PROJECT CONTROL

Case Study – CCS JOE

Phatsima

Martin Janse van Rensburg

phatsima1@worldonline.co.za

PROJECT INFO

• Simple job priced

• Only one end and Joe’s salary in P&G

• 23 Production days per month

• 1000 meter bill quantity (12 months?)

• 100 meters scheduled per month (Cycle Calculation 100 m/month)

• Employment Capital included in Rates – based on machine hours

• Trackless Mining and Engineering Crew

• 20% Mark-up

• More detail, not elaborated on (retention, interest, escalation, cash-flow etc)

BOQ

BOQ – MACRO EXPLODE

PROJECT REVENUE & COST

PROJECT ENVIRONMENT - QS

• Revenue as per certificate (accuracy)

• Accurate Costing – To date Cost and quantities correct (bill, claimed, actual)

• 100% Candy compliance, certification in Candy

• All variations / claims priced (no plug etc. rates)

• Financial accounting and costing compliant

PROJECT ENVIRONMENT - FINANCIAL

• Calendar of Cost roll-over (Buildsmart)

• To date ledger / Chart of account cost codes – mapped to resource codes

• Non-posted costs (Provisions, petty cash etc.)

• Initial budget upload to Buildsmart, revised budget uploads

• Cost rate updates (will show example later)

PROJECT ENVIRONMENT – PLANNING AND PRODUCTION

• Baseline Program (and Revised baseline if applicable)

• Program progress

• Bill and Program linked (QTY forecast)

• Production output analysis

• Tender allowable QTY vs actual QTY

• Tender allowable R vs actual R

VALUATION - 1

VALUATION 1

• Claimed quantity

• Measure Actual Progress QTY

• Progress the Program, synchronise Valuation QTY with Program Progress

COST REPORTING

• Cost import from Buildsmart

(Earned Value not discussed)

SPI – Schedule performance Index (allowable to-date against Baseline)

CPI – Cost Performance Index (allowable to-date against Cost to-date)

L-Sup A-Cat A B-Cat B Consumables Materials E-Empl/Cost P-Plant

ALLOWABLE 318,000 870,255 1,779,924 390,303 111,412 418,631 754,186

COST 318,000 929,312 2,118,643 389,644 280,402 418,390 313,072

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

CURRENT VALUATION - COST VS ALLOWABLE

L-Sup A-Cat A B-Cat B Consumables Materials E-Empl/Cost P-Plant

ALLOWABLE 318,000 870,255 1,779,924 390,303 111,412 418,631 754,186

COST 318,000 929,312 2,118,643 389,644 280,402 418,390 313,072

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

CURRENT VALUATION - COST VS ALLOWABLE

L-Sup A-Cat A B-Cat B Consumables Materials E-Empl/Cost P-Plant

ALLOWABLE 318,000 870,255 1,779,924 390,303 111,412 418,631 754,186

COST 318,000 929,312 2,118,643 389,644 280,402 418,390 313,072

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

CURRENT VALUATION - COST VS ALLOWABLE

REFRESHER

1. Ensure BOQ and Program Conforms

2. Base Forecast

3. Valuation 1

4. Measure ACTUAL QTY progress and re-measure FINAL QTY

5. Progress the Program

6. Synchronise Valuation QTY with Program Progress

7. Update Bill with forecast QTY

8. Import real cost TO DATE

9. UPDATE COST RATE and COST Worksheets

10. Print Reports

11. Next Valuation

VALUATION 2

• COST Rate Update (Point 9 Previous…)

• Rebar support Base rate R69-90 – Estimator got it wrong

• Steel became VERY expensive, say R300 per bolt (escalation not discussed)

• Joe received huge increase from R300,000 per month to R400,000

VALUATION - 2

L-Sup A-Cat A B-Cat B Consumables Materials E-Empl/Cost P-Plant

ALLOWABLE 448,062 892,881 1,826,203 400,451 114,309 429,516 773,795

COST 703,416 953,474 2,173,728 399,775 1,786,935 429,266 321,212

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

CURRENT VALUATION - COST VS ALLOWABLE

L-Sup A-Cat A B-Cat B Consumables Materials E-Empl/Cost P-Plant

ALLOWABLE 448,062 892,881 1,826,203 400,451 114,309 429,516 773,795

COST 703,416 953,474 2,173,728 399,775 1,786,935 429,266 321,212

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

CURRENT VALUATION - COST VS ALLOWABLE

L-Sup A-Cat A B-Cat B Consumables Materials E-Empl/Cost P-Plant

ALLOWABLE 448,062 892,881 1,826,203 400,451 114,309 429,516 773,795

COST 703,416 953,474 2,173,728 399,775 1,786,935 429,266 321,212

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

CURRENT VALUATION - COST VS ALLOWABLE

L-Sup A-Cat A B-Cat B Consumables Materials E-Empl/Cost P-Plant

ALLOWABLE 448,062 892,881 1,826,203 400,451 114,309 429,516 773,795

COST 703,416 953,474 2,173,728 399,775 1,786,935 429,266 321,212

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

CURRENT VALUATION - COST VS ALLOWABLE

VALUATION 2 - REFRESHER

1. Contractor BLEEDS

2. If he doesn’t run proper project controls, only finds it out in certificate 11

3. If he enforces proper controls, Joe is history (maybe Estimator and Procurement as well)

4. Reduction in Project Margin from 16.67% to 11.55%

Serious Note…

Client should award to contractor that can execute, because

1. The above scenario will erode relationships

2. Contractor will seek remedy (Variations, contract exit etc.)

3. Both contractor and client needs to be “healthy” for successful Project

4. Ensure proper Contract Price adjustment included in longer projects

1. For Valuation 3…

2. Joe’s Cost rate back to R300,000

3. Support element Cost rate back to R69.90

4. This will show reversal on cost…but only done to reset for following examples

5. Forecast cost and duration, with Contract Variation (Not using Cost Worksheets)

…Otherwise changing support density example will become problematic

And that has never ever occurred in executing a mining project…

SOME “RESETS”

VALUATION - 3

L-Sup A-Cat A B-Cat B Consumables Materials E-Empl/Cost P-Plant

ALLOWABLE 245,814 497,786 1,018,117 223,253 63,728 239,457 431,394

COST -9,540 531,566 1,211,864 222,876 -1,338,854 239,323 179,077

-1,500,000

-1,000,000

-500,000

0

500,000

1,000,000

1,500,000

CURRENT VALUATION - COST VS ALLOWABLE

L-Sup A-Cat A B-Cat B Consumables Materials E-Empl/Cost P-Plant

ALLOWABLE 245,814 497,786 1,018,117 223,253 63,728 239,457 431,394

COST -9,540 531,566 1,211,864 222,876 -1,338,854 239,323 179,077

-1,500,000

-1,000,000

-500,000

0

500,000

1,000,000

1,500,000

CURRENT VALUATION - COST VS ALLOWABLE

L-Sup A-Cat A B-Cat B Consumables Materials E-Empl/Cost P-Plant

ALLOWABLE 245,814 497,786 1,018,117 223,253 63,728 239,457 431,394

COST -9,540 531,566 1,211,864 222,876 -1,338,854 239,323 179,077

-1,500,000

-1,000,000

-500,000

0

500,000

1,000,000

1,500,000

CURRENT VALUATION - COST VS ALLOWABLE

L-Sup A-Cat A B-Cat B Consumables Materials E-Empl/Cost P-Plant

ALLOWABLE 245,814 497,786 1,018,117 223,253 63,728 239,457 431,394

COST -9,540 531,566 1,211,864 222,876 -1,338,854 239,323 179,077

-1,500,000

-1,000,000

-500,000

0

500,000

1,000,000

1,500,000

CURRENT VALUATION - COST VS ALLOWABLE

L-Sup A-Cat A B-Cat B Consumables Materials E-Empl/Cost P-Plant

ALLOWABLE 245,814 497,786 1,018,117 223,253 63,728 239,457 431,394

COST -9,540 531,566 1,211,864 222,876 -1,338,854 239,323 179,077

-1,500,000

-1,000,000

-500,000

0

500,000

1,000,000

1,500,000

CURRENT VALUATION - COST VS ALLOWABLE

1. For Valuation 4…

2. Support density change

3. Thus reduced advance rate from 100m/month to say 80m/month

CHANGE IN SUPPORT

1. Reduced Mining tempo = Longer time

(assume same total quantity / scope)

1. Affects P&G = Duration extended (Program)

2. Increased Drill steel and Bolts usage (Estimate)

3. Increased Equipment Operating cost (OPEX Bolter)

4. Affects Equipment depreciation (CAPEX Bolter)

5. Reduced crew meters – R/m increase

6. Lets first assume only 200 meters of the tunnel scope applies

7. No CPA, shown, but will affect coefficients

CHANGE IN SUPPORT

BOQ – MACRO EXPLODE

Tempo

Support Cost

VALUATION - 4

VALUATION - 5

VALUATION - 12

L-Sup A-Cat A B-Cat B Consumables Materials E-Empl/Cost P-Plant

ALLOWABLE 303,690 1,453,325 2,972,474 651,807 186,057 699,111 1,810,633

COST 303,690 1,453,325 2,972,474 651,805 186,057 699,114 1,810,633

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

CURRENT VALUATION - COST VS ALLOWABLE

L-Sup A-Cat A B-Cat B Consumables Materials E-Empl/Cost P-Plant

ALLOWABLE 303,690 1,453,325 2,972,474 651,807 186,057 699,111 1,810,633

COST 303,690 1,453,325 2,972,474 651,805 186,057 699,114 1,810,633

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

CURRENT VALUATION - COST VS ALLOWABLE

L-Sup A-Cat A B-Cat B Consumables Materials E-Empl/Cost P-Plant

ALLOWABLE 303,690 1,453,325 2,972,474 651,807 186,057 699,111 1,810,633

COST 303,690 1,453,325 2,972,474 651,805 186,057 699,114 1,810,633

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

CURRENT VALUATION - COST VS ALLOWABLE

L-Sup A-Cat A B-Cat B Consumables Materials E-Empl/Cost P-Plant

ALLOWABLE 303,690 1,453,325 2,972,474 651,807 186,057 699,111 1,810,633

COST 303,690 1,453,325 2,972,474 651,805 186,057 699,114 1,810,633

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

CURRENT VALUATION - COST VS ALLOWABLE

VALUATION - FINAL

CLOSING

1. Project Controls – Both Client and Contractor cannot afford not to enforce

2. Above example, Contractor ended on target (Margin)

3. Client didn’t “overpay” but lost 2 months on Program

4. “All In” Bill R/m increased from R60,436/m to R62,871

QUESTIONS