many different ways by differ-ent people.

In relation to the PCDP training program WorleyParsons differ-

entiate Prime and Subcontracts as follows:

Prime Contracts A contract agreement between WorleyParsons and the client to do work, or to provide services.

WorleyParsons will invoice the client directly for provided ser-vices on its own ‘letterhead’ paper.

For the project controls function this means that cost, revenue and profit margin is managed and monitored against an inter-nal approved control budget and a client approved contract value.

The value of the contract (commitment) is the client’s cost to the project and Worley-Parsons revenue.

Sub Contracts

As the prime contract holder, WorleyParsons can commit part of the work scope to a special-ized third party contractor.

This contractor becomes then a sub contractor or sub consultant of WorleyParsons, and as such, will invoice the WorleyParsons directly for their services.

Unless special approval is re-quired, clients will usually not be party to this contract arrange-ment; as far as they are con-cerned the subcontracted scope of work is still WorleyParsons responsibility.

For the Project Controls function this means that the value of the committed subcontract will be part of WorleyParsons’ cost to the project. Internal cost and profit margin for this commitment is managed by the subcontractor, and is of no concern to WorleyParsons.

EPCM / PMC Contracts

Prime contract holders are awarded total responsibility for the execution of the workscope.

This includes cost, schedule, quality, project delivery risks & liabilities, as well as the com-mercial outcome of the pro-ject.

The project is fully executed by own resources and/or (partly) subcontracted under their responsibility. Therefore Prime contracts are often referred to as ‘self per-forming’ contracts.

Engineering & construction contracts can be drawn up in any number of formats, de-pending on the project objec-tives and drivers, contract strategy and the skills and resources of the client and /or the contractors.

The PCDP training modules have a strong focus on:

• Self performing Engineering and Procurement Services contracts

• PMC (Project Management Consultant) contracts

• EPCm (Engineering, Pro-curement, Construction & Completions management) contracts.

and to a lesser extent on Turn Key EPC contracts.

“A verbal contract is not

worth the paper it’s

printed on.”

~/~ Samual Goldwin

PMC

PMC Projects are executed under a three-part contractual relationship among:

1. The Client - who establishes the form of contract and general terms & conditions.

2. The Project Management consultant - acting as the client’s representative in administering the contract (s) and managing cost, schedule, design, procure-ment and construction & completions of the overall development.

3. The respective contractors, who responds to the risk and liabilities of the general con-tract

The usual contractual relation-ship amongst these 3 parties on a single project is for the client to have one contract with the Project Management Con-sultant (PMC), and separate contracts with the respective contractors.

In short, the PMC is managing the commitments on behalf of the client.

No contractual relationship exists between the PMC con-tractor and the other contrac-tors.

Unless agreed otherwise, the PMC contractor is not respon-sible or liable for the technical or commercial outcome of the project.

The approach of the PMC pro-ject controls function is there-fore different to that of a ‘self performing’ contract.

Cost and schedule perform-

ance is managed and monitored against a client owned TIC (Total Installed Cost) budget and a high level EPC schedule as opposed to the agreed Con-tract Value and detailed EPC execution schedule in self per-forming contract environments.

The budget for the PMC con-tract usually sits outside the TIC budget so management of this contract does not fall under the remit of the PMC team.

However, the contract arrange-ment between the client and the PMC contractor can contain risk and reward incentives for achieving the overall project goals, which means that all cri-teria for self performing con-tracts will be applicable to this contract.

For that reason, the commercial health of this contract will only be managed, controlled and reported internally, separately from the PMC scope of works.

Because the client has no direct benefit or interest in the com-mercial outcome of the PMC contract, the cost associated for controlling and managing the PMC contract itself is usually carried by WorleyParsons.

EPCM

Identical to PMC projects, with two differences:

1. In addition to the tasks de-scribed for PMCs, the EPCM contractor has fur-ther responsibilities; carry-ing out detailed engineering work as well as purchasing equipment and material on client’s behalf.

2. The budget for EPCM ser-vices is part of the project TIC.

This is a significant difference; it means that an EPCM ser-vices contract will be one of the commitments that needs to managed under the TIC budget on behalf of the client.

To avoid area’s of conflict and confusion, EPCM projects are usually executed with two distinct ‘line-ups’; one team looking after the EPCM Ser-vices contract (the self per-forming bit), the other team with a focus on the responsi-bilities associated with manag-ing the Overall EPC develop-ment and TIC budget on be-half of the client.


“If everything seems under

control, you’re just not going fast enough.”

~/~ Mario Andretti

“Ability is what will get you to the top if the boss has no daughter “

~/~ Author

Unknown

4.1 MAJOR VALUES

Good project controls require the effective integration of cost, schedule and technical infor-mation and the management systems that generate that information.

However, many management systems used on projects are not well integrated because they were developed inde-pendently of each other to satisfy specific needs.

For example, the accounting system can be designed pri-marily to keep track of ex-penses and payments, to meet payrolls, calculate taxes, etc.

Cost information is still in many cases related to organizational

and high level General Ledger accounts, the scheduling sys-tems’ focus is to support work planning and control (detailed project tasks), while technical management is mainly oriented to specifications, performance characteristics and technical goals (project deliverables).

Pulling cost, schedule and technical information together in a meaningful, coherent fash-ion is considered essential for effective project management and failing to do so will even-tually lead to fragmented pro-ject reporting and may mislead the manager by presenting a distorted view of the project status.

A combination of 6 major measures is needed for project

analysis and to determine how well the project is performing according to plan:

• Planned Values

• Earned Values

• Committed Values

• Cost Incurred

• Forecast Values

• Invoice/Payment Values

4.0 BREAKDOWN STRUCTURES

4.2 ANALYSIS

The system set-up must be structured in such a way that it can generate the required data to analyse project-performance in terms of:

Planned Achievement - What is planned?

Actual Achievement - What is done?

Expenditure - What is the cost incurred to achieve this?

Commitment - What’s the amount committed?

Budget Control - What are the forecasted under/overruns?

Cash flow / Call - What is the projects’ Cash flow position?



“It is not enough to do

your best; you must know

what to do, and then do your

best”.

~/~ W. Edwards

Deming

of WPMP.

The Define phase is a very im-portant phase, because this is the decision-gate for proceeding with the execution of the project.

The key deliverables of the de-fine phase are:

• The FEED package (technical definition of what needs to be done)

• The Class 3 Total Installed Cost (TIC) Estimate (cost of the execution stage)

• The level 2–3 EPC Schedule (what the project duration will be)

The class 3 estimate becomes the basis for the Control Budget.

The level 2-3 EPC schedule becomes the basis for the Detail Execution Schedule.

The project initiation process begins once the project passes this gate.

At this point we want to break the project into manageable units. We do this with coding.

The Project Controller must understand the use of each section of code structure, since this structure drives cost collec-tion, performance measurement and data interchange among several company systems.

4.3 PROJECT LIFECYCLE

The table below represents WorleyParsons’ Project Man-agement Process (WPMP).

Like most of our clients, Worley-Parsons has an “Opportunity and Project realisation” process model in place that ensures that the value and risk is always known throughout the project life-cycle.

Decision gates at the end of each phase allow us to proceed with, stop or recycle a project at each gate.

This PSDP training module focuses on the Phase 3 "Define" and Phase 4 "Execute" portions

IDENTIFY EVALUATE DEFINE EXECUTE OPERATE

Determine project feasibility and align-ment with business

strategy.

Select the preferred Develop-ment Option(s) &

Execution Strategy.

Finalize scope, cost, schedule and get

project funded

Produce an operat-ing asset, consistent with scope, cost and

schedule

Start Up, operate asset to ensure per-formance specifica-

tions & return to shareholders

Key Deliverables

• Valuation Report

• Class 1 – Order of Magnitude Estimate (+ / - 50%)

• Development Plan

• Class 2 – Screen-ing Estimate (+ / - 30%)

• Business Pro-posal / Front End Engineering De-sign (FEED) Package

• Class 3 – Control Estimate (+ / - 15%)

• Level 2-3 EPC Schedule

• Functional Asset

• Class 4 – Defini-tive Estimate (+ / - 10%)

• Performance Assessment

Key Decision Approve Feasibility

Review Approve Develop-

ment Plan AFE approval

(Approved For Ex-penditure)

Operations Accep-tance

Value Enhance

1 4 3 2


its market presence. In essence, the EPS breaks an organization down into CSG’s (Customer Sector Groups. EPS facilitates projects port-folio management and prioriti-zation, enterprise wide pro-ject and functional reporting, efficient management of resources’ requirements / assignments across projects and business units, etc.

• WBS (Work Breakdown Structure) The WBS is a deliverable-oriented hierarchical break-down of the project scope into smaller, easier managed components. With each descending level of the WBS, the definition of the project scope increases in detail. A WBS is project specific, therefore varies from project to project based on technical, schedule and costs risks and execution strategies. The WBS is typically accom-panied by a WBSD (dictionary).

• CBS (Cost Breakdown Structure) A “flat”, pre-defined, enter-prise wide dictionary of cost codes (also referred to as Codes of Account). The CBS is identical across all projects and business entities and in itself contains little valuable project perform-ance information, but when tag linked to elements in the project WBS, it forms a struc-ture that facilitates finding, sorting, compiling, summariz-ing, defining and manage-ment of the information the code is linked to.

Chapter 5.0 will address the principles of the Codes of

Accounts in more detail.

**Note: In project manage-ment practice the CBS is defined in two distinct ways:

One, already described above, and second, being a project specific code structure that breaks down the Control Budget into small manage-able components for cost management purposes. Although the latter is not the WorleyParsons preferred approach, this model can be encountered in some parts of the world. Section ‘4.6 - Seg-regated CBS/WBS’ concept will elaborate further on this CBS concept.

• OBS (Organizational Break-down Structure) A hierarchical arrangement of the company’s organization, also depicting reporting rela-tionships (in essence, the Company Org-chart).

• RBS (Resources Break-down Structure) Closely related to OBS, with one major difference that company’s personnel func-tionally assigned to OBS element, can and does per-form different role(s) on pro-jects (Project Org-chart).

• Client Codes List of pre-defined codes provided by the client to facili-tate cost and progress report-ing and analysis against Cli-ent specific breakdown struc-tures. Defined as any of the follow-ing, but not limited to: AFE (Approved For Expenditure), OAG (Operational Asset Grouping), Owner’s Cost Centre, Asset Management WBS (closely related to fixed and assets under construc-tion settlement rules), Work Order numbers, etc.

4.4 CODING STRUCTURES

Coding structures, in their hier-archical and dynamic index forms, are the foundation of all management systems.

Project delivery, financial and other corporate business sys-tems & tools exchange relevant data based on defined coding structures at any required level: from detailed execution levels, all the way up to the summary dashboards and executive re-porting.

In order to meet ever changing and increasing demand of our business, the code values con-tained in the various coding structures should satisfy several criteria, like being robust, intelli-gent, intuitive, uniform or ex-pandable.

Coding structures and codes also have additional attributes.

These attributes can be variable (i.e. code values that change from project to project), or can be fixed (i.e. pre-defined codes applicable to all projects, also referred to as ‘constants’).

The degree of adoption, align-ment and implementation of coding structures is a key factor in the organizations’ ability to successfully manage and de-liver projects in a consistent, reliable and fast, yet flexible and easy way.

The same applies for the or-ganizations’ functional lines of managing and reporting on all aspect of its business.

The most familiar coding struc-tures are listed below:

• EPS (Enterprise Project Structure) In a broader sense, the EPS is viewed as a reflection of company’s diversification and

“If I wanted you to

understand, I would have explained it

better”

~/~ Johan Cruyff


Subsequently, the Project ends up with two different breakdown structures, one for collecting cost and another for measuring progress.

Both WBS and CBS are not aligned because they serve a different purpose to different stakeholders, and they don’t correlate with each other at the adequate level for manage-ment, control and reporting purposes.

While this concept is not fa-voured by WorleyParsons, it still may take place due to a variety of reasons, such as:

• different project stakeholders having uncoordinated objec-tives;

• timing of both structures defi-nition may be different;

• there could be a lack of un-derstanding of differences between an asset driven WBS on one side (operating organizations) and execution strategy driven on the other side (project delivery oriented organizations).

An example of a scenario that can easily lead to a segregated CBS/WBS set-up is described below:

“ A Class 3 TIC estimate is gen-erated in the Define phase and taken up by the cost control function in the Execute phase.

The estimate components are rolled-up to a manageable level of detail and adopted as the Control Budget. Subsequently, cost will be col-lected and controlled against these CBS elements. Because the elements are rolled-up estimating line-items,

odds are that the cost baseline will be commodity-oriented.

On the other hand, the project planning function is tasked with the development of the project execution strategy and division of the project scope into smaller, activity based compo-nents. They will use a WBS as the tool, and the result will be the work packages and underlying activities logically connected to reflect the way the project pro-gress will be executed, moni-tored and reported. (activity based elements)”.

In such an environment, the scheduler monitors and expe-dites progress and completion of the detail project activities, while the cost engineer man-ages the project cost.

Interfaces between the two groups are usually minimal.

Pro’s

+ Easier to develop a break-down structure in isolation. Almost everyone is capable to develop a separate CBS and/or WBS when you only have to consider your own require-ments

4.5 PROJECT BREAKDOWN CONCEPTS

The previous four sections of this chapter defined the general framework related to the coding structures definitions, major values and required analyses considerations, as well as the gated approach to the project delivery through its lifecycle.

As mentioned in section 4.4, WorleyParsons preferred ap-proach for establishing break-down structures is the inte-grated WBS-CBS concept.

There are no straightforward “rights” or “wrongs” when it comes to breaking down pro-jects into manageable units for cost and progress management purposes; it really comes down to the collective experiences of the various stakeholders to de-termine what would make the most sense for the project at hand.

In general, Cost and Work breakdown structures can be developed following one of the two basic concepts:

• concept that returns separate Cost and Progress status info (Segregated CBS/WBS)

• Concept that returns inte-grated Cost & Progress status info (Integrated CBS/WBS)

The following sections will ad-dress some of the issues re-lated to the degree of synchro-nization between WBS and CBS coding structures:

4.6 SEGREGATED WBS/ CBS CONCEPT

In this approach, the WBS and CBS are developed independ-ent from each other. Both struc-tures are project specific.

Project Stage

Overall Project

Area / Facility

Cost Centre

Cost Centre

Area / Facility

Cost Centre

Cost Centre

Project Stage

Overall Project

Activity Detail

Project Stage

Area / Facility

Trade / Discipline

Activity Detail

Trade / Discipline

Area / Facility

Project Stage

Activity Detail

Activity Detail

Activity Detail


return data across projects for benchmarking or business intelligence reporting pur-poses

The following graphical repre-sentations illustrates how a segregated WBS-CBS coding structures could look like on projects:

+ Seamless flow of cost data from Estimate Breakdown into the CBS, and from there into Benchmark Database Code Structure

+ Relatively straight forward to develop a WBS when scope and execution strategy are defined

+ Clients are very familiar with this concept

Con’s

− No performance measure-ment possible, unable to compare cost and progress against the same breakdown elements

− Forecasts not based on per-formance-to-date results, and tend to be more of a guessing by involved project stake-holders

− Regular re-visit of the control budget by the estimator or quantity surveyor required to confirm the ETC (to-go) and EAC (at-completion) fore-casts.

− One-dimensional skill & knowledge development of project controls staff — you’re either a cost engineer or a planning engineer

− No ‘natural’ incentive for cost and planning to interact/interface

− Complex environment for implementing enterprise wide systems.

− Since both WBS and CBS are project specific, it will be difficult to collect consistent

CBS - COST BREAKDOWN STRUCTURE

WBS - WORK BREAKDOWN STRUCTURE

Cost Collection

Progress Collection

Roll up / drill down ability progress

Roll up / drill down ability Cost

Cost Management Function Scheduling/Planning Function

Overall Project

Control Account

Project Stage

Area / Facility

Trade / Discipline

Control Account

Trade / Discipline

Area / Facility

Project Stage

Control Account

Control Account

Control Account


4.7 INTEGRATED WBS/CBS CONCEPTS

The integrated WBS/CBS con-cept is gaining fast momentum in the Project Delivery commu-nity because of its ability to return credible cost and sched-ule forecasts based on perform-ance-to-date indicators for both expenditure and progress in parallel.

Integration of Cost and Work breakdown structures can be achieved via the following two methods:

• By having the Cost Break-down exist within the Work Breakdown Structure.

• By tag-linking ‘project-specific’ WBS elements to a ’fixed’ CBS (predefined, en-terprise wide dictionary of Codes of Accounts).

Integration via the WBS

To create an integrated WBS/CBS, the various team functions will have to work together to find a common structure that con-tains breakdown elements that would satisfy both cost and schedule requirements, taken all execution strategies and client/contract requirements into consideration.

The lowest level where cost and progress coincide is called the Control Account level:

The project performance base-lines are established in a way that allows full implementation of EVM (Earned Value Method-ology) according to the best and recommended practices in pro-ject management.

In essence, this means captur-ing, monitoring and control of cost & progress against the same elements at the lowest levels of breakdown structures, and the ability to roll-up and report on project cost and pro-gress (schedule) at any level of detail.

From the project controls pro-spective the Integrated WBS/CBS concept calls for involve-ment of personnel with a broader project management and integrated cost and plan-

ning skills.

This concept is also known as the “CTR” model is widely used for Asia, Middle East, Australia and some parts of Europe & Africa

Pro’s

+ Ability to capture and com-pare cost & progress against the same breakdown ele-ments (see page 28)

+ Ability to perform Project Per-formance Analysis (and man-agement).

+ Forecasts-to-go are based on Performance-to-date data & trends (defendable forecast as opposed to ‘best guess’)

+ Improved interface between Cost & Schedule groups. Concept requires Schedule and Cost engineers to work together to find a common structure that contains break-down elements that suit both cost and progress require-ments.

“He who smiles in a crisis has

found someone to

blame”

~/~

Author unknown.

Cost & Progress

Example integrated WBS - CBS

Roll up / drill down ability cost & progress (performance)

PC

DP

Module 1 - Introduction to P

roject Controls.

Rev 0

CODE CONTROL ACCOUNT CONTROL BUDGET

COST TO DATE

% COMPLETE

ESTIMATE TO COMPLETE

ESTIMATE AT COMPLETION

UNDER-/ OVERRUN

CONTRACT ‘A’

A-100 Site Survey $4,000 $5,750 100% $0 $5,750 $1,750 A-200 Prepare Site Design $4,500 $5,600 100% $0 $5,600 $1,100

A-300 Procurement Equipment/Materials $1,000 $750 100% $0 $750 -$250

A-400 Commissioning BTS $750 $0 0% $750 $750 $0

A-300 Transmission Connection $750 $0 0% $750 $750 $0

A-400 Integrate BTS $500 $0 0% $500 $500 $0

TOTAL CONTRACT "A" $11,500 $12,100 70.3% $2,000 $14,100 $2,600

CONTRACT ‘B’

B-100 Procurement Equipment/Materials $4,000 $5,250 100% $0 $5,250 $1,250

B-200 Equipment Installation $1,000 $1,250 80% $200 $1,450 $450

B-300 Antennae Installation $2,000 $1,800 80% $400 $2,200 $200

B-400 Installation Feeder Lines $4,000 $3,500 90% $400 $3,900 -$100

B-500 Testing Antennae Line System $1,500 $1,600 33% $1,000 $2,600 $1,100

B-600 Installation BTS Cabinet $1,000 $800 50% $500 $1,300 $300

TOTAL CONTRACT "B" $13,500 $14,200 81.5% $2,500 $16,700 $3,200

EPC MANAGENT & SUPPORT

O-100 Procurement Long Lead Items $15,000 $13,500 100% $0 $13,500 -$1,500

O-200 Produce Site Folder $1,000 $0 0% $1,000 $1,000 $0

O-300 Site Assessment $500 $0 0% $500 $500 $0

TOTAL MANAGEMENT & SUPPORT $16,500 $13,500 90.9% $1,500 $15,000 -$1,500

TOTAL $41,500 $39,800 85.5% $6,000 $45,800 $4,300

CONTINGENCY (15%) $6,225

CONTROL BUDGET $47,725 $39,800 85.5% $6,000 $45,800 -$1,925

EXAMPLE PERFORMANCE REPORT INTEGRATED CBS/WBS

parison, data collection, cross-WBS elements reporting as well as statistical & benchmarking analyses across multiple pro-jects via a ‘common denomina-tor’ (fixed CoAs).

As described in section 4.4, Project management practice defines Cost Breakdown Struc-tures in two distinct ways: one, the project specific budget breakdown (CBS = Project Con-trol Budget), and second, the enterprise-wide coding structure (CBS = pre-defined cost codes across the company ).

The latter is the basis for the WBS+ enterprise codes model.

With this approach, Control Account = WBS + CBS (+ At-tributes, as and if required).

The Project Management Insti-tute (PMI) defines Control Ac-counts as follows:

“a management control point where scope, budget (resource plans), actual cost and schedule are integrated and compared to earned value for performance measurement “ (PMI PMBoK 4th Edition).

While not directly included in the control account, other cod-

ing structures can be used as attributes or mapping codes.

When cross-referenced, all these matrices of EPS, WBS, OBS, CBS, RBS, etc., create a variety of control points enabling management and reporting by any selection criteria, level of detail, or angle, a project and/or business may require. (such as shown in the pyramid represen-tation).

The next page shows the princi-ple of the Integrated WBS-CBS concept using the examples of page 25 and 27.

The project specific WBS+CBS+ attributes method has all the benefits that comes with an integrated WBS/CBS model plus:

• It allows for the transfer of data between enterprise-wide systems and tools within WorleyParsons.

• it has the potential to collect consistent return data across projects for benchmarking or business intelligence report-ing purposes

Examples of both WBS/CBS integration models are shown on page 30 - 31.

+ Seamless roll-over Control Budget elements - Control Schedule activities

+ Creates a multi-dimensional skill level in the Project Con-trols Group. (Very effective way to gain an understanding of the complexities of each other’s tasks is to let a Cost Engineer develop and moni-tor a schedule and a Sched-ule Engineer manage a Con-trol Budget).

Con’s

− Many Clients are not familiar with this concept (see Segre-gated Concept) and mostly do need some encourage-ment before they fully com-prehend and accept this con-cept.

− The Contract Strategy needs to be firmed up before the CBS/WBS can be locked in.

− Developing an Integrated CBS/WBS breakdown struc-tures requires all-round EPC Cost and Schedule capability.

− Two-dimensional; slicing & dicing, sorting, filtering or summarizing of project data is restricted to the elements and levels of the WBS.

− Project specific, structure, therefore it will be difficult to collect consistent return data across projects for bench-marking or business intelli-gence reporting purposes

Project specific WBS + Pre-defined Enterprise codes.

This concept facilitates a tailor-made work scope breakdown for each individual project (through the variable WBS com-ponents), but still enables com-

“Few things are harder to put up with

than the annoyance of

a good example”

~/~

Mark Twain.


EPCM

DISCIPLINE

CTR / CONTROL ACCOUNT

PROCUREMENT SERVICES

AREA / SUB FACILITY

DISCIPLINE


DETAIL ENGINEERING

DISCIPLINE


EPC MANAGE-MENT & SUPPORT PROCUREMENT

PROCUREMENT PACKAGES

DISCIPLINE

LOGISTICS

DISCIPLINE

SERVICE CONTRACTS

PROCUREMENT & LOGISTICS

AREA / SUB FACILITY

DETAIL ENGINEERING

CONTROL ACCOUNT

DISCIPLINE

PROCUREMENT

DISCIPLINE


FABRICATION

CONSTRUCTION WORKPACKS

DISCIPLINE

INSTALLATION / ERECTION

DISCIPLINE


AREA / SUB FACILITY

FACILITY

DETAIL ENGINEERING

CONTROL ACCOUNT

DISCIPLINE

PROCUREMENT

DISCIPLINE


FABRICATION


DISCIPLINE

INSTALLATION / ERECTION

DISCIPLINE


AREA / SUB FACILITY

FACILITY

OVERAL PROJECT

CONTRACTORS’ DETAILED CBS/WBS LEVELS CONTRACTORS‘ DETAILED CBS/WBS LEVELS CONTRACTORS‘ DETAILED CBS/WBS LEVELS VENDORS‘ / SUPPLIERS’ DETAILED CBS/WBS LEVELS

EPCM CONTRACTOR

PROCUREMENT & LOGISTICS CONTRACTS

EPC CONTRACT

A

EPC CONTRACT

B

6

5

4

3

2

1

Example: CBS exists in WBS


WBS + CBS = Control Account

Leve

l 0

Leve

l 1

Leve

l 2

Leve

l 3

Leve

l 4

Civil

Buildings

EPCM Services

Insulation

Structural

Electrical

Equipment

Piping

Capital O/H

Contingency

Constr.Indirects

Pro

ject

WP2.1.1.1.1

WP2.1.1.2.1

WP2.1.1.3.1

WP2.1.1.4.1

WP2.1.1.5.1

Area 2.1.2

Area 2.1.1

Area 2.1.3

Unit 2.1

Unit 2.2

Unit 2.3

Unit 2.4

Pla

nt 1

P

lant

2

Pla

nt 3

Pro

ject

WBS : a hierarchical structure

CBS :

Pre-defined Enterprise-wide codes

Example Relational WBS+CBS


they see fit (don’t dictate how to execute their work), without handing them a ‘blank cheque’ as they still need to fit in the overall integrated WBS-CBS.

Another benefit is that cost & progress will flow in ‘bottom-up’, allowing roll-up through the breakdowns of the respective contracts into the control ac-counts.

This also provides more trans-parency and the ability to drill down to each individual contract and monitor performance for both the overall project as well as the individual contracts.

4.9 CONTROL ACCOUNTS AND COST CENTRES

Both Segregated and Integrated breakdown models are following the same hierarchical principles:

• project actuals are collected at the lower levels in the breakdown structure

• Ability to roll up/drill down along the breakdown levels to suit the required level of de-tail reporting.

Cost Centre - Unit of activity or area of responsibility against which costs are accumulated; defined sections in the corpo-rate system, representing units of responsibility as well as ac-counting units. (AACEI –RP 10S-90)

Cost Centres are not be con-fused with Control Accounts.

A Control Account is the break-down element in the project breakdown structure where cost

and progress elements coincide.

In the segregated WBS-CBS example on page 26, the lowest CBS elements can be consid-ered cost centres, while the con-trol account level is the ‘top of the pyramid’; the overall project level (WBS and CBS will not “meet” until rolled up to project level 1).

The examples for the integrated WBS-CBS models on page 30 and 31 shows that the cost cen-tres and control accounts are one and the same.

In the Integrated WBS-CBS con-cept, the control account is the backbone of the cost control and progress reporting system.

It is not uncommon, however, that cost and progress are cap-tured at a different, more de-tailed level, against different WBS or CBS elements.

In that event, the project data needs to be rolled up to control account level in order to feed into the integrated WBS-CBS.

In other words, there is flexibility to expand the integrated WBS-CBS structure below control account level to meet specific cost and planning requirements, as long as they can be summa-rized back at the control account levels.

A good example of this can be found in engineering scopes, where progress is usually cap-tured at the deliverable level, and cost is recorded at the higher level, i.e. by groups or types of deliverables.

4.8 MANAGING EPCM CONTRACTS

The role of the EPCm project controller is to manage cost and schedule for all commitments on behalf of the client.

Since the EPCm contract is just one of the many contracts, the project controller responsible for the overall EPC needs to take an umbrella-view, and treat the EPCM contractor ( WorleyPar-sons ) in the same manner as the other contracts awarded under the TIC budget

From an EPCM perspective, the level of control is usually the Control Account level..

Below Control Account level, each vendor / contractor is free to develop its own breakdown structure in as much detail as they desire, as long as it satis-fies the criteria of data roll-up to the EPC Control Account level.

The advantage of this approach is that the respective contrac-tors will maintain the flexibility to breakdown their work scope as

“Success always occurs in private, and failure in full

view”

~/~ Murphy's Law


4.10 CONTRACT ADMINI- STRATION AND COST CONTROL

In a ‘self-performing’ EPC envi-ronment, the Project Controller manages the overall project cost and schedule.

This includes both the ‘self-performing’ portion as well as the sub-contracted work scope.

Detail management of the sub-contracts (variation control, progress verification, invoicing & payment authorization etc) is usually the responsibility of the Contract Administration group, who feeds the cost and sched-

ule updates back to Cost Con-trol and Planning.

As mentioned before, in an EPCm environment the core-task of Project Controls is to manage commitments & con-tracts on behalf of the client.

This can cause some confu-sion between the Cost Control and Contract Administration groups; managing the Overall Project Cost & Schedule per-formance on an EPCm will be, in principle, the same as man-aging all the contracts and commitments!

One common way to address

this, is to combine the Contract Administrators’ role and the Cost Controllers’ role, and include a Project Controls rep-resentative in the EPCm site-team to verify the contractors cost-, schedule and progress claims as well as the validity of the Change Requests and site instructions.

There are various alternative scenarios possible, but the aim should always be to have a single-point accountability for cost and schedule manage-ment, and that there is no over-lap or ‘double-dip’ of tasks and responsibilities between the Contract Administration and Project Controls functions.

“ Project Management is

far too important to leave to the

Project Managers”

~/~ David Packard


Using the CTR method

A CTR (Cost, Time & Re-sources) is the lowest level in an integrated WBS/CBS where cost and progress coincide. Below CTR level, WBS and CBS can split into separate detailed levels e.g deliverables (WBS) or Expenditure catego-ries (CBS). Because it is a level of the WBS, CTRs are always project specific. To drive some consis-tency across projects, some companies impose the use of standard CTRs where possible.

In terms of return-data genera-tion, the CTR model is consid-ered “two-dimensional”; slicing & dicing, sorting, filtering or summarizing of project data is restricted to the elements and

levels of the WBS. The CTR model is widely used for Engineering scopes in Asia, Middle East, Australia and some parts of Europe & Africa.

Fig 5.1 illustrates the principle of the CTR concept

Using the WBS+CBS Method

With this method, control ac-counts are a combination of a WBS code and a CBS code.

The WBS code is unique to the project but the CBS must be selected from a company stan-dard list of Cost Codes.

Additional code attributes will add more detail to the Control Account. An example is shown below in Fig 5.2

There are almost as many dif-ferent Work Breakdown Struc-tures as there are projects.

This is not surprising, Work Breakdown Structures are tai-lored to the specific nature and reporting requirements of pro-jects while, at the same time, trying to comply with financial codes to meet accounting re-quirements.

Due to their unique characteris-tics, a project WBS can seldom be recycled in full for the next project.

All projects are the product of team endeavors in which the flow of project cost, resource, progress, and other information is essential to project success or failure.

Project Performance manage-ment is facilitated by measuring expenditure and progress against the same project break-down elements. As explained in the previous chapter, the Pro-ject Breakdown element where cost and progress coincide is called a Control Account.

Within WorleyParsons there are currently two commonly used methods for creating Control Accounts: the CTR Method and the WBS+CBS+attributes method.

5.0 ENTERPRISE CODING STRUCTURES

WBS Code WBS Level e.g

1-0-00-0-0-00 Project Project X

1-2-00-0-0-00 Project Stage Engineering

1-2-44-0-0-00 Area / Facility Central Processing Platform

1-2-44-1-0-00 Sub Area / Facility Cellar Deck

1-2.44-1-6-00 Discipline Piping

1-2-44-1-6-08 CTR Isometrics

Deliverable Register (Progress)

Time Cards - (Manhour Expenditure)

Fig. 5.1 Example CTR Concept

Fig. 5.2 Example WBS+CBS+Attributes Concept

Code WBS Level e.g

1-0-00-0 Project Project X

1-2-00-0 Phase Execute

1-2-44-0 Area / Facility CP Platform

1-2-44-1 Sub Area Cellar Deck

Code CBS Level

W000000 EPCM Services

W030000 Engineering

W030300 Piping

W030302 Piping Design

Code ADC Level

07.000 Design Documents

07.300 Drawings

07-311 Isometrics + +

WBS CBS Attribute (e.g Activity Detail Code)

Control Account


CBS+ Attributes).

However, for projects that are executed via work share across multiple entities, it is imperative to globally align methods, proce-dures, systems as well as the coding structures that support these methodologies.

In addition, there is a growing business demand to collect con-sistent return data for the pur-pose of benchmarking and busi-ness intelligence reporting.

The CTR model does not have the ability to accommodate all these enterprise-wide require-ments, because CTRs are an integrated part (level) of the project WBS, and it is a key-requirement for projects to keep the WBS project specific.

To achieve this by using the CTR method, it would either require the use of Standard Work Breakdown Structures, or introducing a list of standard

CTRs that would cater for every possible project environment. For a company that executes projects globally across all in-dustries, these were not viable options.

The WBS+CBS+Attributes model on the other hand, can potentially meet all the these requirements providing that the CBS and some of the key attrib-utes are globally adopted and consistently applied across all projects. The enterprise-codes will then act as a ’constant’ across projects. (see Fig 5.3)

The combination of a WBS code and global enterprise codes has the following advan-tages:

• It provides the project with a coding structure that meets the specific requirements of the project, i.e. size, com-plexity, execution strategy, control and reporting require-ments, etc.

The ‘relationship’ between the project specific WBS and pre-defined codes/attributes makes it possible to generate flexible, but consistent return-data for individual projects and across multiple projects. It is therefore also considered a multi-dimensional structure.

The WBS+CBS+Attributes model is very common in Can-ada, the US, Latin America and some parts of Europe.

Global Project Execution

Effective project cost and schedule performance reporting is heavily reliant on the coding structure that breaks down the project scope and budgets.

As long as projects are exe-cuted in a single location/entity, this can be achieved via either a project (or location) specific coding structure (CTR model) or via a combination of a flexible and pre-defined codes (WBS +

“The sooner you begin coding the later you finish.”

~/~ Author

Unknown

Control Account Attributes

Ability to Control... WBS

CBS EPS

OBS

RBS

CCS

Single project, single entity Multiple projects, single entity Single project, multiple entities Multiple projects, Multiple entities Statistics, Business Intelligence Global Benchmarking

Required

Not Required Project specific Code Structure Location specific Code Structure Global Code Structure

Minimum Requirement

WBS Work Breakdown Structure CBS Cost Breakdown Structure EPS Enterprise Project Structure OBS Organization Breakdown Structure RBS Resource Breakdown Structure CCS Client Coding Structure

Legend (refer to Chapter 4.4) Strategic Directive

Fig. 5.3

It is designed as a four tiered structure in a 1-2-2-2 coding format with the first character representing the major code (alpha).

The second, third and fourth tiers are numeric, as shown below.

The samples below were taken from the Global CoA dictionary. It shows that the code composi-tion is uniform at any tier ena-bling sorting, grouping and re-

porting by its components

EPCM Services and TIC codes share the same format.

Global Code of Accounts most recent revision is published on EMS (Project Controls - Docu-ment PCP-0008)

For project controls purposes, the Codes of Accounts is al-ways used in combination with a WBS code and some addi-tional project and/or enterprise attribute –codes.

• It provides a common under-standing and quick interpreta-tion of historic project data and facilitates the collection of this data at a meaningful level of detail.

• It allows for the transfer of data between enterprise-wide systems and tools within WorleyParsons.

For these reasons, WorleyPar-sons adopted the WBS+CBS+ Attributes model as the pre-ferred project breakdown method going forward.

5.1 ENTERPRISE CODES AND ATTRIBUTES

In order to support this method, a set of enterprise-wide coding structures were developed and rolled out to the Project Delivery group;

• An enterprise-wide CBS - the Global Code of Accounts (CoA)

• A set of Attribute Codes to provide more detail and re-porting flexibility to Engineer-ing and Management services scopes: the Activity Detail Codes (ADC)

• A set of Attribute Codes to provide more detail and re-porting flexibility to TIC (Total Installed Cost) scopes: the Cost Type (CT)

• A set of standard Expenditure Categories to be able to spec-ify and distinct project expen-diture (EC)

Global Codes of Accounts

WorleyParsons Global Code of Accounts format is an alpha-numeric, seven characters long code.


A Civil Works N Protection & Coating B --- Spare --- O --- Spare --- C --- Spare --- P Pipelines D Structural Steel Q --- Spare --- E --- Spare --- R Other Direct Costs F Buildings & Architectural S Construction Indirect Costs G Mechanical T --- Spare --- H Turnkey Packages U --- Spare --- I Infrastructure V --- Spare --- J Marine & Offshore W EPCM & Consulting Services K Piping X Taxes & Duties L Electrical Y Contingency & Escalation M Instrumentation Z Owner's Costs

W000000 EPCM & Consulting Services

W030000 Engineering (and Sciences)

W030200 Mechanical

W030201 Mechanical Engineering

W030202 Mechanical Design

A000000 Civil Works

A040000 Earthwork

A040500 Excavation

A040501 Excavation - Machine

A040502 Excavation - Hand (Example Civil Works CoA)

(Example Services CoA)

Alpha

Tier 1

X Numeric

Tier 2

X X Numeric

Tier 3

X X Numeric

Tier 4

X X CoA Composition

“Nothing is impossible for

the person who doesn't

have to do it.”

~/~ Ruud

Lubbers


• Analysis of project(s) by types of deliverables or tasks per-formed and their relative ra-tios, in addition to discipline based breakdown

• Analysis of performance at the disciplines’ types of deliv-erable, i.e. studies, specifica-tions, drawings, etc. by com-parison of earned value and actual data capture

• An enterprise wide collection and maintenance of historical data for benchmarking pur-poses and establishment of standard norms per type of activity / deliverable / task

The guiding design principles of activity detail codes, both format and content, where optimization of number of codes, simplicity and intuitiveness on one side, and statistical/analytical value addition on the other side.

The ADCs may be classified into two broad sets: Non-Engineering and Engineering ADCs, mainly defined by their association with the services CoAs.

The Engineering ADCs are de-veloped as a matrix of common codes across the disciplines, as and where applicable. (see extract on the following page).

This concept enables measure-ment of each discipline’s input when sharing the same deliver-able(s).

Maximizing the number of pro-jects using ADCs is required to

support development and main-tenance of the historical data, benchmarking and engineering norms by type of deliverable or task.

At the same time, flexibility is built into the ADCs design in a way that supports all project sizes. For instance, for very small project (<200 services hours) and secondments, ADC 00-000 General Activity can be used for all Control Accounts.

For small projects in the range of <201<999 services hours, using just the ADC summary codes could be a preferred option (XX-000 Project Initiation to Project Close Out).

The XX-900 Other and Custom Line Items ADC codes are only used on projects (typically lar-ger projects) where custom line items are added, which still require time capture but do not have statistical significance

Only for projects that exceeds 1000 services hours, it will be required to use the Detail ADCs.

The use of Non-Engineering ADCs is left to projects to choose between 00-000 Gen-eral Activity or the detailed ADC, with the project size at about 3000 services hours as possible decision point.

Activity Detail Codes can be accessed in EMS under label PCP-0035.

5.2 ATTRIBUTE CODES

The codes contained in the WBS and CoA coding structures are usually not sufficient to ad-dress the level of detail that is required to manage and monitor projects.

For instance, example 5.2 on page 34 shows that the combi-nation WBS Code 1-2-44-1 and CoA W030302 would only return cost and progress data for the Piping Design scope on the Cellar Deck.; it will not give us the ability to drill down deeper.

In order to create that next level of detail, the WBS & CoA codes need to be “tag-linked” to addi-tional attribute codes.

These attributes can be project-specific and/or pre-defined by the company.

This section will address the 3 main attribute-codes that are enterprise pre-defined; the Ac-tivity Detail Code, the Cost Type Code and the Expenditure Cate-gory Code.

Activity Detail Codes

Activity Detail Codes (ADC) provide additional detail to the W-series of the CoAs (Engineering & Management services), allowing:

• A lower than a discipline level (CoA) of data capture by type of activity or type of deliver-able/task performed on pro-jects.

1-2-44-1 Cellar Deck


07-311 Isometrics

WBS Code (Project Specific)

CoA Code (EMS PCP-0008)

ADC Code (EMS PCP-0035)

+ +

Fig. 5.4 - Example Engineering Control Account


W030100 W030200 W030300 W030400 W030500

ADC Label ADC Process ADC Mechanical ADC Piping ADC Electrical ADC Instrumentation

07-000 Design Doc’s & Drawings

07-100 PFDs / UFDs 07-100 PFDs/UFDs 07-100 PFDs / UFDs

07-200 Process P&IDs / Utility P&IDs 07-200 Process / Utility P&IDs 07-200 Process / Utility P&IDs 07-200 Process / Utility P&IDs 07-200 Process / Utility P&IDs 07-200 Process / Utility P&IDs

07-300 Dwgs, Diagrams & Schematics

07-301 Cause & Effect Diagrams 07-301 Cause & Effect Diagrams

07-303 Plot Plans 07-303 Plot Plans 07-303 Plot Plans 07-303 Plot Plans 07-303 Plot Plans

07-305 Hazard. Area Class. 07-305 Hazard. Area Class. 07-305 Hazard. Area Class. 07-305 Hazard. Area Class.

07-307 GAs / Orthos / Details 07-307 GAs / Orthos / Details 07-307 GAs / Orthos / Details 07-307 GAs / Orthos / Details

07-308 Equipment Drawings

07-309 HVAC Drawings

07-311 ISOs (2D)

07-314 S/L - Single Line Drawings

07-315 Diagrams 07-315 Diagrams 07-315 Diagrams

07-316 Schem/Conn/Terminations 07-316 Schem/Conn/Terminations

07-318 Substations / Switchyards

07-320 T & D Lines

07-322 Location Instr. Drawings

07-324 Loop/Logic Controls Dwgs

07-326 Heat Tracing 07-326 Heat Tracing

07-328 U/G Drawings

Extract Engineering ADC List (Ref. PCP-0035)


Currently, WorleyParsons has around 750 employees that can be classified as direct hire Con-struction labour, and a signifi-cant rise is anticipated for 2012-2016 in the Oil Sands market-place and the Improve sector.

As required for benchmarking purposes, direct hire labour should be associated with the Construction service that was provided to the project or with the commodity/equipment item that was worked on.

For that reason, it was kept separate from the Services la-bour (W-series), traditionally the code-section that captures time-cost on “self-performing” work scopes.

Instead, the combination of CoA + Cost Type is used to capture the labour associated with direct hire. This will link the direct hire with the corresponding CoA on which they have dedicated their labour.

In order to achieve this, Cost Type 93-000 Labour needed to be broken down in more de-tailed Construction labour Cost types, e.g:

93-010 Boilermakers

93-020 Bricklayers

93-030 Carpenters...etc

A complete list of Construction Labour Cost Type Codes can be accessed in EMS under label PCP-0008.

In example 5.6 below, the Code of Account for a Slurry Pump is G041102 and the cost type will correspond to the type of direct hire (93-070 Electrician).

Consequently the installation costs associated with the Pump are captured with this piece of equipment which will is neces-sary for the benchmarking tool.

Cost Type Codes

The Cost Type Code provides additional information to the TIC Management codes (which means all codes except the W series). The following cost types are used within Worley-Parsons:

The Cost Types are in the same format as the Activity Detail Codes (nn-nnn) and will always start with 9. (see example 5.5)

WorleyParsons preferred Pro-ject Controls and estimating tools contain fields to capture Cost Type codes.

In GBS, the only use of the Cost Type will be for direct hire la-bour (93-000).

Cost Types - Labour Direct Hire

As per recent Corporate strat-egy announcements, Worley-Parsons will be expanding its portfolio to include, among oth-ers, direct hire construction labour (“blue-collar” services) in selected markets.

Although direct hire construction labour was historically limited to the WorleyParsons Cord Group in Canada, it is expected to see growth of Direct Hire in the de-veloped world, namely USA, UK and Australia.

“There is no “I” in Team. But there is

no “U” either.”

~/~ Jean

Giraudoux

Cost Type Code

E - Equipment 91-000

M - Material 92-000

L - Labour 93-000

S - Sub Contracts 94-000

F - Freight 95-000

R - Rental 96-000

- - - Spare - - - 97-000


K020100 CS Pipe

92-000 M - Material



Cost Type (EMS PCP-0035)

+ +

Fig. 5.5 - Example Procurement Control Account


G041102 Slurry Pumps

93-070 L - Electrician



Cost Type (EMS PCP-0008)

+ +

Fig. 5.6 - Example Mechanical Installation Control Account


As such, it groups Expenditure Types such as Travel -Taxis and Travel -Airfares into Expenditure Category Travel.

There are about 70-80 Expendi-ture Categories.

Relation with Codes of Ac-counts

All labor and non-labor transac-tions in Finance are linked to an Expenditure Type and grouped by Expenditure Categories.

Usually, Projects only have between 5 to 10 Non Labour expense categories they require

to report on. These expense categories are contained in the Codes of Accounts (W-series)

Project Controls rely on Fi-nance to provide them with monthly expense ‘actuals’.

In order to provide the summary detail levels required for Project reporting, the Finance Expense Categories are mapped against the CoA W-series categories.

The complete list of the Finance Expense Types and Categories codes can be accessed for reference purposes in EMS under label FIP-0386.

Expenditure Categories and Expenditure Types

Expenditure Categories and Expenditure Types are used by the Finance/Accounts function to store labor and non-labor transactions against a project in a consistent way, globally across the organization.

GBS, or alternate Finance sys-tem, records transactions against a project. These trans-actions are posted against an Expenditure Type in the master list.

The Expenditure Type reflects the type of transaction being incurred at detailed level, such as Travel – Taxis or Travel – Airfares.

The global Master list of Expen-diture Categories and Expendi-ture Types is owned by Corpo-rate Finance, and any change to the list must first be approved by Corporate Finance.

The list contains between 750-800 different Expenditure types.

The Expenditure Category acts as a parent to a group of Expen-diture Types for mapping to their Charts of Accounts.

+



07-311 Isometrics



ADC Code (EMS PCP-0035)

+ + 9000 Labour - regular

Expense Category (FIP-0386)

+

1-3-03-2 Project Common

W909200 Expenses



+ 9200 Travel

Expense Category (FIP-0386)

Finance Enterprise Code

“Nothing is fool-proof to a sufficiently

talented fool .”

~/~ Bill Arnett


6 .0 PROJECT INIT IATION

“Eighty percent of success is

showing up”.

~/~ Woody Allen

6.1 BASELINES

The project baseline is defined as the agreed original cost budget and project schedule and is used to measure how performance deviates from the original plan.

Performance management will only be meaningful if there is well defined and documented baseline prior to project execu-tion commencement .

Establishing the initial baseline for a large project is a difficult and time consuming effort, but it pays many dividends in terms of understanding the full scope of the project and being realistic about the job that lies ahead.

Many cost overruns and schedule slippages are the result of not fully recognizing and consequently, underesti-mating the scope and complex-ity of the work to be done.

There are two types of Base-lines;

• Cost Baseline (the original Control Budget)

• Schedule Baseline (the agreed and approved Engi-neering Services or EPC schedule)

The techniques and processes to develop project baselines will be addressed in more de-tail in the schedule Develop-ment and Cost Management chapters.

6.2 TOOL SELECTION

To measure project perform-ance against approved base-lines, WorleyParsons have selected tools which enables them to

1) manage the EPCM / PMC projects (TIC management) on behalf of a client

2) execute and manage Engi-neering & Procurement (EP) services projects (self per-forming contracts)

WorleyParsons utilizes the

following tools:

Engineering / Project Man-agement Services:

• InControl V8.0 / V10 - Inte-grated deliverable manage-ment/document control sys-tem that generates planned and actual progress status against Engineering & Pro-ject Management deliver-ables

• GBS (Oracle) OTL — Cap-tures time-cost at Control Account level

• Primavera P6 - Schedule performance (planned, ac-tual and forecasts) as well as graphic reporting (Bar-Charts, S-Curves, Histo-grams etc.) based on pro-gress actuals generated by InControl.

TIC Management:

• Primavera 3.1, 5.0 or 6.0 - (see Engineering / Procure-ment Services).

• PrimaVera Risk - tool for conducting schedule risk assessments. The system uses Monte Carlo simulation to show the many possible outcomes (end dates) in the project – as well as the likeli-hood they are to occur

• InControl v10 / Prediction Plus - Applications designed to manage TIC performance on behalf of the client (from the detail engineering stage through to commissioning and close-out).

• CAMS (Contract Administra-tion Management System) centralizes contract informa-tion (commitment value, variance management and contract correspondence and cash flow-management).

• Intergraph SmartPlant Materials – Software for Procurement and materials management. (Material Specifications, Requisition-ing, Evaluation, PO genera-tion, Expediting, Fabrication

management, Store/Warehouse management, Invoice reconciliation)

• CMT - Completions Manage-ment Tool for planning and monitoring of commissioning activities, as well as logging of all evidences necessary to the process

• @Risk - WorleyParsons uses @RISK as its preferred tool to conduct cost risk as-sessments. The system uses Monte Carlo simulation to show the many possible outcomes (Cost At Comple-tion) in the project – as well as the likelihood they are to occur.

• Quest - Estimating system designed as a tool to aid estimators in the preparation of major capital cost esti-mates. (bottom up)

• Kbase Aspentech - Esti-mating tool that supports conceptual and detailed cost estimates over the project lifecycle. (top down)

• Accenta - tool to manage internal commercial project performance (PCS) used mainly in US/Europe

• ProComs - tool to manage internal commercial project performance (PCS) used in Asia/Middle East

• Hyperion - Hyperion is fi-nancial performance man-agement software; used for financial consolidation and accounting functions at WorleyParsons. Having a central (global) database, it makes for consistent finan-cial reporting and ease of consolidation across the global business.

In order to produce timely re-ports and results, the systems used by WorleyParsons allow for data transfer between each application, without the need for re-keying information.

The flow of information on a EPCM/PMC is as follows:

The flow of information is as shown in on page 42.


“They don’t make bugs like Bunny anymore”

~/~ Olav Mjelde

PC

DP

Module 1 - Introduction to P

roject Controls.

Rev 0

Enterprise Management System (EMS)

Knowledge Management Systems and Project Websites

Client Systems Finance & Administration

Systems

Project Controls Systems Engineering & Design Systems

Procurement & Construction

Systems

Document / Data Management

Systems

HSE Management

System

OmniSafe

Management Re-porting & Budget

Tracking

Hyperion

Timecards & Financial Manage-

ment System

Oracle / GBS

Planning/Scheduling Schedule Risk

Analysis

Primavera P6 Primavera Risk

Capital Cost Estimating

Quest / Kbase Aspentech

Capital Cost Risk Analysis

@Risk

V8/10: Cost & Progress Management (Engineering & Project Management Services)

Prediction Plus: Cost & Progress Management (Total Installed Cost)

InControl V8.0 / V10 Prediction Plus

Project Commer-cial Performance

(Internal PCS)

Accenta / ProComs

CMT

SmartPlant Materials

Completions Management Tool

- Procurement - Materials Mngm’t - Expediting - Logistics Control - Stores Mngm’t

CAMS

Contracts Administration

System

Engineering Applications

Various

Document & Data

Management

Client Documentation

SmartPlant Foundation Document &

Data Management

EDS TOOLKIT


“If the minimum wasn't

acceptable it wouldn't be called the

minimum”.

~/~ George

Muncaster

7 .0 SCHEDULE DEVELOPMENT METHODOLOGY

(how much is it going to cost?) and a Level 3 EPC Schedule (how long is it going to take?).

In order to achieve this, the project team studies various Technical and Project Execu-tion options. As the project pro-gresses, the various technical options are reviewed, and sub-sequently selected for further definition or stopped all to-gether.

By continuously narrowing down the options, new work-fronts will open up, and study efforts will concentrate on get-

ting more definition into the selected technical options.

The focus of a Definition Phase Project Schedule is to ensure that the project is ’hitting’ the deliverable milestones that are driving these key decisions.

Execute Phase Schedules: The objective of the Execution Phase is to issue AFC Docu-mentation & Drawings, and expedite Equipment & Materials delivery to support the Procure-ment / Fabrication / Construc-tion / Commissioning process.

There is a difference between managing schedules for projects in a Definition Phase and pro-jects in an Execution Phase. This is because these project phases are driven by different project objectives and deliver-ables (defining the Scope of Works versus executing the SOW)

Evaluate / Define Phase Schedules: The objective of the Definition Phase is to deliver a defined Scope of Works for the Execu-tion Phase (what needs to be done?), a Class 3 Estimate

accomplishes, and therefore suggesting that the project is under-performing and in trouble.

This is not necessarily the case; in order to get the project in a position where it can make some key-decisions on the best way forward, a significant num-ber of hours will have to be ex-pended up front to study the various technical and project execution options & scenarios.

Many deliverables that support these different technical options could be held up at the various “Issue for Review” or “for Com-ments” stages, waiting for a directive on how to proceed. Subsequently, the project has relatively low physical progress to show.

The example shows that at the time of the HAZOP (4 months into the schedule) the project is still only 30% complete while already 70% of the budget has been expended.

However, during the HAZOP, (Hazardous Operations work-shop) some key decisions were made, and the progress curve changes behaviour rapidly:

work-fronts have opened up, deliverables are finalized with relatively little effort (or can-celled all together), and the red progress-curve has gone up steeply (from 30 to 90% in 6 weeks).

The blue expenditure curve stays pretty much linear throughout the duration of the project..

Therefore, the common per-formance calculation methods (comparison Cost against Achievement) need to be ap-plied with care to avoid unnec-essary panic and recovery scheduling exercises.

To present a more reliable schedule performance picture, the planner could consider one of the following measures:

• the introduction of greater level of detail (additional progress gates or schedule activities)

• monitoring the milestone ’hit-rate’ against Planned Mile-stone dates as opposed to just measuring physical pro-gress of weighted activities against Planned Progress.

7.1 EVALUATE / DEFINE PHASE (FEED

SCHEDULES)

An Evaluate/Define phase schedule (FEED) has different drivers compared to an Execu-tion Phase schedule and there-fore they require a different management and performance measurement approach.

A typical 6-months FEED Schedule could look something like the simplified example on page 39:

A FEED schedule is usually back-loaded in terms of pro-gress achievement, while the expenditure will be either front-loaded or, at best, linear.

For most of the duration of the project, the Performance curve (Expenditure versus Progress) of a Select/Define project will show a ‘distorted’ performance picture.

Especially in the first few months, the dotted red pro-gress-curve will be lagging be-hind the solid blue expenditure curve; usually an indicator that the project spends more than it

EXAMPLE MILESTONE SCHEDULE FORMAT (FEED)

1 2 3 4 5 6 7JAN FEB MAR APR MAY JUN JUL

START FEED

REVIEW CONCEPT STUDIES

12 wks2 wks

IDC / BASIS OF DESIGN /

EQUIP.LIST DESIGN.REVIEW

16 wks

START BUDGET ENQUIRIES

START 3D MODEL

20 wks 22 wks

STRUCTURAL ANALYSIS / DESIGN 60%

3D MODEL 80%

COMPLETE PRELIM MTO

CLIENT TECH REVIEW

TIC COST ESTIMATE /

EPC SCHEDULE

IFD DRAWINGS ANALYSIS / DESIGN 100%

26 wksFEED CLOSE-OUT

FINAL REPORTS / MTO IFD-PACKAGE

FEED – 30% COMPLETE

IFD LAY-OUTS

IFC HAZOP


MOBILISATION COMPLETED

KEY PROCESS DELIVERABLES

FROZEN

PRELIM MTO

4 wks

DATA COLLECTION

10 wks

PFD’s HAZID

14 wks8 wks

DEFINE EQUIPMENT

LAYOUT

START STRUCTURAL

ANALYSIS / DESIGN

INSTALLATION / CONSTRUCTION

PHILOSOPHY

24 Wks

24 Wks

BUDGET QUOTATIONS20 wks

24 wks

3D MODEL 30%

COMPLETE

1 2 3 4 5 6 7JAN FEB MAR APR MAY JUN JUL

START FEED

REVIEW CONCEPT STUDIES

12 wks2 wks

IDC / BASIS OF DESIGN /

EQUIP.LIST DESIGN.REVIEW

16 wks

START BUDGET ENQUIRIES

START 3D MODEL

20 wks 22 wks

STRUCTURAL ANALYSIS / DESIGN 60%

3D MODEL 80%

COMPLETE PRELIM MTO

CLIENT TECH REVIEW

TIC COST ESTIMATE /

EPC SCHEDULE

IFD DRAWINGS ANALYSIS / DESIGN 100%

26 wksFEED CLOSE-OUT

FINAL REPORTS / MTO IFD-PACKAGE


IFD LAY-OUTS

IFC HAZOP


MOBILISATION COMPLETED

KEY PROCESS DELIVERABLES

FROZEN

PRELIM MTO

4 wks

DATA COLLECTION

10 wks

PFD’s HAZID

14 wks8 wks

DEFINE EQUIPMENT

LAYOUT

START STRUCTURAL

ANALYSIS / DESIGN

INSTALLATION / CONSTRUCTION

PHILOSOPHY

24 Wks

24 Wks

BUDGET QUOTATIONS20 wks

24 wks

3D MODEL 30%

COMPLETE

PROGRESS 100% - 90% - 80% - 70% - 60% - 50% - 40% - 30% - 20% - 10% - 0% -

EXPENDITURE - 100% - 90% - - 80% - 70% - 60% - 50% - 40% - 30% - 20% - 10% - 0%



(note: Fast Track means over-lapping project stages, in other words, engineering and procur-ing are still ongoing when the construction is already started)

Examples of projects where schedules have been com-pressed towards the start-date or end date are plentiful, and has often resulted in:

• Unrealistic/Unachievable Milestone dates at either the front-end or the back-end of the project

• No commitment (“dream on”!), or at best, reluctant buy-in (“un-realistic, but we’ll do our best…”) from the other stake-holders.

• Almost from day one, a con-tinuous cycle of Recovery Plans and revised Recovery Plans

• Inefficiencies in Engineering, Procurement, Construction and Commissioning work processes due to constant moving targets.

• An environment of missed deadlines, excuses, finger-

pointing between client, con-tractors & Project Team mem-bers and, subsequently large Project staff turn-over (personal frustration or victim of a ‘blame’ culture).

EPC-driven Schedule

An alternative method is the “Multi-stakeholder”-driven sched-uling technique, an interactive schedule development process that involves all schedule stake-holders (Engineering, Procure-ment, Construction & Commis-sioning), without handing any of them a “blank cheque” starting point.

This is an important difference compared to the traditional “Single Stakeholder” schedule techniques, where the outcome usually favours one stakeholder only (e.g. Construction) and could result in inefficient work-processes in other project stages.

So how does this process work? The following pages will show a step-by-step outline of this schedule development method:

7.2 EXECUTE PHASE

The most common method for developing EPC schedules is the “Single Stakeholder”- driven EPC schedule development.

This principle usually works as follows (simplified):

Construction-driven Schedule Determine what the end-date is, and then work back from that date to determine the Commis-sioning, Construction, Procure-ment and Engineering activities.

or

Engineering-driven Schedule Reverse of the Construction Schedule, start with the Engi-neering AFC deliverables and work forward.

Although both techniques are commonly applied across the globe, they both represent a rather one-dimensional view of the project delivery process, and in a “Fast-Track” Project execution environment, these techniques can result in some ‘tensed’ interfaces between the various schedule stakeholders.


Development Step

Description

Step 1:

Workshop: ‘Execution Strategy-On-A-Page’

By: Project Stakeholders

Method: Workshop

Inputs:

Contractual project milestones, key dates and end-dates

Major / Critical Equipment list;

Permit requirements

Contract Award Lead times

Procurement PO award lead times;

Benchmarks Equipment / Materials delivery lead-times;

Benchmarks Engineering and Construction timing

Key deliverables:

Target EPC execution strategy

Preliminary Authority Approval / Permitting strategy

Preliminary Procurement strategy

Preliminary Contract strategy

Close Out:

High level ‘One-page’ EPC execution strategy to kick off the Level 3 schedule development process (Steps 2-7).

Step 2:

Develop First Pass EPC Schedule and Preliminary Critical Path

By: Planner

Method: Forward Pass

Inputs:

Execution Strategy-On-A-Page as developed in Step 1

Preliminary Equipment list;

Procurement PO award lead times

Benchmarks Equipment / Materials delivery lead-times;

Key deliverables:

Preliminary ETA dates (Estimate Time Arrival) Equipment & Materials

Preliminary early start (ES) dates of the construction-activity ‘windows’ based on ETA dates equipment & materials

Preliminary engineering schedule for AFC deliverables issue-dates to support achieving the ETA dates and Construction ES dates

Close Out:

Preliminary Level 3 EPC schedule, with pre-determined “constraints”, to be used as basis for schedule development by all individual stakeholders (as opposed to the ‘blank piece of paper’ approach.)

“The sooner you get behind schedule, the more time you have to make it

up.”

~/~ Author

Unknown


2009 2010 2011A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D

KEY MILESTONESContract Award Contract Award

Mechanical Completion Mechanical Completion

Ready for Operation Ready For Operation

PRE-CONTRACT ACTIVITIESPDS Set Up PDS Set Up

Geotechnical & Topographical Survey Completed Geotechnical & Topographical Survey Completed

Permits & Work Authorization System Established Permits & Work Authorization System Established

Office / Warehouses / Laydown areas Office / Warehouses / Laydown areasControl Valves Specifications available Control Valves Specifications available

PERMITS Environmantal Agreement Environmantal Agreement

Fire Authority Agreeement Fire Authority Agreeement

Public Health Authority Agreement Public Health Authority Agreement

Construction Permit Construction Permit

DETAILED ENGINEERING 1st Rev P&ID HAZOP HAZOP P&ID P&ID AFC

ProcessPrelim Struct GA's Prelim M TO Final GA's Final M TO

CivilM echanical DS 30% M odel Review 60% M odel Review Final GA's Final M TO

PipingElectrical DS SLD's Prelim M TO Final Lay-outs Final M TO

ElectricalControl Valve DS Prelim M TO Final DCS/ESD I/O List Final M TO

InstrumentPROCUREMENTColumns Crtitical Vendor DataReactors Ex WorksWaste Heat Boilers Delivery On SiteExchangersPumpsControl ValvesSwitchgearsDCS/ESD SystemsBulk Piping, valves & fittings 1st DeliveryBulk Steel 1st DeliveryBulk Electrical Cables 1st DeliveryInstrument Bulks 1st Delivery

CONTRACTSSOW / MTO available SOW / MTO available NOI / Bid list process for contractorsCivil ContractorStructural ContractorScaffolding contractorMechanical/Piping ContractorE&I ContractorCONSTRUCTIONSite excavation, Remedial and PreparationSite Ready for Construction Site Ready for ConstructionContractor mobilizationSubstation erectionSubstation Equipment installationSubstation CommissioningUnderground ServicesStructural Steel - off site fabricationStructural Steel - ErectionMechanical Equipment InstallationPiping PrefabricationPiping ErectionE& I worksSystems Hand-overCommissioning

EXAMPLE ‘EPC EXECUTION-STRATEGY-ON-A-PAGE’


Development Step

Description

Step 3:

Develop high level Construc-tion Schedule

By: Planner / Construction Manager / Procurement Manager

Method: Forward Pass

Inputs:

Construction / Completions strategy based on ES and ETA date restric-tions determined in Step 2

High level construction tasks and durations (at this stage, Activity-windows rather than detailed Tasks)

High level constructability review (consideration of large equipment instal-lation and access).

Benchmarks Construction manhours to cross-check durations.

The “Construction - Procurement” schedule ‘busts’ identified in Step 2

Key Deliverables:

Level 3 construction schedule supported by achievable ETA dates

Conversion ETA dates into ROS dates (Required on Site)

Engineering AFC target dates Construction / Fabrication drawings & documents

Close-out :

A “Construction/Procurement Agreed” Level 3 construction base-line schedule based on achievable ROS dates

Step 4:

Develop Procurement Schedule

By: Planner / Procurement Manager / Engineering Manager

Method: Backward Pass

Inputs:

ROS dates as per construction schedule developed in Step 3

Firmed up procurement PO / delivery lead time cycle.

The “Procurement - Engineering” schedule ‘busts’ identified in Step 3.

Key Deliverables:

Procurement schedule with achievable PO Award and ROS dates

Expediting plan for Material & Equipment Delivery on Site

Vendor data expediting plan to support AFC dates construction / fabrica-tion drawings & docs

Close-out:

An “Engineering/Construction/Procurement” agreed procurement plan with realistic ROS dates and vendor data expediting targets

“How long is a minute

depends on which side of the bathroom door you are

on.”

~/~ Albert Einstein


Development Step

Description

Step 5 :

Develop Engineering Schedule

By: Planner / Engineering Manager / Lead Engineers


Inputs:

Target RFQ dates as per procurement schedule developed in Step 4

Target AFC dates for construction / fabrication drawings as construction schedule developed in Step 3

Benchmarks Engineering manhours to cross-check durations.

The “Engineering - Construction ” schedule ‘busts’ identified in Step 2

Key Deliverables:

Milestone dates and priorities for RFQ input-deliverables.

Milestone dates and priorities for engineering AFC deliverables

Close-out :

Schedule Risk Range/Analysis workshop with all internal project stakeholders (ref Chapter 16 - Risk Analysis)

Schedule Risk Analysis Report

Level 3 EPC Baseline schedule with agreed engineering, procure-ment and construction targets and priorities

Step 6:

Contracting Plan

By: Planner / Project Manager / Contracts Manager


Inputs:

EPC schedule as developed in Step 2 to 5

Final or Preliminary contract strategy

Lead time contract award evaluation & approval Turn-around cycle

Identified ITB Packages (and level of required definition of the packages)

The “Contracts – Engineering” schedule busts as a result of the ITB pack-age definition and Issue dates requirements.

Key Deliverables:

Identified engineering deliverables required for input in ITB Packages

Milestones ITB packages issue / evaluation & contract award dates

Mobilisation dates of the Contractors

Close-out :

Schedule Risk Range/Analysis Workshop with all internal project stakeholders

WorleyParsons Level 3 EPCM Baseline schedule – Issued For Client Comments

Development Step

Description

Step 7:

Alignment Client Schedule targets

By: Planner / EPCM team / Client

Method: Reconciliation workshop “WorleyParsons EPCM schedule against contractual (Client) milestone dates”.

Inputs:

EPC schedule as developed in Step 2 to 6

Contractual milestones (Client Schedule)

The identified “Client– WorleyParsons” schedule ‘busts’.

Key Deliverables:

Agreement between WorleyParsons and the Client regarding resolving the ‘busts’ and possible acceleration scenarios.

Early agreement between WorleyParsons and the Client on procurement and contract strategies that are required to support the schedule

Close-out :

WorleyParsons and Client approved EPCM Baseline schedule


There are multiple levels of schedules and various forms of schedules. The Control Sched-ule is, as its name implies, the schedule that is used for master control of the project.

It is important that the Control Schedule be at a level of detail that can be intelligently re-viewed by management; too much detail gets beyond human comprehension and can contain illogical and arbitrary con-straints.

The level of detail for the con-trol schedule is the Control Account level. Scheduling be-low Control Account levels (Deliverables/Job Cards/Procured items etc) is consid-ered detail scheduling.

For Evaluate/Define (FEED) schedules this task falls on WorleyParsons (self-performing contract), while in an EPCM schedule environment, the Detail Schedule will be the responsibility of the various contractors.

7.3 PROJECT BASELINE: CONTROL SCHEDULE

A major effort during the set-up process is developing the work breakdown structure, which is the basis for the schedule.

“If it wasn't for the 'last minute',

nothing would get done”.

~/~ Graig

Fitzpatrick


quantities and costs are as-signed to each schedule-activity and their totals should match the approved budget quantity/cost of that in the control budget.

Control Account progress and Scheduled completion dates for engineering deliverables are derived from a weighted deliv-erable register.

Milestones

As a minimum, all interfaces with procurement and construc-tion should be represented in the schedule as driving mile-stones, and linked to the pro-curement and construction schedule.

Select/Define-phase (FEED) schedules should represent all major internal / external review dates, the completion dates of the Critical Path deliverables (impact on project completion

date), and the key deliverables that will open up the various work-fronts (impact on progress).

Sub-consultant Scope

When the engineering scope is subcontracted, the subcon-tracted work scope will appear as a weighted ‘one-line’ – item on the control schedule.

Resource units can either be manhours or manhour cost as a distributed portion of a unit of measurement (UoM) such as per drawing.

Detailed schedule management of this work scope is the sub-contractor’s responsibility.

Engineering Supervision & Support

Engineering management and support services should be re-flected as line-items in the “General” section.

In this event, the Detail sched-uling will be done separately from the project EPC schedule, and levels must summarize to control account level in the Master Schedule.

The Detail Schedule will break-down each Control Account in activities representing deliver-ables and/or detailed construc-tion/procurement tasks.

The Detail Schedule activities must follow the CPM method (Critical Path Method) and should be a closed network (dependencies and relation-ships).

Detailed Resource-units, unit-quantities and costs are man-aged by the respective Sub contractors nad reported up to EPCM management. However, it is still important that the control schedule carry suffi-cient resource information to allow meaningful analysis of manpower levels and the estab-lishment of progress S-curves.

7.4 CONTROL SCHEDULE: ENGINEERING

Activities/Tasks

The level of detail for engineer-ing activities is the Control Ac-count – level.

Resource-units (manhours),

“If you're 6 months late on

a milestone due next week

but really believe you can make it, you're

probably a project

manager.”

~/~ Author

Unknown

• ETA (the Estimated Time of Arrival of the procured item)

The Procurement schedule can represented in the following two formats:

1. Procurement package bro-ken down into the 7 key Services activities.

Enables the Planner to report the status of each individual commitment.

2. Procurement Packages categorized by each of the 7 Procurement Steps.

In this option the commit-ments will be listed and scheduled under each of the Procurement Services Step headers. (see example on page 52 - 53)

Both options are acceptable means of representing a Pro-curement Schedule. However, from an EPCM Control Sched-ule management perspective, this last representation has some distinct advantages.

Categorizing the commitments by Procurement Steps enables the Planner to quickly review the status of all commitments and monitor their movements as they progress through the 7 Steps (and act accordingly).

Also, during the schedule devel-opment period, where the Criti-cal Path is constantly changing, the “Procurement Step” lay-out could be very helpful to the Planner.

Rather than scroll down through pages of individual Purchase Orders & associated activities,

this lay-out format immediately identifies which commitment (s) and Procurement Steps are causing the schedule ’pain’.

Schedule Weightings

Resource-units and quantities and cost are assigned to each schedule activity and their totals should match the approved budget quantity/cost of that in the control budget.

Procurement Supervision & Support

All efforts associated with coor-dinating and managing the pro-curement Scope of Works will be assigned to a general “Procurement Supervision & Support” Control Account

Manufacturing Schedule.

Detail scheduling of the actual manufacturing process of each Purchase Order is the responsi-bility of the Vendor/Supplier

The Procurement Package will appear as a weighted ‘one-line’ Control account item in the Con-trol schedule.

Detail scheduling will be done separately from the project EPC schedule, but will have to feed into in the Control Schedule.

7.5 CONTROL SCHEDULE: PROCUREMENT

The procurement scope can be divided into 2 categories, namely Procurement services (all efforts leading up to Pur-chase Order award ) and the actual management of the Pro-curement commitments (technical & commercial man-agement and expediting/close outs of the awarded POs).

Procurement Services

The principle workflow for Pro-curement Services is identical for all major equipment and material packages in both the Define (Long lead items only) and Execute phase:

• RFQ Preparation (Prepare specification package for Vendors to bid on)

• Issue for Enquiry (submit Specification package to the short listed Vendors for bid )

• Technical/Commercial Bid Evaluation (evaluate the re-ceived bids on technical com-pliance and on best price)

• Award Recommendations (issue recommended Vendor to the client)

• Purchase Order Award (Prepare and issue the Pur-chase Order)

• Vendor Data Review (Expedite, receive, and coor-dinate distribution of Vendor Data to the Package Engi-neers for incorporation into the design drawings in order to issue them with AFC status)

“ To know the road ahead, ask those coming

back”

~/~ Chinese Proverb



EXAMPLE PROCUREMENT PLAN CATEGORIZED BY PROCUREMENT STEPS

EXAMPLE PROCUREMENT PLAN CATEGORIZED BY PROCUREMENT PACKAGE

2010 20114 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 9 10 11 12 13

RFQ - Request For QuotationRFQ - Suction Scrubber RFQ - Suction ScrubberRFQ - Air Cooler RFQ - Air CoolerRFQ - Control Valves RFQ - Control ValvesRFQ - Switchgears RFQ - SwitchgearsRFQ - DCS/ESD Systems RFQ - DCS/ESD SystemsBR - Bids ReceivedBR - Suction Scrubber BR - Suction ScrubberBR - Air Cooler BR - Air CoolerBR - Control Valves BR - Control ValvesBR - Switchgears BR - SwitchgearsBR - DCS/ESD Systems BR - DCS/ESD SystemsTBE/CBE - Techn./Comm. Bid EvaluationTBE/CBE - Suction Scrubber TBE/CBE - Suction ScrubberTBE/CBE - Air Cooler TBE/CBE - Air CoolerTBE/CBE - Control Valves TBE/CBE - Control ValvesTBE/CBE - Switchgears TBE/CBE - SwitchgearsTBE/CBE - DCS/ESD Systems TBE/CBE - DCS/ESD SystemsAR - PO Award RecommendationsAR - Suction Scrubber AR - Suction ScrubberAR - Air Cooler AR - Air CoolerAR - Control Valves AR - Control ValvesAR - Switchgears AR - SwitchgearsAR - DCS/ESD Systems AR - DCS/ESD SystemsPO - Purchase Order AwardPO - Suction Scrubber PO - Suction ScrubberPO - Air Cooler PO - Air CoolerPO - Control Valves PO - Control ValvesPO - Switchgears PO - SwitchgearsPO - DCS/ESD Systems PO - DCS/ESD SystemsETA - Estimate Time ArrivalETA - Suction Scrubber (45 wks) ETA - Suction Scrubber (45 wks)ETA - Air Cooler (43 wks) ETA - Air Cooler (43 wks)ETA - Control Valves (42 wks) ETA - Control Valves (42 wks)ETA - Switchgears (41 wks) ETA - Switchgears (41 wks)ETA - DCS/ESD Systems (40 wks) ETA - DCS/ESD Systems (40 wks)VDR - Vendor Data ReviewVDR - Suction Scrubber VDR - Suction ScrubberVDR - Air Cooler VDR - Air CoolerVDR - Control Valves VDR - Control ValvesVDR - Switchgears VDR - SwitchgearsVDR - DCS/ESD Systems VDR - DCS/ESD Systems

2010 20114 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 9 10 11 12 13

501 - Suction ScrubberRFQ - Request For Quotation RFQ - Suction ScrubberBR - Bids Received BR - Suction ScrubberTBE/CBE - Techn./Comm.Bid Evaluation TBE/CBE - Suction ScrubberAR - PO Award Recommendations AR - Suction ScrubberPO - Purchase Order Award PO - Suction ScrubberVDR - Vendor Data Review VDR - Suction ScrubberETA - Estimate Time Arrival ETA - Air Cooler (43 wks)503 - Air Cooler RFQ - Air CoolerRFQ - Request For Quotation BR - Air CoolerBR - Bids Received TBE/CBE - Air CoolerTBE/CBE - Techn./Comm.Bid Evaluation AR - Air CoolerAR - PO Award Recommendations PO - Air CoolerPO - Purchase Order AwardVDR - Vendor Data Review VDR - Air CoolerETA - Estimate Time Arrival ETA - Air Cooler (43 wks)801 - Control ValvesRFQ - Request For Quotation RFQ - Control ValvesBR - Bids Received BR - Control ValvesTBE/CBE - Techn./Comm.Bid Evaluation TBE/CBE - Control ValvesAR - PO Award Recommendations AR - Control ValvesPO - Purchase Order Award PO - Control ValvesVDR - Vendor Data Review VDR - Control ValvesETA - Estimate Time Arrival ETA - Control Valves (42 wks)

“Everyone can win, unless there is a

second entry”.

~/~ Author

Unknown

Construction Supervision & Support

All efforts associated with coor-dinating and managing the Con-struction Scope of Works will be assigned to a general “Construction Supervision & Support” Control Account.

Detail Construction Look ahead Schedules.

The construction detail schedule can be developed on a 3-month look-ahead basis, and will con-tain a greater level of detail.

This will be the responsibility of the respective Contractors.

Although this is done separately from the overall Control Sched-ule, the detail schedule must still summarize to Control Account levels in the Control Schedule.

The activities are to be sched-uled according the CPM method (Critical Path Method) and should therefore form a closed network (dependencies and relationships).

EPCM Schedule : Integrate or Interface?

Due to improved ICT platforms (connectivity) and web-based technology, most of the current scheduling tools and systems are quite capable of integrating the activities of the EPC Control Schedule and the various Con-struction Detail Schedules in one combined, integrated pro-ject schedule.

Although this is definitely the preferred method for self per-

forming EPC contracts, it is not recommended to implement this concept on EPCM/PMC pro-jects.

There are 3 major reasons why WorleyParsons prefers to keep the Control Schedule and the Detailed Construction schedule separate in an EPCM/PMC envi-ronment:

1. Contractors Flexibility - The levels below Control Ac-count level are considered detail scheduling and this is normally the responsibility of the Contrac-tors.

Contractors, especially the ones who have been awarded Lump Sum contracts, will insist on having a high level of flexibility to breakdown and control their Construction Detail schedule as they see fit.

The EPCM planner tends not to interfere too much in the Con-tractors’ Detail Schedule, simply because it can lead to potential ‘efficiency-loss’ claims from the contractors further down the track. (such as re-work and/or resource “stand-by time” Change Requests as a conse-quence of earlier ’schedule-input’ from the EPCM planner.)

Interfacing with the Control Schedule (rather than integrat-ing) will provide the Contractors with that flexibility.

The only requirement is that their level detailed schedule can be rolled-up to the Control Ac-count levels in the Control Schedule.

7.6 CONTROL SCHEDULE: CONSTRUCTION

Work Packages / Job Cards

The level of detail for Construc-tion activities in the Control Schedule is usually the Con-struction work package level.

To facilitate this, the EPCM Construction team will develop a Construction Work Pack register together with the respective responsible contractors.

Considering that they are exe-cuting the work, their buy-in to the schedule and WBS will be essential.

The contractor will then break down the Work Packages into either Job Cards and Job Card Tasks (Brownfield works) or detailed Construction Tasks (Greenfield works).

Each Construction task or Job Card is assigned an individual Control Budget in the agreed UoM, the sum of all Tasks / Job Cards budgets will add up to the Work Package budget.

Progress & Schedule manage-ment of the Detailed Construc-tion tasks will be the contractors’ responsibility.

At this level, the contractor will report progress, summarized to Work Pack level, together with the updated schedule dates and forecasts.

These updates are transferred to the respective Control Ac-counts in the Control Schedule.



ter plan on commissioning sys-tem level. (System Hand-over Packages).

The commissioning systems and their budgets are deter-mined by the Commissioning manager together with the Com-missioning Contractor, and are based on the agreed Commis-sioning Execution plan.

The Commissioning contractor will break down systems into activities with logic between each system activity.

It is important that the contrac-tor’s schedule activities and logic include all necessary steps such as; MC dates, punch-outs, Client & Contrac-tor’s walk-downs, acceptance certificates. If not coordinated, these activities can cause un-necessary delays

Commissioning Milestones

All interfaces with the construc-tion-schedule should be repre-sented in the schedule as driv-ing milestones.

7.7 CONTROL SCHEDULE: COMMISSIONING

Commissioning Activities

At some point the ‘geographic’ based construction schedule need to be replaced by a pre-commissioning / commissioning system driven schedule. Typi-cally, this transition occurs when bulk construction is approx. 60—70% complete.

Commissioning activities are represented on the project mas-

Especially when the project progresses, and scope changes, resource allocations, recovery-scenarios and re-schedule exer-cises will occur, the EPCM plan-ner could spend more time rec-onciling all the schedule updates (closing network gaps, identify-ing danglers**, repairing activity relationships, reshuffling re-sources, resource-units & quan-tities), than analyzing the actual results.

3. Data Integrity - Direct access

or Electronic links for third party updates will compromise the “checks & balances” for the provided input.

The popular Software Develop-ment phrase “garbage in, gar-bage out” is definitely applica-ble to electronic links or direct third-party access: it is an envi-ronment where it is very easy for garbage to enter the system...

2. Schedule Administration - By having one integrated sched-ule, all the schedule-settings, resource and activity coding dictionaries should be identical across all contracts to enable either ‘direct access’ inputs from the Contractors or seamless importing of their schedule up-dates into the overall Control Schedule.

This could turn into an adminis-trative nightmare for the respon-sible EPCM planner.

“The nice thing about not

planning is that failure comes as a complete surprise rather

than being preceded by a

period of worry and

depression.”

~ /~ Author

Unknown

** dangler - activity that has no succes-sor or predecessor

8 .0 SCHEDULE CONTROL

Network Logic Relationships

A Schedule Network Diagram is built by organizing the activities in a logical sequence and assign dependencies (relationships) between the scheduled activi-ties. (creating Successors and Predecessors).

The 4 commonly used relation-ship types are:

Finish-to-Start (FS)

The activity B can only start once the activity A has been concluded.

Finish-to-Finish (FF)

In this relationship, activity B cannot finish until the preceding activity A is completed.

Start-to-Finish (SF)

Activity B cannot be completed before Activity A has started.

Start-to-Start (SS)

Activity B cannot begin before its successor task A has started.

A properly laid out project schedule network diagram al-ways flows from left to right to reflect the chronology of all project works

Start Dates

A Start date is a date on which the particular schedule activity is anticipated to be started.

Although this sounds obvious, a project schedule can contain up to 3 different ‘Start Dates’:

• Early Start Date

• Late Start Date

• Actual Start Date

The Early Start (ES) date repre-sents the earliest possible point of time at which the schedule activity can begin.

The Late Start (LS) date repre-sents the latest point at which the schedule activity may be kicked off without causing de-lays in the project completion date.

The Actual Start (AS) date marks the beginning of work on a scheduled activity.

Finish Dates

The term Finish date refers to the date in which the particular schedule activity is anticipated to be completed.

As with the Start dates, we can also differentiate three possible Finish dates:

• Early Finish Date

• Late Finish Date

• Actual Finish Date

The Early Finish (EF) date is the earliest possible point of time at which the schedule activity may potentially be com-pleted .

Schedule Performance will be measured against the agreed Baseline Schedule.

The Project-schedule is updated periodically using progress infor-mation gathered from the vari-ous ‘scope-owners’.

After each update the schedule will be recalculated and the return results needs to be ana-lyzed to determine how well the project performs against the Schedule baseline.

8.1 SCHEDULE ANALYSIS

WorleyParsons uses the Prece-dence Diagram method (PDM) to calculate networks with the Critical Path Method (CPM). It is important that the project controller is familiar with the base-principles of the various Schedule Analysis tools and techniques as well as the asso-ciated acronyms and abbrevia-tions.

Schedule Network Logic

A Schedule network diagrams is an arrangement of activities involved in completing a project along with:

• the sequence in which activi-ties must be done

• all logical relationships that may exist between the activi-ties (successor/predecessor tasks), and

• an estimate of the time re-quired to complete each of them.

No matter how well the baseline schedule is developed, some-thing will happen which may change it dramatically. A closed Schedule Network Logic (no open ends or danglers) will help to quickly assess the impact of such events or event chains on the overall Completion date.

A FS

B

A

FF

B

A

SF

B

A

SS

B

“ No task will be started until

the last possible minute”

~/~ Student’s Law


calculations after incorporating all updates. However, the calcu-lation principles still remain the same as in the ‘manual’ days:

A Forward Pass is used to de-termine and calculate the early start and finish dates by starting at the project start and working forwards through the schedule network logic (see Fig 8.1)

A Backward Pass is used to determine and calculate the late start and finish dates by starting at the project’s scheduled end date and working backwards through the schedule network logic (see Fig 8.1)

Critical Path

A Critical Path is a string of activities in the Logical Network Path that has no flexibility in terms of schedule slippage.

In other words, a delay in any of the activities in a critical path will result in a slippage of the Overall Project completion date.

This amount of flexibility can also be referred to by the term ‘Float’. Critical Path activities are therefore referred to as ‘zero’-float activities. (see Fig 8.1)

The Late Finish (LF) date is the latest date at which the sched-ule work activity may be com-pleted without causing delays in the project completion date.

The Actual Finish (AF) date marks the completion of work on a scheduled activity.

While Actual Start and Finish dates are set in stone, the early and late Start & Finish dates will likely change multiple times throughout the life cycle of the project.

For example, during the pro-gression of the project, the pro-ject could fall behind or move ahead of schedule, which could ultimately lead to a modification of the project plan. This could result in new Early and Late Start and/or Finish dates.

In this day and age, ‘state-of-the-art’ scheduling tools are utilized to perform the schedule

Forward Pass Calculation

Early Start dates:

ES Predecessor + duration Predecessor = ES Successor

Early Finish dates:

ES + Activity duration –1

Backward Pass Calculation

Late Finish dates

LF Successor - duration Suc-cessor = LF Predecessor (s)

Late Start dates

LF - Activity duration +1

CRITICAL PATH ACTIVITIES A01 - A05 : ‘ZERO’ FLOAT

Figure 8.1 - Example Network

6 A08 7

2 DAYS

9 10

ES EF

LS LF

8 A09 9

2 DAYS

11 12

ES EF

LS LF

10 A10 12

3 DAYS

13 15

ES EF

LS LF

16 A05 20

5 DAYS

16 20

ES EF

LS LF

15 A04 15

1 DAY

15 15

ES EF

LS LF

11 A03 14

4 DAYS

11 14

ES EF

LS LF

6 A02 10

5 DAYS

6 10

ES EF

LS LF

1 A01 5

5 DAYS

1 5

ES EF

LS LF

TF = 4 DAYS

TF = 3 DAYS

6 A06 8

3 DAYS

11 13

ES EF

LS LF

10 A07 11

2 DAYS

14 15

ES EF

LS LF

FF = 1 DAY


By monitoring how many days float are available in the sched-ule, the project controller can advise project management on potential risk on critical activi-ties.

In order to determine the total float, Project Controls use the Critical Path method to calculate all ES, EF, LS and LF dates.

The calculation-rule to deter-mine the Total Float of each activity is :

(see Figure 8.1)

Free Float

Free Float is the amount of time that a schedule activity can be

delayed without delaying the early start of any immediately following schedule activities.

The calculation-rule to deter-mine Free Float of each activity is:

(see Figure 8.1)

Total Float

Total float is the number of days an activity may be delayed with-out interfering with the projected completion date.

During baseline plan develop-ment, whenever possible, the project should build float into the schedule to allow for unfore-seen events such as adverse weather conditions, labour dis-putes or other issues that could affect the schedule.

Project Controllers must be aware of the Total Float time they have available to them at the beginning of the project, and the numbers of days float should be monitored and re-ported by the project controller at all times.

LF date - EF date = TF

(Delta ES date initial Activity and ES date succeeding Ac-tivity) - duration initial Activity = FF

“All activities will fill their

allotted time”

~/~ Parkinson Law


individual schedule activity de-scriptions, the Early and Late dates (optional), the activity duration and the % Complete.

On the right hand side, the ac-tivities are represented by date-placed horizontal bars. (see Fig 8.2)

Resource S-Curve

An S-Curve (also called a Sig-moid Curve) is a mathematical process that results in a S shaped curve . The S-Curve is used as a means of represent-ing the planned expenditures of resources over project duration against the real-time resource expenditure (Actuals) and/or earned expenditure (Earned Value)

This is important to project man-agement in that it can be used to monitor the project as it pro-gresses and compare it to the

projected S-Curve to determine whether or the project is being completed on time and on budget.

In this context, resources can be the cumulative incurred cost of the project, the number of man hours earned at any given stage in the project, or the ex-penditure of raw materials for construction or assembly.

Resource Histogram

A resource histogram provides a quick and easy “stacked bar” view of exactly what resources are available, what resources are being utilized at the present time (or at whatever time the project management team is seeking information on) and how long those resources are expected to be tied up.

Fig 8.3 shows an example of a combined S-Curve / Histogram.

8.2 SCHEDULE REPORTS

In terms of Schedule output, the Project Controller should be familiar with the 3 most common report types:

• Bar Chart

• S-Curve

• Histogram

Bar chart

A bar chart (also referred to as a bar graph or a Gantt chart) is a graphical representation of scheduled activities .

A bar chart is easy to read, easy to understand, and provides the ability for easy comparison of all provided data.

In a typical bar chart , the left side of the chart displays, as a minimum, the work breakdown structure components or the

Fig 8.3 S-Curve / Histogram (Combined)

Fig 8.2 Bar Chart

“The person who says it will

take the longest and

cost the most is the only one with a clue how to do the job.”

~/~ Anonymous


Therefore, the only work ele-ments to be concerned about are those that are actually in progress.

The method of measuring pro-gress is the “Earned Value”- method.

The Earned Value method measures the value of accom-plished work, and is calculated as follows:

Earned Value =

% Complete x Current Budget.

Earned Value can be consid-ered the “Missing Link” between

Schedule and Cost analysis.

Figure 9-1 illustrates the diffi-culty in trying to understand performance without Earned Values, by using the familiar “Budget versus Actuals” pres-entation.

At first glance, it would appear that the project is in good shape from a cost standpoint. The chart seems to indicate that cost performance (blue line) is better than planned (red line) and that it is likely that the pro-ject is going to under run its budget.

The key to performance meas-urement is the objective assess-ment of work in progress in relation to the approved base-line

All work is either completed, in progress or not yet started.

Completed work presents no performance measurement problem since these work pack-ages have been closed, the budget has been earned and progress been reported.

Future work will not be meas-ured until the work gets under-way.

9.0 PROGRESS MEASUREMENT

Figure 9.1

ACTUAL vs BUDGET

0

50

100

150

200

250

TIME

$ O

R M

ANH

RS

PLANNED (BUDGET)

ACTUALS

COST VARIANCE

PLANNED PROJECT COMPLETION

TIME NOW


It compares actual cost of work done to the budgeted cost of work planned. What is missing is the budgeted cost for work done commonly re-ferred to as “Earned Value”.

When earned value is taken into consideration, the cost picture clears up because the

cost and schedule components can be addressed separately.

Figure 9-2 now shows that the project is behind schedule and under running cost and that the cost under run is only about half that depicted in figure 9-1.

What is not clear is whether the variance between budget and actual costs is because of good cost performance or simply due to the fact that work is not get-ting done.

The problem with the chart is that it compares apples and oranges.

Figure 9.2

at Control Account level, it is likely that physical progress is collected at a lower level (e.g Deliverable /Job Card Level).

The responsibility for progress collection and verification on each Control Account lays with the Control Account owners.

Since the nature of each task varies, several methods of progress measurement can be applicable.

When contracts are managed on behalf of the client (EPCM environment), the Breakdown

Structures and method of pro-gress measurement of the re-spective (sub) contractors will be subject to approval by WorleyParsons prior to contract commencement.

The criterion should always be that their breakdown structures must be able to interface with the Control Account level in the Overall Project WBS.

This chapter will address the different methods for calculating progress in each stage of the project.

Earned value is the key to un-derstanding project status, be-cause it represents the value of work done.

The main objective of the pro-gress measurement system is to generate Earned Values for each Control Account.

At Control Account level, per-formance data can be summa-rized to the higher levels in the WBS/CBS for reporting or analysis purposes.

Although cost and schedule performance is always managed

COST/SCHEDULE PERFORMANCE

0

50

100

150

200

250

TIME

$ O

R M

ANH

RS

PLANNED (BUDGET)ACTUALSEARNED VALUE

SCHEDULE VARIANCE

COST VARIANCE

SCHEDULE VARIANCE

EXPECTED PROJECT COMPLETION

PLANNED PROJECT COMPLETION

TIME NOW

FIGURE 1.2


known as a CTR (Cost, Time, Resources).

All Control Accounts are as-signed with a budget (in $ and/or manhours) and broken down in deliverables (drawings/documents).

All deliverables are ‘weighted’ in the Control Account by dis-tributing the Control Account budget over the deliverables.

In summary, the weighting prin-ciple for Engineering Services scopes works as follows (bottom –up):

1) The sum of all deliverables budgets within a Control Ac-count must add up to the cur-

rent Control Account budget.

2) The sum of all Control Ac-counts within a Discipline must add up to the Discipline budget.

3) The sum of all Discipline-budgets must add up to the Engineering Services control budget.

Status ‘Control-gates’ are as-signed to each deliverable in order to achieve the 100 % completion stage.

These ‘Control-gates’ are equal to the issue-stages of a draw-ing/document and could be allocated as follows:

9.1 ENGINEERING: INCREMENTAL MILESTONE METHOD

The Deliverables Register is the basic document for Engineering progress measurement.

It contains all drawings and documents required to complete the project, arranged by disci-pline and Control Account.

The scope of each Engineering discipline is broken down in Control Accounts.

An engineering Control Account is usually a collection of similar type deliverables (e.g P&ID’s, Isometrics etc) and is also

Rules of Credit (Issue –Stages) Incr.% Cum. %

STA – Start 10% 10% IDC – Issued for Inter Discipline Check 30% 40% ICC – Issued For Client Comments 20% 60% INC – Incorporate Client Comments 10% 70% IFB – Issued For Bid 20% 90% IFD – Issued For Design 10% 100%

Table 9.1 - Example Definition Phase (FEED) – Incremental Milestone

Rules of Credit (Issue –Stages) Incr.% Cum. %

STA – Start 10% 10% IDC – Issued for Inter Discipline Check 30% 40% ICC – Issued For Client Comments 20% 60% INC – Incorporate Client Comments 10% 70% IFA – Issued For Approval 20% 90% AFC – Approved For Construction 10% 100%

Table 9.2 - Example Execution Phase – Incremental Milestone

ferred into the Control Schedule and the Control Budget to re-flect the overall status of work.

Progress Measurement is being prepared using the ‘In-house’ tool InControl which will have CTRs from all different disci-plines detailed out at each de-liverables level.

There can be a direct link be-tween InControl and external specialist Document Control software to allow exchange of information about deliverables status

The cut-off time for weekly re-port information is usually Close of Business of the last day of the week.

Progress can be claimed up to the next control-gate, however to proceed through the gate, the deliverable must be physically issued (with a transmittal to show for it).

The progress of each deliver-able will be summarized at Con-trol Account Level and trans-



“ We don’t see things as they

are; we see them as

we are”

~/~ Anais Nin

3D Model Progress shall be updated by Model Co-ordinator in Piping department and shall be communicated to the Plan-ning team on the cut off date and updated in InControl where they are called up as weighted LOE (level of Effort) line-items.

Pipe Stress

Pipe Stress analysis progress shall be measured on key gates through which the stress analy-sis of a line will undergo.

The lines are categorised as per their criticality and are called up as weighted LOE line-items in InControl.

The report containing all the lines and their status for each gate shall be generated by Pip-ing from Stress Software and

submitted to Planning for up-date in InControl.

Following are the key gates for Pipe stress progress:

3D Model progressing

3D modelling and the extracted deliverables represents a signifi-cant portion of the work of the engineering group on projects (could add up to 15 - 20% of the expended hours).

As such, being able to effec-tively assess the progress on these activities is critical to the measurement of overall pro-jects.

The incremental ‘issue-gate’ method described on the previ-ous page is designed for deliv-erable progressing, however, a significant amount of 3D model-ling effort is carried out prior to deliverables being extracted.

Software such as InControl does not provide the detailed progressing at 3D model level.

3D Model Progress measure-ment is based on the following principles:

1. 3D Model is divided into ma-jor disciplines. See example below.

2. Each Discipline is broken down into different physical Areas & Workpacks.

3. The area workpacks are di-vided into 12 key activities (CTRs) which are given indi-vidual weightings. (see follow-ing A/G Piping example)

Major Disciplines Weight %

A/G Piping 44

Equipment 15

Buildings 5

UG & Roads 10

Civil & Structural 16

Electrical 6

Instruments 4

Total 100

No. CTR Description Weight %

1 Check discipline database set-up 3% 2 % lines modelled in area (max) 65% 3 Model checked to issued P&IDs AFD 5% 4 30% model review 5% 5 Pipe supports added 1% 6 Stress checked 5% 7 60% model review 5% 8 Clash check complete 5% 9 Isos for are AFC - add 2% 10 Inst vendor drawings - Code 1 or 2 Checked 2% 11 90% model review 1% 12 No holds 1%

Key Gates Weight %

Stress lines extracted from Model

10

Stress lines modelled into Caesar

10

Preliminary stress lines issued to Piping

20

Stress lines reissued with holds

40

Stress lines issued; all holds cleared

30

Stress lines issued & checked

5

relevant isometrics 25

Total 100

of one or more equipment /material items that will be pur-chased from one single Vendor/Supplier


When providing Procurement services, WorleyParsons is responsible for the entire proc-ess that leads up to award of a Purchase Order. This is pre-dominantly manhour effort. (with the exception of non-labour expenses).

The Procurement Management & Support scope (discipline level) is broken down in Control Accounts.

The Control Accounts for Pro-curement Services are usually activity based accounts such as Requisition preparation, Pur-chase Ordering, Expediting, Vendor Inspection etc.

Each Control Account is allo-cated a budget ($ or manhours) and broken down into identified Procurement Packages (as per Procurement register).

In the Procurement Services scope, the Procurement Pack-ages are the ‘deliverables’ of the Control Account.

The Control Account budget will be distributed across the Pro-curement Packages, creating weighted ‘deliverables’.

‘Control gates’ are assigned to each deliverable in order to achieve the 100 % completion stage.

These ‘control-gates’ are aligned with the workflow-steps required to complete a deliver-able. A ‘Purchase Order’ Con-trol Account could look some-thing like this:

9.2 PROCUREMENT: INCREMENTAL MILESTONE METHOD

Procurement progress can be divided in 4 categories :

• Progress of procurement services (procurement sup-port provided to the client).

• Progress of materials / equip-ment purchased by Worley-Parsons (managing the manufacturing & delivery process).

• Progress of materials / equip-ment purchased by Worley-Parsons on behalf of the Cli-ent and free-issued to Con-tractor (managing the manu-facturing & delivery process).

• Progress of procurement when it is part of a subcon-tracted scope of work (Procurement / Fabrication/ Installation sub contract).

The measurement method for Procurement Progress is identi-cal to the “Deliverable Register” gate principles.

Based on the agreed Procure-ment Strategy, a Procurement Package register, grouped by Discipline, will be developed and issued for client approval.

A procurement package consist

Table 9.3 - Rules of Credit (Procurement Services) Incr.% Cum. %

RFQ – Request For Quotation ** Note 10% 10% IFQ – Issue for Enquiry 20% 30% TBE / CBE – Technical / Commercial Bid Evaluations *** Note 40% 70% AR – Issue Award Recommendation 15% 85%

PO – Purchase Order Award 15% 100%

Notes ** or RFP - Request For Purchase ***or TBA/CBA - Technical / Commercial Bid Analysis

“By the time you're eighty

years old you've learned everything. You

only have to remember it.”

~/~ George Burns


Free-Issue Equipment / Mate-rials

“Free-issue”-items are the equipment & material items that are purchased by the client and free-issued to the Fabrication / Installation contractors. In other words, the contractor only pro-vides labour services.

This scenario is very common when in situations where bulk purchase discounts can be negotiated to ensure full control of material management or when managing schedule-driven EPCM projects in an overheated commodity market.

Under such conditions, not only the exotic equipment / materials will be ’critical’ in terms of deliv-ery lead-time, even ordinary equipment items and bulk ma-terials could suddenly find themselves on the critical path and will need to be ordered early to ensure ‘on-time’ deliv-ery.

As the EPCM contractor, WorleyParsons will not only provide the services to pur-chase and expedite the delivery of ‘free-issue’ equipment and materials, it also has the re-sponsibility to monitor progress and cost for these items.

The Procurement scope (Project Stage level) is broken

down in Area/Facility and Disci-plines, and from there into Con-trol Accounts.

The Control Accounts here are the Procurement Packages (unlike the Procurement Ser-vices scope, where the pack-ages act as deliverables)

Each Control Account is allo-cated a budget ($) and broken down in one or more Procured items.

In this scenario, the Procured Items are the ‘deliverables’ of the Control Account.

The Control Account budget will be distributed across the Pro-cured items, creating weighted ‘deliverables’.

‘Control gates’ are assigned to each deliverable in order to achieve the 100 % completion stage.

These ‘Control-gates’ are aligned with the Progress Pay-ment Milestones as negotiated by the respective Vendors.

Physical progress of the pro-cured items is provided by the vendors / suppliers and verified by the Procurement/Contracts team.

Progress Payment milestones will vary from Vendor to Ven-dor, but an example is outlined below:

Progress can be claimed up to the next control gate, however to proceed through the gate, the milestone must be achieved.

In addition to this “Serial” gate method, there is also the option to claim progress using the “Parallel” gate method. This method allows the Controller to claim progress beyond the gate, without achieving the milestone.

This “Parallel “ gate method is frequently used for progressing bulk material (multiple evalua-tions under one Procurement Packages).

Physical evidence must be pro-duced to demonstrate that this milestone is achieved.

The progress of each deliver-able will be summarized at Con-trol Account Level and trans-ferred into the Control Schedule and Control Budget to reflect the overall status of work.

InControl Software is utilized to manage and maintain the Pro-curement Services progress.

The Procurement team is re-sponsible for updating the PO status of each Procurement Package on a regular basis.

The cut-off time for weekly re-port information is Close of Business of the last timesheet day of the week.

Rules of Credit (Vendor) Incr.% Cum. %

POA – Purchase Order Award 5% 5%

VDA – Vendor Drawings For Approval 5% 10%

VDF – Vendor Drawings Final 10% 20%

MAP – Material Purchased 30% 50%

FAM – Fabrication / Manufacturing 35% 85%

SHP – Shipping Documents Ready 5% 90%

INS – Equipment Received 5% 95%

FIN – Submission of Final Documentation 5% 100%

“ No matter what happens, there’s always

somebody who knew it

would”

~/~ Lonny Starr


This method allows the Control-ler to claim progress beyond the gate, without achieving the milestone.

This “Parallel “ gate method is used for progressing bulk mate-rial (multiple deliveries under one Procurement Packages).

WorleyParsons is using Smart-Plant Materials (SPM) to man-age and maintain the Procure-ment scope.

This system allows the Procure-ment/Contracts manager to update the status of each Pro-curement Package at the regu-lar interval.

The cut-off time for weekly re-port information is Close of Business of the last day of the week.

Progress percentages for work performed in remote locations shall be forwarded to the Pro-curement/Contracts Manager by the above cut-off time for entry into SmartPlant Materials.

Materials Purchased as Part of Subcontracted Scope

When Procurement is included in a (sub) contracted scope of work scope, then management and expediting of the procured items falls under the responsi-bility of this (sub) contractor and must be included in their monthly status report.

Again, report format and Break-down levels should be ap-proved by the EPCM contractor and fed into the overall project breakdown structure.

Progress can be claimed up to the next control gate, however to proceed through the gate, the Payment Milestone must be achieved.

Physical evidence must be pro-duced to demonstrate that this milestone is achieved. This is usually the Payment-Certificate.

The progress of each Procured Item will be summarized at Con-trol Account -Level and submit-ted to the EPCM Project Con-troller for transfer into both Con-trol Schedule and Control Budget to reflect the overall status of work.

As described in the Procure-ment Services section, there is also the option to claim progress using the “Parallel” gate method.

“I like work; it fascinates me. I can sit and look at it for hours. “

~/~ Jerome

Thiessen


The intent of both is the same (completion of Construction tasks), however they use differ-ent ‘vehicles’ to achieve this.

Greenfield Projects

In a Greenfield project environ-ment, the Construction Work Packs are broken down into detailed construction tasks.

This is usually done using Scheduling Software (Primavera, MS Project, Arte-mis, Open Plan etc..)

Each construction task is loaded with key quantities (Unit of Measurement ) associated with the work package (such as (m3 concrete, m pipe etc), cre-ating weighted ‘deliverables’.

Physical progress will be col-lected against these detailed tasks and summarized to Work Package level (Control Ac-count). The progress can be rolled up to the WBS levels of the Construction scope.

Depending on the nature of the works, one of the following six methods of progress can be applied:

• Units Completed

The basis for progress meas-urement is Quantities Installed against Estimated Quantities-At-Completion or against the

QAB.

This method is applicable to tasks that involve a repeat of easily measured pieces of work, when each piece requires approximately the same level of effort.

For example :

Cable-pulling is a task where accomplishment is easily meas-ured in terms of linear meters of wire pulled.

Steel Erection can be meas-ured by tonnes erected.

Placing and finishing a concrete slab would normally be reported on the basis of m3 poured and finished

• Incremental Milestone

A method that can be used for tasks which includes subtasks that must be handled in se-quence.

For example, installing a major vessel can be segmented into subtasks and can be assigned an increment of progress for the entire task.

Completing any subtask is con-sidered to be the achievement of a milestone and each incre-mental milestone completed represents a certain percentage of the total installation.

9.3 CONSTRUCTION: VARIETY OF METHODS

The basis for progress meas-urement in the Construction-phase can differ, depending on trade and nature of work.

The breakdown principle is simi-lar to the methods described for Engineering Services and Pro-curement.

The Construction scope (project phase level) is broken down in Trades/Disciplines, and from there into Construction Work Packs (Control Account level).

Note: While Construction Work packs are usually single trade /discipline, there are also in-stances where Construction Work Packs could be multi trade / discipline. A modular constructed facility is a good example of this.

Each Control Account is allo-cated a budget ($ or Unit of Measurement of choice) and broken down to the next level; measurable construction deliv-erables.

Construction deliverables can be categorized according to the type of project:

• Greenfield Project Deliver-ables (building new facilities)

• Brownfield Project Deliver-ables (modifying/upgrading existing facilities) “ Even if you

are on the right track,

you'll get run over if you

just sit there.”

~/~ Will Rodgers


Page

ment & Support Control Ac-counts will be aligned to the Overall Project % Complete.

Discipline Supervision progress is following the % Complete of their respective disciplines etc.

• Supervisor Opinion

In this method the supervisor makes a judgement call on the % Complete.

This is a subjective approach and should only be used for minor tasks such as: dewater-ing, landscaping, etc.

• Weighted Equivalent Units

This method is applied for tasks with a different unit of work measurement that requires detail monitoring.

Structural Steel erection pro-vides a good example.

Steel Erection is normally esti-mated and controlled by using tonnes as the key quantity for

Unit of Measure.

However, when it is required to monitor Steel Erection in greater detail (as some Con-struction Contractors tend to do), than this task need to be broken down in subtasks.

Each of these subtasks could have a different unit of meas-ure.

It will be difficult to summarize the ’Earned Values’ of these subtasks to main-task level when they all have a different UoM-basis.

To handle this, each subtask is weighted according to the esti-mated level of effort and con-verted into equivalent units.

An example of this method is shown below.

• Job Cards

This “Extended Version” of the Incremental Milestone principle will be described on the follow-ing pages

• Start/Finish Percentages

Method is used for tasks that lack definable milestones or those for which the effort/time required is very difficult to esti-mate such as: aligning a fan and motor, flushing and cleaning, testing etc.

In this method a % complete is assigned to the start of a task and 100% is recorded when the task is finished. This concept can be applied in many varia-tions such as 50/50 - 30/70 etc.

• Performance Ratio

This method is applicable to tasks that are continuous during the life of the project and which are estimated on bulk alloca-tions of dollars rather than on the basis of production.

Project Management and Sup-port, for example, are area’s where this method can be ap-plied.

The % complete for Manage-

“ A problem shared is a

buck passed “

~/~ Author

Unknown


Weight Task UoM QTY Actual % Complete Earned

25% Set Columns Each 87 74 85.1% 110

25% Install Beams Each 859 145 16.8% 22

35% Install Girts & Sag Rods Bay 38 12 31.5% 57

10% Plumb & Align % 100 5 5% 3

5% Punchlist % 100 0 0% 0

100% Erect Steel Totals Tonnes 520 N/A 36.9% 192

Calculation Method :

1. Line-item Set Columns: 74 installed out of 87 = 85.1% Complete

2. 85.1% x the weight of that line-item (25%) = 21.2 %

3. 21.2 % x Budget Quantity Steel 520 Tonnes = 110 Tonnes Earned in Equivalent Weight for that line-item

4. Sum of all the Earned Values (192), over the Budget Quantity (520) is the % Complete of the Steel Erection Scope.

Example Weighted Equivalent Units methods

cremental Milestone principle: the Brownfield scope is broken down in Trade/Discipline spe-cific Construction Work Packs (Control Account level), and from there into the Brownfield deliverables; the Job Cards.

Job Cards are assigned ‘achievement gates’ to measure progress, just like for instance an engineering deliverable (Issue Milestone Gates), only here they are represented by the detail tasks to complete a Job Card.

These tasks are weighted, add-ing up to 100%.

Progress is earned by complet-ing each detail task. (the ‘Incremental Milestone’ princi-ple) and rolled up to Job Card level.

Completing all the Job Cards in a Work Pack completes the Construction Work Pack.

In addition, the Job Card in-cludes the relevant details for Inspection, Safety, Construction drawings, required materials etc.

An example of this principle is shown on page 68-69.

The Top section captures the Job Card details such as the Project, the Work Pack, the responsible person, Job Card description etc.

Section B is for specifying Special Requirements, if any. In this particular instance there is a requirement for a Hot Work Permit prior to work com-mencement.

Section C lists down the weighted Job Card tasks that need to be executed in order to complete this Job Card.

Sections D and E specify the materials and AFC drawings required to execute the tasks on this Job card.

Section F lists down specific HSE requirements for this Job Card.

Section H covers the required Inspection Test Reports (certificates / approvals).

The labour resources, crew-mixes and tools & equipments required to perform the work are listed in Sections H and J.

The bottom section is reserved for formal sign-off to authorize commencement of the work and to confirm its completion.

Brownfield Projects

Cost and Schedule Perform-ance management for Brown-field works comes with its own specific challenges.

Brownfield work will be exe-cuted in an existing “live” facil-ity environment, meaning that that there are many interfaces with the facility Operations group.

In order to start work in an exist-ing plant or facility, the area must be made available by the facility Operations group.

In some instances, this could mean that the plant, or parts of it, will have to be shut-down for a period of time.

Given that every “non-production” day of the facility will have a direct impact on the revenue stream, the Brown field contractor therefore must mini-mize the execution time.

It is therefore important that the work-scope is packaged, planned and executed in great detail.

In addition to this, the contractor has to comply with the various pre & post work requirements and ensure that all Safety and Quality clearances are in place in order to start and/or complete the works.

Job Cards

The preferred and, arguably, the most accurate method for planning, executing and moni-toring Brownfield construction tasks will be the Job Card based progress measurement approach.

This approach is basically an “Extended Version” of the In-

“ Opportunity is missed by most people because it is dressed in

overalls and looks like

work”

~/~ Thomas Alva

Edison


Construction Foreman rounds up the crew, collects the materi-als from the warehouse, and executes the work according to the Job Card.

If, for whatever reason, certain Job Card tasks cannot be com-pleted, then the uncompleted tasks will be transferred to a Punch-list.

A Punch-list is a list of out-standing tasks that will have to be completed prior to pre-commissioning, and is usually done by a dedicated “task-force” at the tail end of the pro-ject.

After completion of the Job Card, the Foreman returns the completed Job Card to the Workface planners, who will then arrange for the works to be inspected and approved by the

site inspectors.

Job Cards are meant to be ‘quick hits’; the total duration of a Job Card should be one-two days to maximum a week.

In terms of scheduling, Job Cards and Job Card tasks are considered detail schedule activities, and therefore the responsibility of the Brownfield Contractor.

Considering their great level of detail, Job Card tasks are very suitable to be imported directly from the Job Card Management Software into the Schedule.

The progress collected on Job Card tasks will be summarized up to Job Card level and from there to Construction Work Pack (Control Account Level), before it is transferred to the Overall EPCM Control Sched-ule.

Job Card Development and Workflow

Job Cards are developed by Workface Planners at the start of the Construction phase and will be expanded to a greater level of detail as the project progresses.

Workface Planners are tasked with the breakdown of the Work Packs into Job Cards and de-tailed Job Card tasks.

The Workface Planners are also responsible for identifying and obtaining all necessary pre & post work qualifications, authori-zations and clearances, and ensuring availability of all re-quired drawings, materials, re-sources and tools.

Once the Job Card is approved and the site location cleared for commencement of works, the

“If at first you don't succeed,

remove all evidence you ever tried.”

~/~ David Brent


Job Card No. 4-S-WPS-01 / 004

Project: : Tatanka Gas Development WorkPack ID : 4-S-WPS-01

Client: : CROC Contract ID : 9571

Work Package: : 4-S-WPS-01 Structural Shutdown Works Engineer : S.T

Job Card Description : Tie-in SD – Install Bearing Plates

Contracts : 4 – Brownfield Works / Tie-in /HUC Revision : A

B - Special Requirements

JSA Hot work Permit; Hot work Control Procedure.

C - Job Card Tasks / Operation Details

36 100 580 TOTAL

100 18 LT 1.00 105 Install Bearing Plates 3 location at B1 6

83 18 LT 1.00 105 Install Bearing Plates 3 location at B 5

64 18 LT 1.00 105 Install Bearing Plates 3 location at A1 4

46 10 LT 1.00 61 Grinding Prepare for Installation at B1 3

36 18 LT 1.00 102 Cut & Seal Weld Deck Plate location at B1 2

18 18 LT 1.00 102 Cut & Seal Weld Deck Plate location at A1 1

Complete Cum (%)

Incr (%)

Unit Qty Hrs Job Card Entry Item No

Pcs 1.00 Bearing Plates 710x900x45 3



Check Unit Qty Material Material Code Item

A1

A1

A1

Rev

Topside Structural Main Deck Flooring Layout 1 Demolition Drawings 8381-2202-DY-015-R

Topside Structural Elevation Truss Row ‘3’ / ‘S’ 1 Construction Drawings 8381-2101-DS-009-01

Topside Structural Elevation Truss Row ‘A’ / ‘B’ 1 Construction Drawings 8381-2101-DS-007-01

Drawing Title Sheet Drawing Type Drawing No.

D - Material Details

E - Drawing Details

Page 1 of 2


F - Safety / Other Detail

Portable Gas Detector 2

Containment Habitat for Hot Work 1

Details Item No.

Structural Completion Certificate MS-1

Welding Completion Summary MW-1

ITR Description Item No.

0.00 126.00 Rigger RG

43.00 63.00 Structural Fitter SF

98.00 216.00 Structural Welder SW

0.00 6.00 Surveyor SY

NDE Technician

Fire Watcher

Resource Description

580.00

25.00

144.00

Budget Hours

225.00 TOTAL

0.00 IN

84.00 FW

Actual Hours Code

1.0 2.00 Welding machine E21

1.0 1.00 Gas Cutting Set E22

0.5 1.00 Magnetic Testing Set E25

1.00

3.00

Units

Rigging Gears

Grinding machine

Equipment Description

0.5 E33

1.0 E18

Duration (days) Code

CLIENT STATUS

CONTRACTOR STATUS

DATE INITIAL SIGNATURE POSITION DATE INITIAL SIGNATURE POSITION

28/04/09 S.T W/PACK ENGINEER PREPARED

C.SUPT / ENGINEER

SITE FOREMAN

OPERATIONS TL

W/PACK TL

D.D

K.L

30/4/09

28/04/09

VERIFIED

COMPLETED

APPROVED

S.R.E

INSPECTOR

ENGINEER IN CHARGE

VERIFIED

COMPLETED

APPROVED

REVIEWED

G - ITR Details

H - Resource Details

J - Equipment Details

Page 2 of 2


the installed system is ade-quate, controls are properly calibrated, control sequences are correct, and proper re-sponses occur to pre-defined stimuli. Commissioning tests are also referred to as Accep-tance Tests.

A System Handover Package is the Commissioning equivalent of the Construction Work Pack-age.

Significant difference with the construction Work Packs is that a System Handover work packages (Control Account level) is based on Commission-ing (sub) systems rather than Trade/Discipline scopes.

A System Handover Package consists of marked up system boundaries, procedures and a list of inspection check-sheets & certificates.

Progressing of Commissioning activities is done using the Job Card approach, only here they are called the Inspection check-sheets.

The only difference is that the Inspection check-sheet does not contain details on resource

or manpower requirements.

Progress of the Inspection check sheets will be rolled up to System Handover Package level. Prior to functional testing all system check sheets and certificates must be completed and signed off.

• Operations & Maintenance (O&M) Summary and Train-ing.

A facility cannot be expected to operate optimally if the person-nel in charge of operating and maintaining the systems are unfamiliar with how to service the equipment and do not fully understand how and why the systems operate the way they do.

Therefore specified system documentation (O&M Manuals) and training procedures have to be developed and provided to the facility staff.

Like the Commissioning Plan Development scope, the Break-down-and Progress Measure-ment principles are the same as the Deliverable Register method described for Engineer-ing Services in Chapter 9.1

9.4 COMMISSIONING: INCREMENTAL MILESTONES METHOD

Commissioning is a systematic process by which an equipment, facility, or plant is tested to ver-ify if it functions according to its designed intent.

The Commissioning scope is usually subcontracted in full to a contractor that has the organiza-tion, knowledge, and technical ability to provide the total com-missioning service. Generally, the Commissioning scope can be divided in 3 categories:

• Commissioning Plan Devel-opment

The development of a commis-sioning plan that includes items such as the project schedule, construction contractor respon-sibilities, outstanding informa-tion requirements, equipment and system test procedures, system hand-over plan, moni-toring plan (if any), and opera-tor training.

The Breakdown and Progress Measurement principles are similar to the Deliverable Regis-ter method described for Engi-neering Services in Chapter 9.1 (incremental milestone gates)

• Execute Commissioning Tests

The testing activities typically begin with pre-commissioning or inspection tests to verify that equipment and controls are installed as specified.

These inspections are followed by more sophisticated functional performance tests.

Functional tests, often seen as the heart of commissioning, are intended to determine whether

“Some projects finish on time in spite of project management

best practices.”

~/~ Author

Unknown



before the design phase is com-pleted. While the engineering office is refining the design of the pro-ject, budget quantities and asso-ciated cost budgets can be sub-ject to continuous adjustments.

Meanwhile, the project controller has to track project performance against either an inaccurate baseline or a moving target.

Picture the following project scenario:

“A contractor has been awarded a lump sum contract for piling works.

The TIC estimate, and therefore the Control Budget, allowed for 1000 piles for the entire area.

During construction, it is discov-ered that 1000 piles are insuffi-cient and that 1200 piles are required.

The client maintains that they have agreed to one price as the cost of the piled area, and does not agree to pay any additional cost for two hundred additional piles.

The contractor is faced with a quantity variance that includes the cost and manhours associ-ated with the 200 additional piles, but they cannot adjust the current budget to reflect this,

because the client rejected the Change Order.”

The question is now: “After driv-ing 500 piles, what is the correct percentage completion?”

Progress will be overstated if the 1000 piles in the current budget is used as the basis for progress measurement.

(500/1000) x 1000 = 50%

The amount of work (quantity of piles) has changed from 1000 to 1200; so by right, this should be the basis of progress regardless of who picks up the bill.

What is required instead is a method to calculate progress and Earned Value for projects on which the budget quantity is base-lined with a high uncer-tainty or has a great probability to be re-adjusted through the project life-span.

The two most commonly applied concepts to calculate progress for variable budgets are:

• the concept that uses the EAC (Estimate At Comple-tion) value;

• the concept that uses the QAB (Quantity Adjusted Budget) value.

The EAC and QAB concepts are based on the same principles and will return the same result in terms of % Complete, but they use a different basis from which Earned Value is generated.

Both are established and indus-try-accepted methods, and se-lecting the appropriate method for the project usually comes down to project management and/or client preference and the way they want to be reported on project performance.

9.5 EARNED VALUE FOR VARIABLE BUDGETS

The accuracy of the progress measurement methods described in chapter 9.1—9.4 is largely dependant on the quality of the project baseline and the control budget.

Cost ‘overruns’ and schedule slippages are not always due to underperformance of the project execution team; they can also occur when control budgets are under-estimated, when the initial project scope has not been ade-quately defined (scope growth) or when the project is subject to scope changes.

In principle, Earned Value is measured against a rigid budget (current Control Budget) and adjustments to this budget can only be made through approved change orders.

Most projects are subject to fre-quent scope changes and subse-quent change requests.

Working on scope that has not been approved (yet), will not contribute to the overall comple-tion of the current work scope.

When operating in the fast-track project execution arena, it will be more rule than exception that construction has already started

“The first 90% of a project

takes 90% of the time,

the last 10% takes the

other 90%.”

~/~ Author

Unknown

To maintain transparency and restrict arbitrary fluctuations in progress, it is important that these trends are documented in the Variance system before it is incorporated into the EAC fore-cast (See Flowchart on the next page).

The benefit of the EAC ap-proach is that it returns a % Completion based on the latest forecasted quantities, while still maintaining a performance picture against an approved scope.

E.g. assuming a productivity of 1, the contractor would have spent 50% of the budget (which is the cost of driving 500 piles out of the initial 1000) to achieve only 42% Completion.

The impact of the additional 200 piles on cost/schedule per-formance and subsequent over-run/schedule slippage will im-mediately trigger a Project Man-agement investigation and be-comes an incentive to raise a

variance notice, expedite ap-proval or, if rejected, initiate a recovery strategy on cost and schedule going forward.

On the down side, constant changes of quantities and scope can have a demoralizing effect on the project team.

Working around the clock to get the work done, but achieving very little progress due to under estimated quantities or unap-proved change orders is not exactly a ‘morale-booster’ for the project team.

When using the EAC concept, ‘true’ productivity and efficiency is measured by tracking expen-diture for ‘potential’ change work separately from the ap-proved Control Budget, and deduct this number from the total expenditure to get expen-diture on the approved scope.

This way, expenditure and pro-gress can be compared against the same authorized scope.

The EAC based concept

The traditional EAC-based method uses the Estimate At Completion value to calculate the % complete, and applies this progress to the current ap-proved budget to generate the Earned Values for the overall project.

Qty’s Installed Estimated Qty At Completion

or, when applied to the exam-ple project: (500/1200) x 100 = 41.66 (42%)

The EAC is here defined as Current Budget + Performance/Price Trends (variance system).

These trends are usually the result of pending change re-quests, but could also come from educated guesstimates from subject specialists or su-pervisors, current project per-formance data, historical per-formance data from contractors & vendors or previous experi-ences on similar projects.


“A change freeze is like the

abominable snowman: it is a myth and would

melt anyway when heat is

applied”.

~/~ Author

Unknown


Flow

char

t EA

C C

once

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RES

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PR

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M

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AN

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1,00

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EM

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Pot

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Pro

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Req

uest

(PC

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Per

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Per

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O

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nder

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N

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olve

Issu

es &

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ncel

200

200 BAS

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OR

PR

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all under-performing WBS ele-ments can therefore be directly attributed to inefficiency, low productivity or re-work and ac-tioned accordingly.

Although the QAB concept re-turns ’fairer’ productivity and efficiency information, the Pro-ject Controller should apply this approach with some caution.

Applying the QAB based per-formance measurement con-cept should not result in a more relaxed approach towards ex-pediting change-request ap-provals from the client.

Also, not all internally approved changes’ will end up a client approved changed order.

Rejected change orders are therefore ’real’ under-performing work elements that will impact the project bottom-line.

This is even more so the case for Engineering services work scopes where progress is not generated by adjusted quanti-ties (hrs or number of deliver-ables), but via weighted deliver-ables in the deliverable register.

The previous example, but only now projected on an engineer-ing scope (1200 hours) will demonstrate the potential risk of applying the QAB concept to engineering services work scopes;

“The physical progress derived from the deliverable register is 45%, while the expenditure to date is 500.

Because the physical progress is generated from the (quantity adjusted) deliverable register, the earned value will be 540 (45%x1200), implying that the project is ‘over-performing’.(540

earned by spending 500).”

This will present a potential danger in the event the vari-ance is rejected later on; a good CPI/SPI wouldn’t exactly trigger any alarm bells, so chances are that this will go unnoticed until the $ bottom-line flags up a overrun.

This would be hard to explain to the stakeholders, considering the excellent performance to date; (“where were the early warning signs?”).

Some clients do not allow QAB based reporting and insist re-viewing the progress, cost per-formance and the quality of estimating against the author-ized scope.

When applying the QAB ap-proach, It is therefore impera-tive to keep project manage-ment and client informed on the performance of the project against the approved budget as well.

In summary, using the QAB concept to earn progress is a more fairer reflection of the project team effort. (“we are putting in a lot of effort and the project is progressing accord-ingly…”).

Using the EAC concept is a more accurate reflection of the team’s achievement. (“we’re not progressing as planned, but that’s because we constantly have to work on under-budgeted work scope or unap-proved changes ”).

Regardless which approach is applied, the projects' stats for the forensic analysis and norms / benchmarking meas-ures are the same: the actual quantities and the actual expen-ditures are counted.

The QAB based concept

Initially, the notion of Quantity Adjusted Budget (QAB) has been developed for the con-struction industry.

QAB is an additional ‘flexible’ budget based on adjusted quan-tities and is calculated by adding internally authorized changes to the approved Current budget. The QAB is the basis on which progress is measured.

Qty’s Installed Quantity Adjusted Budget

Applying the QAB principle to the example returns the same result: (500/1200) x 100 = 41.66 (42%)

Where the QAB differs from the EAC concept is that the QAB is also used to generate Earned Values and to measure cost and schedule performance against.

Because the QAB includes in-ternally approved change work, the measured project perform-ance can be considered ’true’ performance.

To use the same example; the contractor would have spent 42% of their budget (QAB) to achieve 42% completion.

Since the QAB baseline in-cludes the internal approved changes (regardless whether they are approved by the client),

“Not everything that can be

counted counts, and

not everything that counts

can be counted.”

~/~ Albert

Einstein


Flow

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Per

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needs to reconcile the progress inputs from the respective Con-tractors into an Overall EPC progress status.

It is therefore essential that the Project Controller reviews, ap-proves and documents the pro-gress measurement methods proposed by the contractors prior to contract commence-ment (but preferably already as a pre-award requirement in the bid-phase), so there will be no misunderstanding on how these progress numbers are derived.

Although progress can be cap-tured at lower WBS levels, Pro-gress Management for the Overall EPC starts at the Con-trol Account level.

As explained in Chapter 4.5, the Control Account level is the lowest level in the Control Budget where cost and pro-gress come together.

The Control Budget is a result of a Total Installed Cost (TIC) estimate, generated in the FEED phase and approved by the client.

In the process of weighting the EPC-elements, different units of measurements are being used (manhours, m3, tonnes etc.) and therefore different types of Earned Values are generated after progress update.

9.6 EPCM: CONSOLIDATED PROGRESS

Table 9.4 gives an overview of the Progress Measurement methods discussed in Chapters 9.1—9.4.

It is by no means a definitive and complete summary, but it is safe to say that these method-ologies are commonly used by many contractors across the globe.

The EPCM contractor is tasked with managing the Control Schedule and Control Budget for the entire EPC.

As such, the EPCM Contractor

Execution Stage Methodology Example

Engineering Incremental Milestones

Performance Ratio

Deliverable Issue Gates (IFC, AFC etc)

Project Management & Support

Procurement Incremental Milestones Progress Payment Milestones Purchase Or-ders (Manufacturing) ; PO Award Milestone Gates (Services)

Construction

Units Complete

Incremental Milestones

Start/Finish Percentages

Performance Ratio

Supervisor Opinion

Weighted or equivalent Units

MT Steel erected; LM cable pulled etc…

Equipment Installation steps; Job Cards

Aligning Fan or Motor

Construction Management & Support

Dewatering; Landscaping etc…

Tasks with multiple Units of Measure (UM’s)

Commissioning & Completions

Incremental Milestones Inspection Check sheets; Deliverable Issue Gates (Documentation)

Table 9.4 - Progress Measurement Methodologies

“ Most problems are

caused by solutions”

~/~ Eric Sevareid

are accrued against the budg-ets that are committed.

‘Commitments’ are the control budget amounts that are com-mitted for expenditure (such as the awarded contract value for a Subcontract or a Purchase Order).

Commitments are made throughout the project, so the Control Budget will be moni-tored against a combination of Committed Values and Non-Committed Values.

In addition, it is quite common that some commitments are done partly instead of in full (e.g. material bulks).

Commitments are usually either lower or higher than their re-spective Control Budgets, but have seldom the same value. This is not surprising, after all, the Control budgets were based on an TIC estimate developed much earlier.

The EPCM Project Controller is tasked to manage the Control Budgets for each Control Ac-count and report project per-formance (cost against pro-

gress) along all levels of the WBS.

The main source of ‘actuals’ input will come from the Pro-gress reports from the respec-tive Contractors and Vendors (current commitments).

In addition, the Project Control-ler will have to forecast where each Control Account is head-ing in terms of ‘Cost-At-Completion’

This is a bit harder when not all commitments are made. The difference between the Control Account budget and the ‘At-Completion’ forecast of an as-sociated Commitment is not necessarily an over or under run, nor is it automatically an outstanding, future Commit-ment.

To ensure that all future com-mitments (future contracts & POs, variations orders on exist-ing commitments, ‘top-ups’ for bulk material Purchase orders) are taken into account when calculating the % Complete for the overall EPC, the following principle will be applied:

The deliverables under an Engi-neering Control Account will usually return an Earned Value in manhours, Procurement Packages most likely in dollars and the Earned Value of a Con-struction Work pack can be based on a variety of UoMs, depending on the nature of the work.

To calculate and analyse the overall project result, all these different Earned Values will, somehow, have to be con-verted into one common value.

What all Control Accounts have in common is that they have a budget money value.

It is therefore logical that the Project Controller uses the Pro-ject currency as the common denominator to ‘weight’ the value of each Control Account in the Overall EPC.

The progress measurement methods described in the previ-ous pages are the assessments of work in progress and are based on the Earned Value method.

However, these Earned Values

Example of an EPCM project with a Total Installed Cost of 1,500,000. The project will have multiple WBS levels and Control Accounts, but for the purpose of illustrating the basic principle, only one com-mitment has been made (against the budget of a Control Account called #1—Civil Works): Total EPC budget 1,500,000

Progress Update from Civil Works Contractor:

Value of the Commitment 80,000 (Civil Contactor’s current Contract Value) % Complete Commitment 50% Earned Value Commitment 40,000 (50% x 80,000)

Reconciliation EPCM Project Controller:

Budget Control Account #1- Civil Works 100,000 Estimate At Completion Control Account #1 85,000 (forecast by the EPCM Project Controller) % Complete Control Account #1 47% (40,000 / 85,000) Earned Value Control Account #1 47,000 (47% x 100,000) Progress Overall EPC 3.1% (47,000 / 1,500,000)



installs all the golden doors, claiming 75% completion on the project.

He justifies this progress claim by referring to the consolidated EPC progress method described in the previous chapter. ($ value as the common denominator across the EPC stages)”

In this extreme project scenario, the claimed progress will not reflect the actual physical pro-gress, and an alternative pro-gress measurement method should be considered.

Capped by Project Stages

One method of addressing this is to assign relative weights to the respective project stages, (see example below), and then weight the WBS elements within the project stage.

Engineering 15%

Procurement 40%

Construction 35%

Completions & Handover 10%

By imposing ‘caps’ to the project stages, the progress contribu-tion of each stage to the overall project will be restricted to its cap-value.

Equivalent Units

Another approach to consolidate progress in a Golden Doors scenario is the Equivalent Unit method.

This method requires the Project Controller to convert the key-quantity of each Control Account into equivalent units. (common denominator)

Given that on major contracts progress is always a function of contractor’s manpower (via re-imbursable or lump sum, unit rate or other), the most frequent used Equivalent Unit is man-hours.

Table 9.5 shows the principle of consolidating overall progress using manhours as the Equiva-lent Unit for a small, fictive EPC project Units.

9.7 “HOUSE WITH THE GOLDEN DOORS” SCENARIO

The EPC progress consolidation described in chapter 9.5 can be applied to most of the projects executed within WorleyParsons.

However, there are always ex-ceptions. See below a project scenario that is commonly known as the “House with the Golden Doors”;

“Someone is building a holiday-home in Cambodia, using low cost materials and a local con-structor.

To keep the ‘bad spirits’ outside the house, the architect de-signed a house that has solid golden doors.

These doors can be purchased of the shelf and can be installed within an hour.

After the foundations are in place, the contractor immedi-ately erects the door-posts and

“If you don't know how to do a task, start it, then ten people who know less than you will

tell you how to do it.”

~/~ Anonymous


Task UoM Budget Qty

EAC Qty

Equivalent Units (hrs)

Actuals % Complete

Earned Value

Detail Engineering Dwgs hrs 600 630 600 630 100 600 Procure Bulk Materials $ 500,000 480,000 1600 480,000 100 1600 Set Columns Each 87 87 450 74 85.1 383 Install Beams Each 859 859 450 145 16.8 76 Install Girts & Sag Rods Bay 38 38 630 12 31.5 198 Plumb & Align % 100 100 180 5 5 9 Punch list % 100 100 180 0 0 0 Overall Project 4000 71.6% 2866

However, the manhours weight distribution method could poten-tially return a distorted overall progress result when it is ap-plied in a “mixed productivity” project execution environment.

This can be illustrated by the following example:

An EPCM Project is executed by WorleyParsons Europe. 30% of the physical scope is subcontracted to a ‘low-cost/low productivity’ centre somewhere in Africa. Due to the difference in produc-tivity the manhour budget for this subcontract adds up to 50% of the total manhours .

When applying a straight man-hour weight distribution for the EPC, the project would be 50% complete when this contractor completes his scope (as op-posed to 30%).

Another potential obstacle for using manhours as the common denominator is that accurate manhour estimates are not al-ways readily available (e.g. from Lump Sum contractors).

In that event, the Weight % or even a Pre-determined scale (e.g 1:1000) could be consid-ered as the equivalent unit.

An example of the Weight % for the same line-item, is shown below 74 columns 87 columns 85.1% x Equivalent weight %(11.5) = 9.6 Equivalent weight earned.

Sum of all the Earned % Weight is the % Complete of the project (71.6%)

With the exception of Detail Engineering (where progress is derived from the Deliverable Register), physical progress is calculated using the formula:

actuals EAC

and applied to the Equivalent Unit to calculate an Earned Value in manhours.

For example; line-item Set Col-umns

74 columns 87 columns 85.1% x Equivalent manhours(450) = 383 Equivalent hours earned

Sum of all the Earned Values (2866) over the Equivalent Unit budget

2866 4000

is the % Complete of the project (71.6%)

= 85.1%. = 85.1%.

Table 9.5 Equivalent Units - Manhours

Table 9.6 Equivalent Units - Weight %

Task UoM Budget Qty

EAC Qty

Equivalent Units

(weight %)

Actuals % Complete

Earned Value

Detail Engineering Dwgs hrs 600 630 15 630 100 15 Procure Bulk Materials $ 500,000 480,000 40 480,000 100 40 Set Columns Each 87 87 11.5 74 85.1 9.6 Install Beams Each 859 859 11.5 145 16.8 1.8 Install Girts & Sag Rods Bay 38 38 16 12 31.5 5.1 Plumb & Align % 100 100 3 5 5 0.1 Punch list % 100 100 3 0 0 0

Overall Project 100 71.6% 71.6

• Cost recognized through accruals (recognize cost as they occur, irrespective of receipt of the formal invoice)

Because “cost-to-date” is an essential component in all pro-ject performance calculations, an ill defined cost recognition methodology will eventually lead to confusion and distorted project performance reporting.

In an EPCM environment, the cost breakdown structures of all Contractors must be aligned with the agreed Overall Project Breakdown Structure, and de-pending on the selected Break-down Structure (refer Chapter 4.0 - Project Breakdown Struc-tures), expenditure shall be captured against either Cost Centres (Segregated approach) or Control Account level (Integrated Approach).

Integrated CBS/WBS: When applying the Integrated concept, the cost control sys-tem must be able to relate ex-penditure to work accom-plished.

Since a Control Account repre-sents the work to be performed, its budgeted cost, and its inte-gration with the OBS, it pro-vides a logical place to collect costs.

Applying the Integrated ap-

proach on Self-performing projects could have an impact on the Accounts systems, be-cause the project WBS/CBS coding scheme must be adopted to facilitate collection and summarization of data.

On the other hand, there should be no significant changes to the Accounts sys-tem when executing an EPCM contract.

Considering that the Engineer-ing Services will be the only ‘Self-performing’ part of an EPCM (which usually only rep-resent 15—20 % of the total TIC), means that 80-85% of the cost will not go through the accounts of the EPCM contrac-tor.

It is important that the respec-tive contractors provide the cost data on the Overall Project Control Account level.

Segregated CBS/WBS: Isolated Cost Breakdown Struc-tures were not designed to cap-ture Cost and Progress in one common structure.

Without consideration of the WBS, the capability of Perform-ance measurement on all breakdown levels would not exist.

Instead, CBS based systems will only generate cost of la-bour, material and other direct and indirect costs incurred by organizational elements or against Commodity items.

Project expenditure will be cap-tured against Cost Centres.

For the accounts department, no significant changes to the accounting system will be nec-essary since the Cost Centres are usually based on Account-ing Ledger codes.

Before establishing a cost con-trol method on any project, it is important to differentiate be-tween project cost- and financial control.

Financial control is concerned with the reporting of actuals (receipts, expenditures, W.I.P, revenue to date, cost-to-date and profit to-date).

The financial control structure must be in accordance with internationally accepted rules of accounting and provide the following information: year-to-date and month-end P&L re-sults, invoicing, collection, taxa-tion, regulations, etc.

In essence, Financial Control is an Accounts Department’s re-sponsibility.

Project Cost Control, on the other hand, is concerned with what a specific project should cost and provides an accurate indication of where the project is heading (forecast at completion based on performance to date).

Project cost control must serve the Projects Manager’ require-ment to deal with the uncertainty and risks of project execution and help them make decisions based on the current status and forecasts, and is by no means a ‘bookkeepers’ function.

Project Cost Recognition Methods

We can generally choose be-tween two types of cost-recognition methods to monitor and report the Expenditure to date on projects:

• Cost recognized through Receipts / Invoices (recognize cost as invoices/expenditure claims receipts are received & approved)

10.0 COST CONTROL


tions on these two basic con-cepts being applied across the industry, all with the intent to ‘incentivise’ reimbursable con-tractors to be as efficient and cost-effective as possible, but in principle it all comes down to the same; the client reimburses the contractor for all time-efforts and non-labour expenses.

The basis for cost recognition is simple; man hours x the charge-rate equals the labour cost to the project.

Time is recorded on a weekly basis with hours booked to the appropriate Control Accounts.

All expended hours should be traceable to the respective En-gineering disciplines, Control Accounts and resources.

PAAF

Prior to any time-booking to the project, it may be a required to obtain client approval for all project staff (including designa-tion and proposed rate). This is usually done by raising a Per-sonnel Assignment & Authori-zation Form (PAAF).

Only PAAF approved personnel are allowed to charge time-cost to the project.

Actual man-hours are uploaded to InControl Software.

InControl holds the sell-rates of PAAF’ed personnel and has therefore the ability to generate accurate man-hour expenditure reports.

The accuracy of time reports is a vital control tool and therefore the timely submission of time-sheets is crucial to obtaining accurate information.

In addition, there are the non-labour costs. This is the cost of expenses required to perform a contract, such as travel, accom-modation, printing & copying, but also the cost of bonds, per-mits, temporary or client facili-ties, and Lump Sum subcon-tracts (specialist services con-tracts).

The non-labour cost will be charged to the appropriate Control Accounts as cost is incurred.

10.1 ENGINEERING

Providing Engineering Services is considered the core business of WorleyParsons, and is there-fore by default a ‘self perform-ing’ scope of work.

Looking from an EPCM per-spective, Engineering Services is charged to the Overall TIC on either Lump Sum or reimburs-able basis.

Lump Sum Projects

When Engineering Services are provided on a Lump Sum basis, cost is accrued by multiplying the verified progress (%) by the Committed Contract Value.

Man hours and non-labour costs are recorded against Con-trol Accounts for internal Per-formance Management only (are we making money on the project?)

Reimbursable Projects

A reimbursable contract can be executed using a Schedule of fixed Charge (sell) Rates per Resource Designation (Designer, Engineer etc) or through a salary-multiplier agreement.

The salary multiplier principle is based on an hourly base-rate which is calculated using just the individual salary (gross) and salary-burden (Annual Leave, social benefits etc) and applying a contractual agreed “multiplier” to this rate to derive the sell-rate of each engineering resource. The “multiplier” should cover for the office overheads and profits. There are many different varia-

“ Information about money is as important as money itself”

~/~ Walter Wriston


and the work that has been done.

This makes it very hard to measure Project Performance (no accurate comparison be-tween work accomplished and expenditure)

Accruals

When a contract is executed on a Lump Sum basis , the ac-crual method recognizes cost based on work accomplished:

Period Progress x Contract Value (Commitment).

The progress should be verified and approved by the client rep-resentative (EPCM Engineer-ing Manager or Contract Ad-ministrator).

When the invoice is received and reconciled with the sup-porting back-ups, the Project Controller reverses out the Accrued amount for that period and replaces it with the value of the invoice.

If the invoice value is less than

what was accrued for that month (over-accrual), than the Project Controller will top up the difference by adding an addi-tional accrual to match the ini-tial accrued amount.

If the Invoice value is more than the monthly accrual, the Project Controller follows the Invoice Value.

By always recognizing the most ’conservative’ actuals, the Pro-ject Controller avoids ‘oscillating’ (up & down) behav-iour of Cost–to-date numbers, while limiting the possibility of unpleasant surprises through-out the project duration.

When the contract is Reimburs-able, the accrual will be based on the manhour charge reports from the Contractor.

Cost is recognized as per the approved time-bookings and non-labour charges.

The reconciliation process be-tween the actual Invoiced Value and Accrued Value is identical to that of Lump Sum Contracts.

EPCM / PMC

For the EPCM Project Control-ler, there is no difference in treatment between the EPCM contractor and the other con-tracts he/she has to manage, even though this contract is executed by their own company and therefore ‘self-performing’.

This means that WorleyParsons will have to submit Progress and Cost Performance reports on Control Accounts level in the Overall Project breakdown Structure, just like all other con-tractors.

Invoices / Receipts

Cost is recognized the moment the Invoice of the contractor is received, verified and logged into the Project Controls sys-tem.

The main benefit of this method is that the project expenditure is always supported by solid evi-dence.

The downside is the delay be-tween receiving of the Invoices

The actual commitment (Purchase Order) is usually done by the Client. This means that the contract agreement will be between the Vendor and the Client.

The EPCM contractor is author-ized to act as the Client rep to ensure that the equipment & materials are manufactured/delivered as per technical specifications and agreed time-line and budget.

Equipment & Materials gener-ally comprise a large part of the TIC (rule of thumb: around

40%), so controlling the Pro-curement cost is one of the key success factors when manag-ing an EPC Control Budget.


The Procurement Services can be part of the EPCM Contract scope (free-issued equipment & materials) and/or included in one of the other contract scopes (EPC contracts).

In both scenarios the cost rec-ognition methods are identical to the methods described in Chapter 10.1 Engineering.

10.2 PROCUREMENT

Procurement cost is the cost of everything that is essential to constructing or operating a facil-ity.

In short, this means the cost of materials and equipment, as well as the efforts to support the Purchase Order award , the manufacturing and the expedit-ing process. (Procurement & Logistics Services)

WorleyParsons provide these Procurement Services as part of the EPCM contract scope.


on a Lump Sum basis, cost is accrued by multiplying the veri-fied progress (%) by the Com-mitted Contract Value.

The various methods of Pro-gress measurement are de-scribed in Chapter 9.0

Reimbursable Contracts

There are many Reimbursable scenarios possible, but below is a description of the three most ‘popular’ methods:

• Labour Cost + Tools & Ma-chinery Cost (material & Equipment free-issued by the client)

• Labour Cost + Tools & Ma-chinery Cost + Cost of Mate-rial & Equipment

• Unit Rates

In all scenarios the cost recog-nition methods are identical to those described for Engineer-ing and Procurement for reim-bursable contracts.

Labour Cost

Cost of direct-hire labour & supporting functions that is required to perform a contract.

Methods for the rate-build up are similar to the methods de-scribed in Chapter 10.1 Engi-neering, and will include Over-head recovery and a profit ele-ment.

In general, the construction workforce don’t submit weekly timecards; time is usually re-corded through clock-cards and manually allocated to the ap-propriate Cost-centres or Con-trol Accounts by the Contrac-tors’ field supervisors.

Construction labour cost will need to go through some sort of ’checks & balances’ system before the verified cost can be approved and released.

Depending on the maturity of the Construction contractor in terms of the tools, systems and established workflows, this could end up to be a very time-consuming exercise for the EPCM site-representative.

It is therefore very important that this aspect is already ad-dressed during the Contract bid-evaluation period to ensure either adequate tools & sys-tems availability or sufficient EPCM site representation for the duration of this contract.

Bulk Materials and Manufac-tured Items

Besides a few exceptions, Pur-chase Orders for Equipment & Materials are always on Lump Sum basis.

Both the ‘Invoice Receipt‘ as well as the ‘Accrual’ method can be applied to recognize cost for Purchase Orders.

The cost is directly related to the claimed and verified gated pro-gress.

The progress is aligned with the Payment Milestones schedule in the Purchase Order.

No recording and monitoring is required for material purchased as part of a Lump Sum subcon-tracted work scope, since equip-ment & material procurement will be part of the subcontractors work scope and, as such, in-cluded in their progress weight-ing.

10.3 CONSTRUCTION & COMMISSIONING

Traditionally, WorleyParsons doesn’t have any ’direct-hire’ commitments during the Con-struction/Commissioning stage.

Therefore the Construction & Commissioning scope of work has seldom been ‘self perform-ing’.

The PMC / EPCM contractor will have the responsibility to man-age and supervise the contrac-tors that are engaged to execute the Fabrication, Construction or Commissioning work scopes.

These contracts could be awarded on Lump Sum or Re-imbursable basis.

Lump Sum Contracts

When the contract is executed


fuel. The cost can be recog-nized either by ‘pass-through’ (with or without a ‘mark-up’) supported by the lease-invoice and purchase order, or through the fixed re-covery-rate principle.

Material & Equipment Cost

Cost of the materials and equipment that are installed permanently as part of a con-tract . In essence, the Procure-ment cost (for cost recognition methods, see 10.2 Procure-ment).

Unit Rates.

Cost is recognized through an agreed Schedule of Rate per Installed key quantity. ($-rate per installed m3 concrete, tonne of installed steel, dia-inch piping pre-fabrication etc.).

The rate includes all labour, non-labour, consumables, tools

& machinery, bulk materials cost, as well as the site and general overhead recovery and profit.

The actual Installed quantities (and Forecasts-to-go for that matter) are checked and veri-fied by Quantity Surveyors be-fore being recognized as pro-ject cost.

In addition to their role in estab-lishing the “forecasts-to-go”, the Quantity Surveyors will also be instrumental in the Cost recognition process when ap-plying the Unit-Rate concept.

10.4 SUMMARY

On the next page you will find a high level overview on how the Accrual and Receipt/Invoice Cost recognition methods can be applied for each Project Execution Stage in both Self performing and EPCM/PMC

Tools & Machinery Cost

Cost of the tools and machinery that are used to perform a con-tract (such as cranes, bulldoz-ers, welding machines etc)

Machinery costs may be calcu-lated in various ways, depend-ing on whether the machinery is leased, owned or included in an agreed schedule of (labour) rates.

If the contractor owns the tools & machinery, the costs include ownership costs (investment, maintenance and depreciation) and operating cost (such as fuels and repairs).

Cost is usually claimed and recognized using a fixed recov-ery-rate for each booked labour man-hour.

If the tools & machinery are leased, the cost consist of the lease costs and/or the costs of

“The best way to get on in

the world is to make people believe it’s to

their advantage to

help you”.

~/~ Jen de La Bruyere


Execution Stage

Self Performing Contracts (Internal Cost)

EPCM / PMC Contracts (Commitment Cost management on behalf of the Client)

Reimbursable & Lump Sum Projects

Reimbursable Commitments

Lump Sum Commitments

Engineering Ser-vices

EPC Management & Support services

Labour:

Accrual Method: PM Approved Time-bookings x Cost Rates

Receipts / Invoices Method: N/A

Non Labour:

Accrual Method: Subcontracts only: (reimbursable) Approved Time-bookings x Sell Rates. (Lump Sum) Approved %Complete x Current Subcon-tract / Work Order value Reverse accrued cost after re-ceipt invoice from Contractor, and “Top-Up” to make up the difference between initial ac-crued Value and actual invoiced value (if any).

Receipt / Invoices Method: Verified and PM approved ex-pense claims / Invoices

Labour:

Accrual Method: Authorized Time-bookings x Sell Rates. Reverse accrued cost after re-ceipt invoice from Contractor, and “Top-Up” to make up the difference between initial ac-crued Value and actual invoiced value (if any).

Receipt / Invoices Method: Verified and Client approved Receipts / Invoices

Non Labour:

Accrual Method: N/A


Labour and Non Labour:

Accrual Method: Approved %Complete x Current Contract Value Reverse accrued cost after receipt invoice from Contractor, and “Top-Up” to make up the difference between initial accrued Value and actual invoiced value (if any).

Receipts / Invoices Mehod: Verified and approved Receipts / Invoices

Non Labour:

Accrual Method: N/A, included in Contract Value

Receipt / Invoices Method: N/A, include in Contract Value

Procurement Accrual Method: Verified and approved Payment Milestone Value. Reverse accrued cost after re-ceipt invoice from Vendor, and “Top-Up” to make up the differ-ence between initial accrued value and actual invoiced value (if any).

Receipts / Invoices Method: Verified and PM approved In-voices from Vendor

N/A, Procurement commitments are very rarely on reimbursable basis

Accrual Method: Verified and approved Payment Milestone Value. Reverse accrued cost after receipt invoice from Vendor, and “Top-Up” to make up the difference between initial accrued Value and actual invoiced value (if any)

Receipts / Invoices Method: Verified and approved Invoices from Vendor

Construction Commissioning & Completions

Labour:

Accrual Method: PM Approved Time-bookings x Cost Rates (Salary + Salary Burden + Overheads)

Receipts / Invoices Method: N/A

Non Labour:

Accrual Method: Subcontracts only: (reimbursable) Approved Time-bookings x Sell Rates. (Lump Sum) Approved %Complete x Current Subcontract Value Reverse accrued cost after re-ceipt invoice from Contractor, and “Top-Up” to make up the difference between initial ac-crued Value and actual invoiced value (if any).

Receipt / Invoices Method: Verified and PM approved Re-ceipts / Invoices

Labour:

Accrual Method: Authorized Time-bookings x Sell Rates or Verified Installed Units x Unit Rates Reverse accrued cost after re-ceipt invoice from Vendor, and “Top-Up” to make up the differ-ence between initial accrued Value and actual invoiced value (if any)

Receipts / Invoices Method: Verified and Client approved Invoices from Contractor

Non Labour:

Accrual Method: N/A


Labour and Non Labour:

Accrual Method: Approved %Complete x Current Contract Value Reverse accrued cost after receipt invoice from Contractor, and “Top-Up” to make up the difference between initial accrued Value and actual invoiced value (if any).

Receipts / Invoices Method: Verified and approved Receipts / Invoices

Non Labour:

Accrual Method: N/A, included in Contract Value

Receipt / Invoices Method: N/A, include in Contract Value

Project Cost Recognition Methods

Both Finance and Project Con-trols will accrue cost against the agreed provision based on %Complete project x provision-amount.

The provision amount will be determined by the Project Man-ager and Finance manager and will have to be supported by valid reasons/proper back-up.

Provisions are established ei-ther at the bidding stage or during the project execution and approved by the GM and PM, depending on the size of the provision made at the time.

They are usually only applica-ble for Self performing projects.

Contingencies

A contingency is an identified sum to meet the cost of a future unknown event which, if it oc-curs, will take place during the project execution stage.

Contingency can be utilised to cover events such as cost over runs, procurement under pric-ing and sub-contractor delays.

They are established either at the estimate stage (contingency) or during project execution (provision).

The contingency budget is de-termined through a formal Cost / Schedule Risk Analysis workshop during the Estimating stage, and approved by the GM and PM (self performing con-tracts) or PM and Client (TIC management contract)

Management of the contin-gency budgets can be a project management responsibility (self performing contracts) or/and a client responsibility (TIC Management contracts).

Contingency drawdown

On self performing LS contracts the contingency budget is owned by the Project Manager.

It is relatively common for Pro-ject Managers to draw down on their contingency budget when there is a need to balance budget overruns that are caused by underestimation, under performance or pending change orders.

In reverse, the Project Manag-ers can also add budget under runs to the Contingency ‘pot’, creating a ‘rainy day’ buffer to manage corporate manage-ment expectations. (deliver target profit and avoid ‘over-promising’ until the project is out of murky waters)

The up or down movements in the Contingency budget will be measure of how the project is performing on cost, and act as a trigger mechanism for correc-tive actions. Meanwhile, the project maintains a continuous stable and consistent project performance. (no monthly high / low swings).

If managed properly, the ‘buffer’ method can be very effective way of ensuring that the project will be completed within budget.

10.5 CONTINGENCIES & PROVISIONS

Provisions and contingencies are budget sums that are set aside in the Control Budget to cover the project for possible future events, which if they oc-cur, could impact the cost per-formance of the project.

Provisions /contingencies must be reviewed on a regular basis to ensure it reflects possible changes to the project operating environment.

Provisions

A provision is a sum identified to meet the cost of an event, which if it occurs, may take place after project completion but during the warranty period.

“Provisions” have specific defini-tions in financial terms and there are specific requirements per the financial guidelines, and as such will be adhered to within the financial reporting.

The amount provided should be the best estimate and based on past experience, contractual obligations and customer rela-tions.

In general, provisions are for meeting the contractual obliga-tions during the warranty period and liquidated damages for any delays or non performance, for example, projects with specific clauses such as Defect Liability Period (DLP), Warranty Period (WP) or Risk & Reward schemes related to schedule delays and/or cost overruns.

Provisions can allowed for if there is a likelihood that the project will be hit by such an event (and subsequent claim) .

“The bitterness of poor quality lasts long after the

sweetness of making a

deadline is forgotten”

~/~ Author

Unknown


Weighted Risk is an assess-ment of risk, relative to the other categories.

As an example, the Risk Cate-gories and associated weights could be established as follows:

Engineering 5%Procurement 15% Construction 55% Close out/ Start-up 25%.

The principle is that the maxi-mum contingency that can be drawn down against a Risk Category is restricted by the weighted risk allocation.

Exceeding the allocated contin-gency amount of the weighted Risk category, automatically means that an overrun will have to be reported.

If the contingency budget is determined at $ 2,000,000 the allocation and contingency

draw down picture could be as shown in Fig 10.1 below.

The main benefit of this method is that the project contingency will be managed per Risk Cate-gory, while at the same time, it prevents the project from ‘eating’ the contingency alloca-tions of another Risk Catego-ries.

Within this concept there are many ‘variations-on-the-same-theme’ possible; some of them introduce gated criteria for the contingency amounts that can be released at one time against an overrun, other differ by using a more extensive risk Category Risk list.

However, the base principle comes down to the same. Irre-spective of personal prefer-ences, more important is that the client buys into the chosen contingency draw down ap-proach.

In an EPCM/PMC environment the Contingency budget is owned by the client and cannot be touched without their ap-proval.

The client will expect the EPCM contractor to propose a Contin-gency drawdown or Contin-gency management plan that follows a more ’scientific’ ap-proach than the ‘buffer’ method.

There a various methods of drawing down on Contingency; they can very simple, and they can be so complicated that it will be difficult for an ‘outsider’ to comprehend.

However, the principle is more or less the same;

The contingency budget is dis-tributed via relative risk values (weights) assigned to project risk categories.

Risk Category Weighted Risk

Distributed Contingency

Engineering 5% 100,000

Procurement 15% 300,000

Construction 55% 1,100,000

Close-out & Start Up 25% 500,000

Contingency Budget 100% 2,000,000

Forecast Budget

Overruns

150,000

50,000

400,000

0

600,000

Contingency Drawdown

100,000

50,000

400,000

0

550,000

Remaining Contingency

0

250,000

700,000

500,000

1,450,000

Reported Budget Overrun

50,000

0

0

0

50,000

Figure 10.1

“First, get the facts, then

distort them at your leisure.”

~/~ Mark Twain


of the project be called into question.

11.1 LEVELS OF CHANGE

Management of Change can occur on various levels within the company; at global, at re-gional, at location or at project level.

Changes on Global, regional and location level are usually changes to the company’s Management systems (EMS/WPMP).

Anyone within WorleyParsons can identify and raise a poten-tial change; globally, through the Process Improvement (PI) system and/or regionally / lo-cally through a Corrective Ac-tion notification.

The process of initiating such a change is outlined in the proce-dures QMP-0008 (PI) and QMP-0027 (CA).

Management of Project Change (MOPC) is covered under one procedure in EMS/ WPMP (PCP-0010).

However, these procedures do

not detail how the processes are related to MOPC, but it does describe how scope, cost, and schedule are controlled.

At project level, there is more than one change initiation proc-ess that could lead to an actual project change.

This chapter addresses how change is initiated and managed at project level for self perform-ing contracts (Prime contracts) and in EPCM/PMC environ-ments (managing Client com-mitments) .

It is important for the Project Controller to understand which change initiation process is used under which circumstance, how the initiation/approval process works and how these changes are incorporated into the project baseline.

11.2 PRIME CONTRACTS

The WorleyParsons Manage-ment of Change process for self performing contracts is a simple process that allows anyone on a project to identify and notify a potential change.

A project change is captured on a Project Variance Notification (PVN) form and logged in the Project Variance Register.

Each PVN should be supported by HSE, technical, schedule and cost impact information.

It is an internal document not intended to be reviewed by the Client.

The PVN is the vehicle to inter-nally accept or reject a variance request. The decision to accept or reject a PVN sits with the Project Manager. An approved PVN can result in a change to the Control Budget (cost) and may lead to raising a Project Change Request (PCR).

“Management of Change” refers to the identification, approval and subsequent control proc-esses of all changes that are going to take place to an exist-ing organization, i.e procedures, systems, forms, guidelines or, in the case of an operating organi-zation (client), the change that the project undertaken will bring to them.

However, we refer to “Management of Project Change” as a typical term that addresses all kinds of deviations at the project level (Scope of Work and associated cost and/ or schedule impact).

A well defined change control process serves multiple pur-poses within the project:

• It helps to assure that all changes that take place are not arbitrary and have been carefully considered by the project team and project team leader.

• It allows for all changes to be captured and monitored, pre-venting unpleasant surprises along the way plus more ac-countability should any aspect

11.0 MANAGEMENT OF PROJECT CHANGE

“There's never enough time to do it right first

time, but there's always enough time to go back and do

it again ”

~/~ Theodor Wilson


volvement fall under the Tech-nical Integrity (TI) category.

Therefore this chapter will fo-cus on the TI change proc-esses.

Technical Integrity (TI) has three change processes: Tech-nical Deviation Proposal (TDP), Key Document Change Notice (KDCN) and Technical Query (TQ).

Technical Deviation Proposal

The Technical Deviation Pro-posal is the WorleyParsons process to notify the Client of a proposed deviation from their specifications.

The Technical Deviation Pro-posal is only used on projects where the client does not have their own process for reviewing requests to deviate from their own, third party, or other tech-nical standards.

For clients that have a manda-tory process, WorleyParsons uses the client process instead.

Some examples of when to use a Technical Deviation Proposal are:

• Delivery of a valve would be too late, substitute with one that is available

• Not enough pipe on the order to have a mill run, substitute with something that is avail-able

There is a requirement for two customer signatures on this form. One is for the Client “technical authority,” and the other is for the Client “approving authority.”

A Technical Deviation Proposal could lead to the initiation of a KDCN and/or TQ, depending on the situation.

Technical Query

The Technical Query (TQ) is used to clarify interpretation of, or to modify the design basis, or to resolve a technical matter with the Customer in a formal, documented manner.

Some examples of when to use Technical Queries are:

• Customer changes the de-sired feed rate (125,000 bpd instead of 100,000 bpd)

• Control architecture decision (DCS vs. PLC, or a combina-tion)

If a TQ is expected to have an impact on the project cost and/or schedule , the TQ initiator will raise a Project Variance notification (PVN).

The PCR is an external docu-ment intended to be submitted for Client approval.

An approved PCR can impact the Contract Value (revenue)

The processes that could lead to an initiation of a PVN can vary depending on project stage (engineering, procurement & construction)

11.3 PRIME CONTRACTS: E & EPCM SERVICES

Engineering is broken down in 3 distinct but interrelated variance initiation processes:

• TI -Technical Integrity, en-sures the design conforms to Customer requirements and relevant internal and external design codes and require-ments.

• SID – Safety in Design (related to One Way)

• SD – Sustainable Design (related to EcoNomics)

The change process for Safety in Design (SID) and Sustainable Design (SD) is called a SEAL Decision.

Safe and Sustainable Engineer-ing for Asset Lifecycle or SEAL is WorleyParsons engineering delivery model, developed to improve delivery of safe and sustainable asset lifecycle de-sign solutions.

There is one register used to track all SEAL Decisions.

The SEAL decision process is normally only used in the Iden-tify & Evaluate phase and is optional in the Execute phase.

Most of the projects requiring extensive Project Controls in-

OneWay

WPMP

EMS

etc

WorleyParsons

WorleyParsons and Customer Culture

Technical Integrity

Safety in Design

Sustainable Design+ +

HSE MS

O&M

Reliability

etc

Customer Systems

Training and Awareness

SEAL

OHS & Environmental Obligations, Legislation & Regulatory Commitments, Codes and Standards Compliance, Certification,

Design Basis Compliance

Delivered through Stewardship, Definition,

Planning, Inter-discipline/ Function

Coordination Review, Change Management

and Verification.

Delivered through SID Alignment, Planning,

Execution and Verification, with

consideration for Health and Safety issues over

the asset’s whole lifecycle.

Use of SID Discipline Manuals

Delivered through EcoNomicsTM with

consideration for Social, Environmental and

Economic issues over the asset’s whole lifecycle.

Safety & Environmental Leaders

“Anything that can be changed will be changed until there is no

time left to change

anything.”

~/~ James Bartlett


Work Release Packages

Others (as per the PEP)

The definition of key docu-ments may be altered in the PEP. It is therefore important to check the PEP for specific additions or deletions to this list.

• A line size change for vari-ous reasons (this happens all the time)

• A key document becomes too crowded, split the docu-ment into two

• Change control philosophy, use 4-20 mA instead of bus control, changes the P&ID

If a KDCN is expected to have an impact on the project cost and/or schedule, the KDCN initiator will raise a Project Vari-ance notification (PVN).

11.4 PRIME CONTRACTS: MANAGEMENT & SUPPORT

The project Action/Advice No-tice (AAN) is, in essence, a Technical Query (TQ) for non-technical issues.

Some examples of when you might use the AAN to initiate a change:

• The client would like to change the frequency or amount of detail of project status reporting

• The client wishes to adjust the method for receiving pro-ject deliverables

• We wish to confirm the re-quirements for project close-out

The AAN initiator will raise a Project Variance notification (PVN) if the AAN will have an impact on the project cost or schedule (or both).

Key Document Change Notice

Key Document Change Notices (KDCN) are used whenever a key document is changed after it is frozen. The KDCN is critical to inter-discipline communication.

Key documents are defined as:

PFDs

P&IDs

Plot Plans

Equipment Lists

Line Lists

Single Line Diagrams

Hazardous Area Classifica-tion Drawings

Basis of Design

Flowchart 11.1 Change management Overview for Engineering over 5 project phases

Process Identify Evaluate Define Execute Operate

Technical Integrity (TI)

Use the Technical Deviation, KDCN, TQ or AAN processes for Change Initiation

Safety in Design (SID)

SEAL Decision Recommended

SEAL Decision Optional

Sustainable Design (SD)

SEAL Decision Recommended

SEAL Decision Optional

PVN PCR

Prime Contracts - Change Initiation Change Management

SEAL Register

All Phases

“At the heart of every large

project is a small project trying to get

out.”

~/~ J. Robert

Oppenheimer


IV. or a variance initiated by the Vendor/ Supplier.

Changes initiated by Engineer-ing and Construction (I - II) can result in a revision of the Engi-neering Requisition.

The revised requisition is sub-mitted to procurement who will request the supplier to provide cost and schedule impact for the change.

This is reviewed and, if agreed and approved, confirmed to the supplier through a PO revision or a Contract amendment.

A variance can also be initiated by the procurement group (III), e.g. where a change to com-mercial conditions is required such as change of delivery address, correction of mistakes etc.

If the proposed change is ex-pected to have an impact on the Technical Integrity, or/and the project cost & schedule, the Procurement/Contracts group will raise a Project Variance notification (PVN) to inform the project team of a potential

change to existing Purchase Order’s or subcontract.

The review & approval process is as described for Engineering & Construction initiated changes.

A variance initiated by the Ven-dor / Supplier (IV) may be the result of a concession request or a claim.

The request is reviewed by the relevant parties, including as applicable engineering, con-struction, quality, HSE and procurement.

If accepted, such a request may lead to a change to the engineering requisition or the scope of work as well as to a revision of the PO or an amendment of the contract.

11.6 PRIME CONTRACTS: CONSTRUCTION

Site activities (Construction and Commissioning) only occur in the Execute phase.

A change to a Construction Scope of Works could be the result of:

I. a variance initiated by the Engineering group (ref 11.3 TDP, TQ or KDCN)

II. a variance initiated by the Procurement group (ref 11.5 Variation/Amendment form)

III.a variance initiated by Con-struction Management.

IV.or a variance initiated by the Subcontractor

11.5 PRIME CONTRACTS: PROCUREMENT & SUB CONTRACTS

Most procurement executed by WorleyParsons is on behalf of and for the risk of the Client (Reimbursable procurement). The MOPC processes for client commitment management will be addressed separately in section 11.8.

However, some procurement may be on WorleyParsons’ be-half, e.g. outsourcing of our scope under the prime contract or performance of a turnkey contract. (Turnkey procure-ment)

Turnkey procurement directly impacts our Profit and Loss and is therefore treated slightly dif-ferently to Reimbursable Pro-curement in terms of Change Management.

This section will address Man-agement of Project Change MOPC for WorleyParsons com-mitments.

Changes to a Purchase Order or subcontract commitment could be the result of:

I. a variance initiated by the Engineering group (TDP, TQ or KDCN)

II. a variance initiated by the Construction group (FECR or SQ — ref chapter 12.6)

III. a variance initiated by the Procurement group

PVN PCR

Change Management

Define / Execute Phases

Engineering, Procurement, Construction Change Initiating processes

Vendor/Supplier Internal Change Request processes

Define / Execute Phases

Prime Contracts - Change Initiation

Flowchart 11.2 Change Management Overview for Procurement over 5 project phases

“Whoever said money can't

buy happiness clearly didn't

know where to shop.”

~/~ Gertrude

Stein


When a variance is initiated by the subcontractor, the Contract Administrator will request the subcontractor to confirm the cost and schedule impact or the subcontractor may be asked to submit a claim as a result of the Field Instruction.

After review and approval by the relevant parties, the Con-tract Administrator will raise a PVN to inform the project team of the change to the existing contract and issues a contract amendment to confirm accep-tance of the variance to the subcontractor.

11.7 PRIME CONTRACTS: SEEKING APPROVAL: PVNs / PCRs

In summary, all change initia-tion processes described in

11.1-11.6 could result in the creation of a Project Variance Notification (PVN).

A PVN can be generated by any team member. It is an inter-nal document not intended to be reviewed by the client (although it is not uncommon to issue PVNs “For Acknowledg-ment” to client on reimbursable projects).

Project Control will enter the information into the variance control register with the correct coding and will coordinate the evaluation process and re-quired internal approvals from the Project Manager.

After analysis and recommen-dations of the PVN by the Pro-ject Change Review team, the Project Manager can decide to classify the PVN as:

Change Management for Site Activities is covered under one procedure (FCP-0016).

A variance in the Construction scope (III - IV) can be initiated via a:

1. Field Engineering Change Request Form (FECR)

2. Site Query Form (SQ).

A Field Engineering Change Request (FECR) can be created by the Construction team or sub contractor and submitted to the Construction Manager.

FECRs are internal documents, not intended to be reviewed by the Client. A FECR may or may not result in a Site Query (SQ).

SQs can be created by anyone at site, with or without an FECR.

Just as a FECR, SQs are also internal documents, not in-tended to be reviewed by the Client.

Site Queries may be submitted alone or along with a supporting KDCN.

The FECR and Site Query In-dexes are controlled at site by the Field Document Controller.

If the proposed change is ex-pected to have an impact on the Technical Integrity, or/and the project cost & schedule, the Construction group will raise a Project Variance notification (PVN).

PVN PCR

Change Management

Execute Phase

• Field Engineering Change Request (FECR)

• Site Query (SQ)

Engineering, Procurement, Construction Change Initiating processes

Subcontractor Internal Change Pro-posal / Request processes

Execute Phase

Prime Contracts - Change Initiation

Flowchart 11.3 Change management Overview for Construction


“If project content is allowed to

change freely, the rate of

change will exceed the rate of progress”.

~/~ Graig

Fitzpatrick


It is a mandatory requirement that approval for this change will be sought by the Project Manager from the client.

Changes within the Scope of Work – if it can be demon-strated that changes will not materially alter the documented scope, it is generally classified as a change within the scope of work (eg. significant esti-mate errors, design develop-ment etc.).

Such changes should be man-

aged under the authority of the project manager using a Project Variance Notice (PVN) and generally funded from contin-gency allowances.

Rejection of the PVN - if the Change Review team cannot see any valid reason why the raised PVN should be consid-ered a change to the Scope of Work (neither within nor out-side). The PVN will remain on the Project Variance register receiving a “rejected” status.

This Change Review Team includes as a minimum the Pro-ject Manager, Procurement/Contracts manager and Project Controls Manager but may re-quire the Construction Manager, Discipline Engineers and others to participate as needed.

Changes outside the Scope of Work – where the scope of work is proposed to be modified, a Project Change Request (PCR) will be raised by Project Controls.

The MOPC processes & proce-dures for EPCM/PMC’s are documented in the Project Execution Plan.

These processes and proce-dures are project and Client specific and could therefore differ from the internal Worley-Parsons MOPC processes described in section 11.1-11.7.

A change to a client commit-ment (Purchase Order or Con-tract) can be initiated by

I. the client / EPCM contractor (change in work scope or impact of changes initiated by other contractors)

II. or could be the result of a Project Change request by the respective vendors/contractors.

The EPCM Procurement / Con-tract Manager enters the infor-mation into the variance control

register and will coordinate the evaluation process and re-quired approvals as agreed with the Client.

Once accepted, copies of all PO revisions and/or contract amendments are provided to Project Control for proper cod-ing in line with the existing breakdown structures.

More detailed information on the MOPC processes on Pro-curement / Contracts can be found on EMS/WPMP.

11.8 CLIENT COMMITMENTS

In an EPCM/PMC environment WorleyParsons is tasked to man-age commitments on behalf and for the risk of the client/owner.

This also includes the commit-ment between the client and WorleyParsons to manage the EPC/TIC (the EPCM contract).

Therefore, it is important that the EPCM contractor takes an um-brella view and applies the Man-agement of Change procedures and processes consistently across all contracts / commit-ments, including our own Worley-Parsons EPCM contract.

Changes to client commitments could potentially impact the TIC budget and Overall EPC sched-ule and the MPOC processes are subject to the Client’s applicable governance and delegation pro-cedures.

Purchase Order or Contract Amendment

MOPC

Change Request Purchase Order/Contract Change

Order, Variation or Amend-ment Form (PPF-0004).

Vendor/Supplier Internal MOPC processes

Client Commitments - Change Initiation

Contractor Internal MOPC processes

Flowchart 11.4 Change management Overview for Client Commitments


Any variance from the details contained in these three docu-ments is considered a Variance from the “as sold” basis, and this event triggers our use of the management of project change process as described in the previous chapters.

Impact on Cost

To illustrate the impact on budget and forecast consider the following case-study:

WorleyParsons have been awarded a Lump Sum engi-neering services contract val-ued at $ 1.3M. The cost to execute the project is esti-mated at $ 1.0M

During execution, the project team have identified the follow-ing 4 variances to the work scope:

• Variance A Client requested an QRA workshop which was not included in the original scope. Cost $100K / Charge $110K

• Variance B Client wants all 4” piping and above to be shown in the 3D model, as opposed to the 6”and above as per the origi-nal scope. Cost $50K / Charge $55K

• Variance C WorleyParsons wants to use specialized software that was not budgeted for. Cost $175K / Charge $200K

• Variance D Client requested a change of date and venue for the HA-ZOP, resulting in the un-availability of the initial facili-tator, additional cost to mobi-lize a more expensive, exter-nal consultant and extra travel & accommodation cost

for all the HAZOP workshop participants. Cost $200K / Charge $230K

Project Variance Notices (PVN’s) were raised for all 4 variances and submitted to the Project Manager for approval.

The Project Manager rejected Variance C and proposes to use alternative in-house soft-ware. Therefore, variance C will be cancelled and will have no cost impact on the Control Budget (project cost).

Variances A, B and D obtained his approval to proceed. This means that the project will be hit by an additional cost of $350K ($100K + $50K + $200K).

Due to start-up in-efficiencies, the project did not perform as well as planned, resulting in an estimated cost overrun on the current budget of $40K.

In summary, the project is ex-pected to cost $390K ($350K + $40K) more than the initial esti-mated $1.0M.

This process is illustrated in Flowcharts 11.5 and 11.6.

Although the flowcharts look slightly different, the processes they describe return the same result.

Flowchart 11.6 QAB makes a distinction between types of internal approved variances; changes effecting the amount of work & associated cost (changed quantities) and those impacting cost only (quantities are the same, but the cost has changed).

The EAC method in Flowchart 11.5 method does not differenti-ate between these two variance types.

11.9 VARIANCES: BUDGET & FORECAST IMPACT

Project change processes can have a significant impact on the cost and schedule performance.

Chapter 9.5 already touched briefly on the impact of ap-proved, rejected and pending variances on progress and per-formance measurement.

This focus of this chapter will be on the budget and cost forecast implications of project variances and trends.

Base Documents

Controlling any change requires a basis from which variance is measured. This basis is com-posed of the following three documents:

Notice to Proceed Re-ceived

Approved Project Execution Plan

“As-Sold” Estimate

In order to get paid for services provided, some sort of notice is required to proceed with the work from the client.

The project team must have a clear understanding of both what’s in the project and how we plan to execute.

This means that the project execution plan, which includes both scope of work (what we will do) and an execution strategy (how we will do it) must be ap-proved, published and available to the project team.

Finally, like any other contractor, WorleyParsons wants to spend their resources only on the con-tracted work, not more and not less; so there is a need for an “as sold” estimate that provides the cost basis.


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perspective, receipt of a formal change request from a vendor/contractor triggers the Manage-ment of Project Change proc-ess for the TIC.

The EPCM contractor does not differentiate between contrac-tors.

Flowchart 11.7 on the following page shows that WorleyPar-sons is the EPCM contractor looking after all client commit-ments, but is also one of the contractors executing part of the EPC (Engineering contract valued $1.3M).

The TIC budget amount for the engineering scope of works was estimated at $2.0M, of which $1.3M was committed to WorleyParsons “the engineer-ing contractor”.

WorleyParsons “the engineer-ing contractor” has submitted the 3 fore mentioned PCRs to WorleyParsons “the EPCM contractor”.

Although this appears to be a potential conflict of interest, in practice these are two different teams with different roles and responsibilities; one team look-ing after the technical & com-mercial performance of just the Engineering contract (progress, cost & revenue), and one team is responsible for the perform-ance of all commitments under the TIC. (commitment versus TIC budget).

Where WorleyParsons “the engineering contractor” uses the Management of Project Change processes and proce-dures in EMS/WPMP, Worley Parsons “the EPCM contractor” will have to comply and follow the client specific project change procedures as docu-mented in the Project Execu-

tion Plan for the EPCM con-tract.

Unlike WorleyParsons internal processes, these are not set in stone and can vary from project to project depending on who the client is.

After review and approval by the client and other relevant parties, PCR A was accepted, PCR B was also accepted but still under price negotiation, while PCR C was rejected.

An approved PCR is consid-ered a Variance from the ‘committed’ basis, and as such the EPCM Contract Administra-tor will issue an amendment of the Engineering contract to confirm acceptance of the vari-ance to WorleyParsons, raising the committed value to $1,410,00.

After review of the performance trends to-date and pending variances, the EPCM project controller forecasts a cost growth of an additional $200K for the remainder of the Engi-neering Services contract.

This takes the estimated Cost-At-Completion for this commit-ment to $1,610,000, still $390K under the TIC budget.

Chapter 12 will address the various forecasting and fore-casting techniques in more detail.

Impact on Revenue

The Project Manager is of the opinion that the approved PVN’s are not only a change to the budget, but also to the ’as-sold’ basis. (contract value)

He therefore instructs the Pro-ject Controller to raise a Project Change Request (PCR) for PVN A, B and D and submit them to the client for approval.

The variation register shows the following approval status:

• Variance A PCR approved. Approval impacts the Contract Value.

• Variance B PCR in principle approved, but client disputes the cost for the change. No impact on the Contract Value pending an agreement on cost.

• Variance C PCR rejected. Client’s view is that there is no change in budgeted man hours (just change in cost of the re-source) and that there is suffi-cient budget in the non-labors to absorb the additional cost of the changed venue. No impact on the Contract Value.

The impact to date of the 3 sub-mitted PCRs is the Contract Value is increased by $110K, raising the Contract Value to $1,410,000

The result of this example Man-agement of Change process is that the project is now fore-casted to return $20K profit ($1,410,000 - $1,390,000), as opposed to the original target of $300K ($1.3M - $1.0M).

EPCM perspective

From a EPCM/PMC contractor

“ It’s better to go down with

your own vision than with someone else’s”

~/~ Johan Cruyff


Flow

char

t 11.

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PCM

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12.1 SELF-PERFORMING CONTRACTS

Services Contract (our Prime Contract with the Client)

Contract Value

Planned Values

Earned Values

Committed Values (awarded Sub Contractors)

Cost Incurred

Invoice / Payment Values (our Invoice / Payment Status)

12.2 EPCM CONTRACTS

TIC Management (managing commitments on behalf of the client):

Planned Values

Earned Values

Committed Values (awarded prime contracts)

Cost Incurred

Invoice /Payment Values

An important part of the Project Controller’s roles is the routine generation & analysis of work performance information.

The information gathered is very useful as input data for cost and schedule forecasting. It can also be very helpful when audits, quality reviews, and process analyses are conducted.

As mentioned in Chapter 4.1, a combination of values is needed for project analysis and to deter-mine how well the project is performing according to the plan.

12.0 COST AND SCHEDULE PERFORMANCE

Project Analysis

Self Performing Contracts (Internal Performance)

EPCM / PMC Contracts (TIC Performance)

Required Value

Planned Progress What is planned? What is planned? Planned Earned Value (Planned % Complete x Current Budget)

Physical Progress What is done? What is done? Earned Value ( % Complete x Current Budget)

Expenditure What is the cost incurred to achieve this?

What is the cost incurred to achieve this?

Total Cost -To-Date Value

Commitments How much of the Control Budget is subcontracted?

How much of the TIC budget is committed?

Total current Value of all awarded Purchase Or-ders and Contracts

Budget Perform-ance

What are the forecasted under/overruns?

What are the forecasted under/overruns?

Forecasted Cost Value at Completion minus Current Control Budget Value

Cash Flow Are we getting paid? When is the project ‘Cash-neutral’?

N/A due to absence of a Revenue value.

Actual Payments minus Expenditure-to-date

Cash Call Are there enough funds to pay the creditors?

Are there enough funds to pay the creditors?

Monthly forecasted expenditure + ’Payment Due’ T & C’s.

Profitability Are we making money? N/A due to absence of a Revenue value.

Current Contract Value minus Forecasted Cost at Completion

Project Measure

“ A shortcut is the longest

distance between two

points”

~/~ Charles Issawi


The CPI compares earned units to actual spend units.

If the cost incurred is greater than the value of the work that has been done, the project will most likely overrun the Control budget if it maintains its current cost performance.

The reverse means that the Cost Performance to date is better than expected and that the project is likely to under run its budget, providing the current good performance is main-tained.

Composite Index

The above approach is based on a linear extrapolation; the CPI does not take schedule projections into consideration.

If a project is behind schedule, additional cost impact can be expected either due to a sched-ule slippage or from acceleration of the effort to finish on time.

Multiplying the CPI by the SPI provides a Composite Index, and provides the average cost and schedule efficiency with which work has been performed.

Applying this efficiency indicator to the budget for the remaining work (Remaining Budget / CI) will return an Estimate To Com-plete forecast based on the cur-rent efficiency.

12.4 VARIANCE ANALYSIS

Variance analysis is the proc-ess of identifying the difference between an expected result and an actual result, figure out the causes of the variance and then determine a corrective action.

This section will focus on the variables of cost, and schedule in its variance analysis.

Schedule Variance

Schedule Variance is calculated using the following simple equation:

where the Earned Value repre-sents the actual amount of time taken to progress to the pro-ject’s current stage.

The Planned Value represents the amount of time which reaching the project’s current progress should have taken to achieve according to the base-line schedule.

Schedule variance and its exact number may indicate many possible things to project man-agement.

A number close to zero would indicate that the timeframes in the baseline schedule were accurate within a small margin of error.

12.3 PERFORMANCE INDICATORS

While it is important to know the exact status of a project at any point in time, it is equally impor-tant to analyze how well the project performs against the Schedule and Control Budget baseline.

There are many Performance Indicators that provide the pro-ject team a quick ’heads-up’ on how the project is performing. In this chapter the 3 main Perform-ance Indicators will be dis-cussed; the indicators for Schedule and Cost Perform-ance and the Composite Index (Productivity).

Schedule Performance Index

Schedule performance is a com-parison of the work done to what was planned to be done.

During project execution, units were budgeted and earned. If the earned units at cut-off date are more than the budgeted units, it means more was done than planned, and the project is ahead of schedule.

The reverse means that the project is behind schedule.

Cost Performance Index

Cost performance is a compari-son of what was achieved to the cost incurred to achieve this.

Calculation rule SPI Earned Value Planned Value Where, SPI >1 Project ahead of schedule SPI <1 Project behind schedule SPI =1 Project on schedule

Calculation rule CPI Earned Value Expenditure-To-Date Where, CPI >1 Project will Under run CPI <1 Project will Over run CPI =1 Project on Budget

Calculation rule CI CPI x SPI Where, CI >1 High Efficiency CI <1 Low Efficiency CI =1 Expected Efficient

Schedule Variance (SV) Earned Value – Planned Value

“ Always look to the future, because that

is where you'll spend the rest of your life.”

~/~ George Burns


It could indicate that project management underestimated the amount of time needed to complete the project, or it might indicate that the budget and workforce was insufficient.

Another possibility is that pro-ject management or the work-force suffered setbacks which may not have been avoidable

Cost Variance

The cost variance represents the difference between the Earned Value of a project and the actual cost of the project

The equation to determine the cost variance is as follows:

If the resulting value for the cost variance is a number greater than zero (or ‘positive value’), then it is a favorable cost vari-ance condition.

A value that is less than zero, or a resulting “negative” value, represents a cost variance that is considered less than favor-able.

A figure that is significantly less than zero (‘negative value’) would mean that either the pro-ject team over estimated the amount of time needed or they overestimated the budget and workforce measured in raw man hours that would be necessary to complete the project.

This is not a good thing either as it represents an unnecessary expenditure of resources

A schedule variance figure high in positive numbers could also represent many things.

Cost Variance (CV) Earned Value – Cost to Date

“I cannot afford to waste my

time making money.”

~/~ Louis

Agassiz


all information and knowledge that is available at the time that the forecast is made.

The information that is made available is typically derived from the past performance of the project as well as any antici-pated future performances.

Forecasts can be updated and reissued based on changes to that information.

Below you will find a guideline for calculating “To-Complete” and “At-Completion” forecasts for Engineering, Procurement and Construction & Comple-tions work scopes:

11.5 FORECASTS

Forecasts are estimations, guesses, or predictions that are made by the project team to get a big picture view of where the project is heading in future.

These forecasts are derived through a careful evaluation of

FORECASTING - ENGINEERING

The following Forecasting calculation rules can be used as a guideline :

ETC (Estimate-To-Complete) - Control Budget - Earned Value *) Note 1

EAC (Estimate-At-Completion) - Expenditure To Date + ETC

Budget Under/Over Run - EAC – Control Budget (‘+’ = Over run, ‘-‘ = Under run)

*) Note 1 - rule applies when project status is between 15%- 80% complete. <15% - ETC = Budget - Expenditure >85% - ETC. will be a project managers assessment/opinion.

FORECASTING - PROCUREMENT

ETC (Estimate-To-Complete) - EAC – Expenditure-To-Date

EAC (Estimate-At-Completion) - Current Forecast + Trends *) Note 2

Budget Under/Over Run - EAC – Control Budget

FORECASTING - CONSTRUCTION/COMMISSIONING

ETC (Estimate-To-Complete) EAC – Expenditure To Date

EAC (Estimate-At-Completion) Current Forecast + Trends *) Note 2

Budget Under/Over Run EAC – Control Budget

*) Note 2 - Trends may be the result of a forecast received from the Procurement or Construction Manager but it must be in the Trend system before it can be incorporated into the forecast


13 .0 PROJECT REPORTING

self performing scope of works and TIC Management scope of works as per the WorleyPar-sons Standard Report Matrix on the next page.

In addition to the standard set of reports, the project may require customised reports.

Both the standard and custom-ized reports can be generated from the WorleyParsons suite of tools & systems and it is important that all Project Con-trollers become familiar with layouts, content and defini-tions.

The project reports should be identified and agreed as part of the Project Control Plan set up at the beginning of the project.

Essentially they are the Project Control Deliverable list and are no different from the require-ment we put on Engineering.

It helps to go through these when discussing the Project Control support requirements on projects with the PM or the client.

One of the most important ele-ments of project controls is the communication of the project performance elements to all stakeholders.

This is accomplished via an established set of standard and customised performance re-ports.

The distributed information can include information such as cost status reports, measures of progress, as well as forecasting elements.

WorleyParsons has categorized its Project Controls reports for

“ If you see someone

sprinting, he probably left

too late”

~/~ Johan Cruyff

Project Measure

Project Analysis Self Performing Services

TIC Management (EPCM/PMC)

Planning & Progress

• What is planned?

• What is done?

• What are the slippages?

• Progress S-Curves

• Bar chart Schedules (Level 1 to detail)

• Manpower Histograms

• Engineering Deliver-ables Status Report & Look-ahead sched-ules (High level status through to deliverable register)

(Reports Overall, by WBS and by Contract)

• Progress S-Curves

• Barchart Schedules

• Manpower Histo-grams

• Progress summaries

Cost Control • What is the budget?

• What is committed?

• What is incurred?

• What is invoiced?

• What is paid?

• What is the cost-to-go?

• What is the cost-at-completion?

• What are the cost current & fore-casted over/under runs?

• Manhour Reports (Level 1 to detail)

• MPPR - Manhour, Progress & Productiv-ity Report (Level 1 to detail)

• Cost Report (Level 1 to detail)

• Subcontract Register

• Phased cost reports

• Cost Rate Analysis Reports

(Reports Overall, by WBS and by Contract)

• Cost Report

• Phased cost reports

• Invoice Register

Change Management

• What are the approved Variances?

• What are the pending Variances?

• Client Change Regis-ter

• Internal Change Reg-ister

• Change Register (Overall, by WBS and by Contract)

Project Performance

• What is the Cost Performance?

• What is the Schedule Perform-ance?

• What is the productivity?

• MPPR - Manhour cost, progress & pro-ductivity report (Level 1 to detail)

• TIC Performance reports (Overall, by WBS and by Con-tract)

Commercial Performance

• Are we making profit?

• Are we invoicing?

• Are we getting paid?

• Are there enough funds to pay the creditors?

• When is the project Cash-neutral?

• Internal Commercial Reports: - PCS - Cash Flow - Invoice Register

• ProComs Reports (AME)

Not Applicable

Cash Call • When does the project need funds to pay the creditors?

Not Applicable Cash Call S-Curve

“Of several possible

interpretations of a

communication, the least

convenient is the correct

one.”

~/~ Henry Ford



14 .0 DOCUMENT MANAGEMENT & CONTROL

their completion status.

In essence, it is the project’s deliverable interface with the Project Controls group (deliverable progress) and with the client (in & outgoing deliv-erables).

The Vendor/Subcontract Docu-ment Register is used to expe-dite and track the status of receipt & review of documenta-tion for each purchase order or subcontract, based on the agreed VDRL (Vendor Docu-ment Requirements List).

The Vendor Document/Subcontract Register is the project’s deliverable interface with the subcontractors and vendors.

The Document Controller is responsible for keeping both Deliverable and Vendor/Sub Contract Document register up to date.

Part of the document control

process includes quality verifica-tion of the transmittal to ensure the documentation is complete, correct and at the latest revision.

A periodic QA audit of the proc-ess is conducted by QA as a further measure of ensuring compliance.

14.2 ELECTRONIC DOCUMENT/DATA MANAGEMENT

There is a difference in function-ality between a Document Con-trol system such as InControl and an EDMS system.

Where a document control sys-tem lists down all current and future project deliverables in a deliverable register, an EDMS system physically holds the electronic version of the project documentation.

This functionality allows project teams to access and share the latest revisions of project deliv-erables across multiple project locations, and opens up the possibility for electronic reviews (paperless office).

The EDMS system is still used in combination with a Document Control system, since it can only hold physical documentation. (only empty placeholders for documents that have not been started)

In order to weighed each deliv-erable in the entire scope, a deliverable progress measure-ment system requires pro-gressed and completed deliver-ables as well as the deliverables that are that are not yet started.

There is an electronic link be-tween the two systems that fa-cilitates automatic revision status updates. However, the progress claims in between gates is still a manual update.

Document Control is manage-ment of documents to a very high degree of reliability for security, version, visibility, avail-ability and, most importantly, with a controlled audit trail.

The Document Controls group interfaces with all disciplines within the Project Team.

WorleyParsons is using both Document Control as well as Electronic Document/Data sys-tems applications for project deliverable and vendor data management.

14.1 DOCUMENT CONTROL

WorleyParsons uses InControl as its integrated Deliverable progress management /Document Control system.

The Deliverable Register in InControl contains all (current and future) project deliverables and is not only used to monitor and track on their issuance, receipt and distribution, but also

“When the weight of the

project paperwork equals the

weight of the project itself,

the project can be considered

complete.”

~/~ Walter

Rutherford

This will include documentation relating to WorleyParsons and the vendor / subcontractor works.

The Project specific Document Management Plan will address the following methods, proce-dures and workflows:

• Documents to be managed (Design, Vendor Data, Client Packages etc)

• Document Controls Team & Responsibilities

• Definition Deliverable status gates

• Copy/Distribution require-ments (hard & soft copy)

• Distribution / Approval Matrix

• Document Management Procedure (Revision control, Dwg Numbering etc)

• Deliverable Register format & InControl/SPF Set-Up

• Designated Filing Space Requirement & Lay-out

• Final Documentation Re-quirements

• Vendor Data Format Specifi-cation

• Format Softcopy Format (In coming & Out going)

• Project Close-Out & Archiv-ing

• Softcopy filing directives & procedures (Internal)

14.4 DISTRIBUTION MATRICES

Document distribution matrices will be set-up for each project prior to project commencement.

This document details the docu-ment types, the list of recipients and review cycles required for each document revision.

14.5 QUALITY AUDITS

Part of the document control process includes quality verifi-cation of the transmittal to en-sure the documentation is com-plete, correct and at the latest revision.

This is the senior Document Controller’s responsibility.

In addition, a monthly QA audit of the process will be con-ducted by QA as a further measure of ensuring compli-ance.

Intergraph’s SmartPlant Foun-dation (SPF) is the WorleyPar-sons preferred Electronic Docu-ment /Data Management Sys-tem (EDMS).

EDMS is part of an enterprise-wide system that manages data from integrated Engineering Design systems (such as 3D modelling tools).

Therefore, EDMS systems like SmartPlant Foundation are usu-ally administered by Engineer-ing System Engineers as op-posed to Document Controllers.

14.3 DOCUMENT MANAGEMENT PLAN

A detailed Document Manage-ment Plan shall be developed for each project prior to project commencement.

This document describes the methods, systems and strate-gies to be implemented for suc-cessful set-up and management of the document and data man-agement functions.

As part of the Document Man-agement Plan, a detailed docu-ment and data handover plan will be developed covering the documentation, format and as-sociated checklists to facilitate final documentation to be handed to the Client at project close-out.

“ Anything you lose

automatically doubles in

value”

~/~ Mignon

McLaughlin


oped by breaking the project down into smaller components or commodity elements, then price these detail components to build up the overall project cost.

This method is normally used when the design is well defined and substantially agreed to.

Hybrid Top Down -Bottom Up

Estimates generated in the Define phase will have to use

data from a partly defined engi-neering design.

Some parts of the design are well defined, and some parts are still very much in the conceptual stage.

In this event, the estimator can opt to estimate the insufficient defined design components using the Ratio or Factored ap-proach and apply the Quantity based principles to the parts that are well defined.

15.1 METHODOLOGIES

Basically there are three types of estimates:

1. Ratio or Factored estimates (Top Down)

2. Quantity Based estimates (Bottom Up)

3. Combination of both

Top Down Estimates

A “Top Down” capital cost esti-mate is prepared when the level of engineering and design is not yet matured to a level from which detailed Quantities can be generated.

The quantities are derived via a ratio to basic Equipment data such as weight, size or kW, using historic benchmark data-from similar projects, modified to reflect economic changes, size, location and other factors to predict future cost.

This method is used in the early phases of a project, when the design is not or partly defined.

Bottom Up Estimates - A more detailed approach devel-

15.0 CAPIT AL COST ESTIMATING: BASIC PRINCIPLES

Estimates are used for:

• Project Funding (Go or No-Go decision to proceed with the next phase of the pro-ject)

• Developing prices for quotes, bidding or evaluation of tenders from Contractors

• Determining whether a pro-posed product can be manu-factured and distributed prof-

itably

• Evaluating how much capital can be justified for process-changes and/or improve-ments

• Establishing benchmarks for productivity improvement programs

• Establishing benchmarks for future estimates

Cost Estimating is a process through which the present and future cost consequences of project decisions are forecasted or predicted.

“ Budget: a mathematical confirmation

of your suspicions”

~/~ A.A Latimer


1. What is known? (in essence; the known quantities x rates )

2. What our experience tells us is required? (applying design allowances and factors, de-pending on the level of pro-ject definition at the time of the estimate)

3. What is uncertain? (Contingency, to cater for unknown events).

A simplified example to illustrate how an estimate is built-Up is shown on the screen.

15.2 ESTIMATE BUILD UP

In preparing a capital cost esti-mate, it is a rare occasion when everything is known, specified and measurable.

A capital cost estimate consists of three parts:

between what is known and our “experience” from previ-ously completed work.

In order to address the gap, we include allowances on quanti-ties and growth allowances for quotes and expected contrac-tual awards.

Quantity allowance is subjec-tive, based on the degree of engineering completed and a comparison of the material take off (MTO) quantities to histori-cal experience of the expected quantity.

There is never an exact match of plant type; however there is

an experience range whereby it is prudent to provide some measure to fill the gap between the current design quantities and expected quantities.

With quotations and awards, experience shows that adjust-ments, within the defined scope, occur well after award which may increase the price.

It is therefore necessary to pro-vide a growth allowance on the budget quoted amount in order to arrive at the expected value at award.

The design allowance should not include scope variations, as this will be accounted for in the contingency development, as part of the owner’s risk.

For Lump Sum Turnkey pack-ages, special attention is re-quired to allocate adequate de-sign allowances, to reduce po-tential negative exposure in the estimate.

15.3 WHAT IS KNOWN?

“What is known?” is what is defined and developed from the capital cost estimate design criteria:

• process description

• process flow diagrams

• P&IDs

• plant equipment lists

• site plans, general arrange-ments

• material take-offs (MTO)

• labour rates

• vendor quotations

• Assumed dates of project execution

To this a cost can be assigned with a degree of certainty

15.4 WHAT EXPERIENCE TELLS US?

“What our experience tells us is required?” represents the gap

“ Estimators are still willing

to do an honest day's

work. The trouble is they want a week's

pay for it.”

~/~ Anonymous


TOTAL INSTALLED COST (TIC) ESTIMATE

82.0 M 87.0 M ???

WHAT IS KNOWN?

Basic Estimate Quantities x Rates

(incl. EPCM & Owners Cost)

$ 82,000,000

EXPERIENCE

Allowances Quantity Allowance

Growth Allowance

$ 5,000,000

WHAT IS UNCERTAIN?

Contingency Uncertainties

???

BASE ESTIMATE

uncertainty.

The magnitude of the contin-gency is directly related to the probability of these uncertain-ties occurring.

The contingency amount may or may not be spent during project execution.

The Approved Control Budget is the sum of all costs required to construct and commission the proposed facilities as de-fined by the project scope, and may include Owners costs and escalation.

It also includes a risk amount to cover a selected portion of

risk exposure for the probability of cost overrun (of the estimated amount) and may include an amount for Owners scope change provisions.

As the facility is expected to be built within the Approved Control Budget, it also becomes a measure by which the perform-ance of the Project Leader will be judged

15.5 WHAT IS UNCERTAIN?

“What is uncertain?” is to cover unpredictable or unforeseen items of work within the defined Scope of Work of the estimate which cannot be determined because of lack of complete, accurate and detailed informa-tion at the time the estimate is being prepared.

Contingency is added to the estimate to cover unforeseen needs of a project that is be-yond the control of the ap-pointed EPCM contractor or Owner.

Contingency is necessary to compensate for these areas of

with AACEI.

The principle of aligning the estimating classes with the WPMP project phases is as follows:

As a project moves from one phase to the next, the level of project development and defini-tion of the project scope of work increases.

With the definition, the estimat-ing accuracy increases ( esti-mate matures from a class 1 to a class 4 basis).

The following table identifies each of the phase estimates as an indicative percentage of the total engineering performed at each phase, the expected accu-racy range of the estimate and the level of contingency required to be added to the estimate.

15.6 ESTIMATING CLASSES

The Estimate Classifications within WorleyParsons are aligned with the Project Phases in the WPMP, and the Estimat-ing Classes refer to the level of accuracy.

It should be noted and under-stood that other classification systems are used in conjunction

“ There is as much sense in nonsense as there is

nonsense in sense”

~/~ Anthony Burgess

WPMP GATES IDENTIFY EVALUATE DEFINE EXECUTE

Estimate Class 1 2 3 4

Estimate Category Order

of Magnitude

Screening Control Definitive

Estimate Accuracy ≤ ± 50% ≤ ± 30% ≤ ± 15% ≤ ± 10%

Contingency 20% to 25% 15% to 20% < 10% < 5%

Level of Engineering Complete 0% - 2% 2% - 15% 10% - 40% 30% - 70%

Estimate Type Factored or Parametric

Models

Factored or Parametric

Models

Factored and/or

Quantity Based

Quantity Based


• Preliminary comparisons of alternatives

• A rough indication of the economic feasibility before proceeding with the next phase

• Assistance for business development in preparing proposals and evaluating EPCM service costs

• Initial project planning and control

The emphasis is not on the detailed accuracy but rather a reasonable cost level or delta cost of sufficient accuracy to ensure that the results are meaningful and not misleading.

In these estimates the focus is to build a robust indication of what market prices would be to build a plant or facility based on through puts and to initially

test the economic viability of investing in such a venture.

The skill sets required to achieve the desired estimate is a sound knowledge of the con-stituent parts of the plant or facility and the ability and knowl-edge of existing similar plants and facilities.

Extreme caution and judgment must be exercised in developing these types of estimates particu-larly where the desired estimate is unique in its nature.

15.7 CLASS 1 ESTIMATES - ORDER OF MAGNITUDE

The Class 1 estimate cost is based on design definition which is very limited and con-ceptual in nature.

The general accuracy range for an order of magnitude estimate is +/-50%.

This type of estimate is made without any detailed engineering data and is developed using a variety of Factored or Ratio estimating methods.

The objective of such an esti-mate is usually to provide one or more of the following:

• Indication of whether there is a case for further study

• Early evaluation at minimum expense

15% complete and is used to determine whether there is sufficient reason to pursue the project.

It permits the evaluation of alternative processes, tech-nologies, or alternative scenar-ios.

This estimate may also be used to justify the funding re-quired to complete additional engineering and design for subsequent phases, especially the provision for proceeding to the Define Phase where a Class 3 Estimate may be un-dertaken.

The Class 2 Estimate is gener-ally used in detailed selection studies for the most economi-cally viable process or develop-ment option.

In addition, the estimate is used at the outset to establish man-agement strategies, and for budgeting and planning pur-poses.

Generally a Class 2 estimate is developed by determining the equipment costs and/or weights and then applying factors or multipliers against these to de-termine bulk material and con-struction costs.

Project Specific requirements will need to be taken into con-sideration when applying factors as labour rates, construction productivities and other influ-ences such as market condi-tions, weather in the vicinity of the project location will influ-ence the adequacy of the fac-tors used to generate the cost estimate.

15.8 CLASS 2 ESTIMATES - SCREENING

The Class 2 estimate will deliver a pre-feasibility estimate during the Conceptual or Select stages Phase of Project Execution.

The general accuracy range of a screening estimate +/-30%

This type of estimate is typically prepared when engineering is approximately between 1% and “ If two people

agree all the time, one of

them is unnecessary”

~/~ David Mahoney


estimators)

The accuracy levels of these estimates are within a +/-15% Range.

Class 3 Control Estimates nor-mally provide one or more of the following:

• A mechanism for a Client to present to the board for pro-

ject sanctioning and AFE Approval

• Establish a project Budget

• A yardstick to monitor and control project costs during the execution phase

• Basis for evaluating future changes in scopes

• A basis for negotiating con-tracts for the execution of the works

• For inclusion in a Bankable Document

The Class 3 Control Estimate requires that scopes are clearly defined and quantified, pricing is obtained based budgetary quo-tations, site specific costs are

15.9 CLASS 3 ESTIMATES - CONTROL

The Class 3 Estimate is the most important estimate, as it acts as the stepping stone to project approval and economic evaluation.

The hours and time to prepare this type of estimate should by no means be underestimated. It is an integral effort, and incorpo-rates engineering, procurement, construction and estimating as a team to deliver a good estimate.

The Class 3 Estimate is based on a firm project scope where by 10 to 40% of the engineering has been completed. (the lower the % engineering, the higher the capability/experience re-quired by the projects leads &

15.10 CLASS 4 ESTIMATES - DEFINITIVE

The Class 4 Definitive Estimate is prepared after the project has been sanctioned.

The prime purpose of this esti-mate is to confirm the existing project cost forecasts and to provide a more accurate esti-mate of construction quantities and costs.

This estimate is very similar in its preparation as the Class 3 Con-trol Estimate.

However higher accuracies lev-els are achievable due to ad-vanced/progressed engineering & design definition and quantifi-cation of scope (material take-offs) this also coupled with the fact that large portions of the work have been or are in a com-petitive tender process and awarded contract values forming committed costs for the Project

“You can con someone into committing to an impossible

budget, but you cannot con

someone into meeting it”.

~/~ Jelle van Damme


The table below gives an indication of the level of project definition associated with each estimate class.

Class 1 WPMP Identify Phase Order of Magnitude Estimate Accuracy ± 50%

Scenarios developed.

Locations of plant and main processes and facility types specified.

Class 2 WPMP Evaluate Phase Screening Estimate Accuracy ± 30%

Major equipment specifications, flow diagrams, plot plans, location plans available.

Outline Basis of Design, Project Technical Specification and Project Strategy available.

Develop work breakdown structure.

Class 3 WPMP Define Phase Control Estimate Accuracy <± 15%

Choice of technology made.

BOD produced and finalised

Project locations and environmental conditions studied and surveyed

All Equipment confirmed, capacity ratings finalised

Flow and line diagrams finalised

Quantified material take offs of bulk materials produced

Project schedule prepared

Value improvement practices carried out.

Operations and maintenance needs defined.

Safety reviews completed

Class 4 WPMP Execute Phase Definitive Estimate Accuracy <± 10%

Major equipment ordered.

Design nearing completion.

Final material take offs of bulk materials made.

Major contracts let.

Construction commences.

+10/-15% Accuracy range means that the TIC at project completion is expected to be anything between 110M (+10%) and 85M (-15%), with a 50/50 chance that it will be 100M (the so called P50 value).

Usually the client dictates the required accuracy of the esti-mate, but there have been many cases where this require-ment was hard to meet due to unrealistic expectations from the client.

It’s not rare that a client requires a +/-15% estimate half way dur-ing the FEED, when Engineer-ing is still studying the various options going forward, and Engi-neering definition at hand is not enough to deliver that accuracy.

In such event, we need to man-age client expectations and either confirm that we will deliver the required accuracy, or advise the client on a more realistic accuracy range.

The Risk Analysis process is used to determine what these ranges should be.

15.11 ACCURACY RANGES

The table above provides a guideline to the various Esti-mate-Classes and the Accuracy Ranges associated with these Classes.

This is just a guideline; in prac-tise there are many different accuracy-range combinations possible. (+10/-15, +40%/-10% etc). To translate the above in an example:

a CAPEX estimate of 100M Total Installed Cost, with a

“Everyone asks for a

strong, experienced estimator -

when they get one, they don't

want one. ”

~/~ Janus Lato



with regards to Estimate classi-fications is the reverse of the preferred WorleyParsons WPMP approach.

The AACEI estimating classes increase accuracy using de-scending class numbers (Classes 5 - 1 , where Class 1 is the most accurate class), while the WPMP approach increases accuracy with as-

cending class numbers (class 4 is the most accurate class).

Considering that the AACEI guidelines are often referred to as the industry-norm and, as such, quite present in many of the WP regions and markets, a parallel map between the two approaches is provided below for future reference:

15.12 AACEI ESTIMATING CLASSES

The Association for Advance-ment of Cost Engineering (AACE International) is the lead-ing-edge professional society for cost estimators, cost engineers, schedulers project managers, and project control specialists.

Its recommended best practice

WPMP GATES IDENTIFY EVALUATE DEFINE EXECUTE

Estimate Class 1 2 3 4

Estimate Category Order

of Magnitude

Screening Control Definitive

Estimate Accuracy ≤ ± 50% ≤ ± 30% ≤ ± 15% ≤ ± 10%

Contingency 20% to 25% 15% to 20% < 10% < 5%

Level of Project Definition 0% - 2% 1% - 15% 10% - 40% 30% - 70%


Models


Models

Factored and/or

Quantity Based

Quantity Based

AACEI GATES IDENTIFY EVALUATE EXECUTE

Estimate Class 5 4 3 2 1


Models


Models

Factored and/or

Quantity Based

Quantity Based

Quantity Based

Estimate Category Concept Screening

Study / Feasibility

Budget Authoriza-

tion

Control / Bid Tender

Check Estimate

Level of Project Definition 0% - 2% 1% - 15% 10% - 40% 30% - 70% 50% - 100%

Estimate Accuracy -50%/+100% -15% / +50% -10% / +30% -5% / +20% -3 / +15%

Contingency 30% to 50% 20% to 25% 10% to 15% < 10% < 5%

DEFINE

“A project is complete when

it starts working for you, rather than you

working for it”. ~/~

Scott Allen

16 .0 COST & SCHEDULE RISK ANALYSIS

“ Risk simulation is exactly the

same thing as going to a

casino, only with no cocktail service”

~/~ Ted Allen


ing various project risks (threats and opportunities), determining the projects’ sensi-tivities to those risks and devis-ing the response actions in accordance with obtained re-sults.

Relative measure of risks prob-ability scale falls between: 0 - no probability and 1 - certainty.

The risks impact scale can be either descriptive, such as low, medium, high; or not important, important, very important; or on numeric linear and nonlinear scales, etc.

The qualitative risk analysis results are risks register and risks relative ranking, grouping into categories (RBS - Risk Breakdown Structure), risks prioritizing, etc.

In accordance with WP EMS, the qualitative risk analysis, often referred to as QRA, is the responsibility of the Corporate Risk Management.

Quantitative risk analysis through its various statistical and probabilistic methods is an approach that translates the uncertainties into their potential impact on project objectives in quantifiable terms.

The analysis results offer the project team ranges of possible outcomes (expected values) and associated likelihood of meeting the budget and/or schedule targets.

The quantitative project risk management preparation, facili-tation, analysis/simulation and reporting is a responsibility of Project Controls function.

However, the risks registers recorded and analyzed in QRA management software, are typi-cally used as one of the inputs for quantitative risk analysis.

While this chapter addresses the basic principles of Quantita-tive Risk Analysis, the special-ized PCDP modules 7 & 8 will provide more detail on the analysis methodologies, defini-tions and terminology, and analysis outputs.

16.2 COST RISK ANALYSIS

For Class 1 and 2 estimates (Order of Magnitude and Screening), the contingency is added as a single, below-the-line item to the base estimate, in most cases.

For Class 3 and 4 estimates (Control and Definitive), the contingency is determined after performing a formal risk analy-sis.

Project cost estimates are gen-erated with the cost elements targeted to fall around likely values (mode) with a 50%probability (P50) that the project will not overrun.

16.1 INTRODUCTION

In the context of project man-agement, a risk management includes the processes of con-ducting risk management plan-ning, risk identification, analysis, response planning, and monitor-ing and control.

A basic definition of risk is: an uncertain event or condition that, if it occurs, has a positive or negative effect on project’s objectives.

Therefore, the objectives of project risk management are to increase the probability and impact of positive events and decrease the probability and impact of negative events in the project.

Risk management qualifies and/or quantifies the range of possi-ble outcomes on projects.

Qualitative risk analysis fo-cuses on risks probability and impact assessment resulting in risk rating matrix for the project.

The method involves identify-


Maximum (Pessimistic) Value: most value of the Cost Element (often expressed as a positive percentage of the most likely value).

Simulation

The MonteCarlo method (simulation by means of ran-dom numbers) is most com-monly used simulation. The basic steps are:

• Define variables’ ranges and chose suited PDFs

• Value sampling randomly chosen (MonteCarlo, Latin Hypercube)

• Run deterministic scenario for chosen values

• Repeat previous two steps a number of times to obtain the probability distribution of the result (number of iterations can vary, typical 1000)

Once generated, the results can be represented graphically indi-cating the frequency and/or cumulative distributions of ex-pected values, typically ranging from P5 to P95.

A number of other reports are also generated, including the contingency profile, summary and detailed output statistics, etc.

Together with this cost the accu-racy of the estimate is stated and the range of costs are iden-tified as the P10 and P90 val-ues.

P-Values

The P10 value is the budget-value that has a probability of 10% not to overrun. In other words the most optimistic (challenging) budget-scenario.

The P50 TIC value is the budget value that has an equal chance of overrunning or underrunning the budget within its accuracy range(50/50).

The P90 value paints the most conservative picture, it’s the budget value that has a 90% probability that it will not over-run.

Cost Risk Analysis Principles

The main principle behind a quantitative cost risk analysis is a probabilistic approach where target (deterministic) values are no longer summarized but their PDFs (Probability Distribution Functions) being combined.

Mostly used are 3-point esti-mate PDF types, like triangular, trigen, betaperth, etc.

Other types of PDFs are defined by their means and standard deviations, like normal, log-normal, etc.).

Minimum (Optimistic) Value: least value of the Cost Element (often expressed as a negative percentage of the most likely value)

Most Likely Value: the value that occurs most frequently in an array or range of data (usually, but not always the estimated value).

60 70 80 90 100 110 120 130 140

150

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

100%

P90

P10

P50

$ 87M Base Estimate

1. Create Cost Risk Model

2. Risk Ranging (Trigen distribution)

3. Run Monte Carlo simulation (1,000 iterations)

4. Find P10 - P50 - P90 Values

5. Determine Contingency

7. Analysis Conclusion: Capital Cost Estimate with a TIC value of $100M, 13% Contingency, and a +10/-20 accuracy range. This means that the TIC is expected to be anything between 110M (+10%) and 80M (-20%), with a 50/50 chance that it will be 100M (P50 value)

Cost Risk Analysis Process

“A little risk management saves a lot of fan cleaning”

~/~ Anonymous


6. Determine Estimate accuracy range

TIC ESTIMATE

$ 100,000,000

(- 20%) $ 20 M

P10 $ 80,000,000

(+ 10%) $ 10 M

P90 $ 110,000,000

82.0 M 87.0 M P50

100 M

WHAT IS KNOWN ?

Basic Estimate $ 82,000,000

EXPERIENCE

Allowances $ 5,000,000

WHAT IS UNCERTAIN ?

Contingency $ 13,000,000

Total Installed Cost Estimate ($ 100,000,000)

Base Estimate ($ 87,000,000)


analysis process is highly de-pendent on the quality of the

Schedule Review

Through discussions with knowledgeable project partici-pants (Risk Workshop), risks are identified and the related consequences of these risks to project activities are assessed.

In the specialized modules on risk analysis (PCDP Module 7 and 8) some good practices for describing, qualifying, quantify-ing and prioritizing risks will be presented.

Identify Risks

Any responses to these risks should be included in the schedule base case, work breakdown structure, cost esti-mate, etc. This is work that has to be done.

Develop Model

From the deterministic sched-ule a risk input model is devel-oped to be used in a facilitation and simulation. Enclosed be-low are some guidelines to develop Schedule Risk com-puter model:

• Develop summary critical path method schedule that shows underlying project structure, i.e. parallel paths, their key merge points, etc.

• Optimize the use of finish-to-start {FS} relationships; avoid constraints.

• The number of schedule activities should not be too high (various other options

could be considered, i.e. filter near critical path activities, “risk banding” for large num-ber of common activities, etc.).

• Concentrate on critical se-quences.

Risk Range

For each schedule activity in the model assign the duration ranges based on past experi-ences or by getting input from the project stakeholders during the facilitated schedule risk in-puts session.

• Optimistic duration Shortest (most challenging) activity duration

• Most likely duration Probable duration of the activ-ity.

• Pessimistic duration Longest (most comfortable) activity duration.

Simulation

Similar to the principles outlined for the cost risk analysis, the schedule risk analysis simula-tion is performed.

An additional note applicable to both is that in order to get sensi-ble and meaningful results, the values random sampling is also driven by additional criteria like variables or activities correla-tions, probabilistic branching, chances that activity exists, etc.

16.3 SCHEDULE RISK ANALYSIS

The determination of schedule float and the degree of confi-dence in achieving the sched-uled completion date is made from a formal risk analysis of the overall EPC Schedule once it is prepared.

The cost and schedule risk analysis processes are similar and closely related to each other; schedule accelerations or extensions will always have an impact on the project cost.

On the other hand, the output of the cost risk analysis could influ-ence the sequence or durations of the scheduled activities.

While the cost risk management processes are based on the TIC Estimate or project CBS, the processes for schedule are applied to the schedule network. (elements that require money expenditure to complete a pro-ject versus elements that re-quire time expenditure to com-plete a project)

In an integrated WBS/CBS envi-ronment, where appropriate cost estimates are assigned to schedule activities, the analysis will be done against the same structure.

The schedule risk analysis proc-ess starts with the review of the base case (deterministic) sched-ule to ensure that the schedule is an accurate representation of the scope of the project, level of resources assigned and project calendars.

The quality of the schedule risk

Sep Oct Nov Dec Jan Feb Mar Apr May

Jun

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

100%

P90

P50

P10

23 Nov ’10 Completion Date

Base Case Schedule

1. Create Schedule Risk Model

2. Risk Ranging (Trigen distribution)

3. Run Monte Carlo simulation (1,000 iterations)

4. Find P10 - P50 - P90 Values

5. Analysis Conclusion: Base Case schedule with a completion date of 23 Nov 2010 that has a likelihood of around 20% that this date will be achieved. The schedule has a 10% probability that it will be completed in early November, a 50/50 change of being completed in early Janu-ary and a 90% chance of being completed in early February.

Schedule Risk Analysis Process


“Ever tried? Ever Failed?

No matter. Try again. Fail again. Fail

better”

~/~ Samuel Beckett

probability of 10% of being achieved. In other words the most optimistic (challenging) schedule scenario. In other words the most optimistic schedule scenario.

(Projected to a single activity risk windows, P10 and P90 are calculated for both activity start and finish dates, but more on that in the detailed PCDP mod-ule).

The P50 value is the completion date that has an equal chance of being achieved (50/50).

The P90 value is conservative , it’s the completion date that has a 90% probability that it will be achieved. In other words the most comfortable schedule-scenario.

P-Values

In schedule risk analysis also called “risk windows” represent the time slots in which activities are likely to occur. These risk windows give a graphical indica-tion in form of a (coloured) bar chart of when the activity is likely to start and finish based on the risk analysis.

The P10 value is the schedule completion date that has a

Introduction To Project Controls

Engineering

Transcript of Introduction To Project Controls