CCP_SEC5_ Project Management

PPROJECTROJECT MMANAGEMENTANAGEMENT
Hisham Haridy, PMP, PMI-RMP, PMI-SP
CCP_Section 5

1. Project Management Fundamentals
2. Project Organization Structure
3. Project Communications
4. Project Labor Cost Control
5. Leadership and Management of Project People
CContentontent
5. Leadership and Management of Project People
6. Quality Management
7. Value Engineering
8. Contracting for Capital Projects
9. Strategic Asset Management
10.Change Management Practical Guide
11.Overview of Construction Claims and Disputes
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The management of projects focuses on:
1. Identifying risks
2. Maximizing cost savings
3. Minimizing time delays
4. Improving economic return
These results can only be achieved through:
PROJECT MANAGEMENT FUNDAMENTALSPROJECT MANAGEMENT FUNDAMENTALS
These results can only be achieved through:
1. Effective management of people
2. Tough but fair project objectives
3. Efficient business techniques
4. Outstanding leadership skills
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Project characteristic
Projects are temporary.
ProjectProject
An item of work that requires planning, organizing, dedication of resources and expenditure
of funds in order to produce a concept, a product, or a plant.
It is a temporary endeavor with a definite starting point and ending point undertaken to
create a unique product or service
Projects are temporary.
Has definite beginning and end, the end is reached when the project’s objective have
been achieved.
Projects are unique.
Every project creates a unique product, service, or results.
Progressively elaborated.
Progressively: proceeding in steps.
Elaborated: worked with care and detail.
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ProjectProject ObjectivesObjectives
Something toward which work is to be directed, a strategic position to be attained,
or a purpose to be achieved, a result to be obtained, a product to be produced, or a
service to be performed.
Each project must have at LEAST one objective.
Each project must have at LEAST one objective.
The objectives of the project MUST be made known and communicated.
Project objective MUST follow the SMART rule;
S = specific
M = measurable
A = attainable
R = realistic or relevant
T = time bound
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ProjectProject ManagementManagement FunctionFunction
Cost Management
Time Management
Human Resources
Human Resources
Communications
“Poor administrative practices” barriers
are common to all companies and are
generally referred to as Matrix
Interface Conflicts (MICs)
Major Factors That Are Essential for the Successful Execution of Projects
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Development
planning
Feasibility
study
Conceptual
Project PhasesProject Phases
Most of these phases will overlap, and the degree of overlapping will depend on the work
content of each phase and the efficiency of decision making present in the project.
1
2
3
Conceptual
study
Project
planning
Basic design
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Detail design and
procurement
Construction
Commission
and start-up
3
4
5
6
7
8

Solve Problems
Upgrade Quality
Engineering
Request
Project
Development
Project Life CycleProject Life Cycle
Project
Execution
Addition Quantity
Environmental
Stay In Business
budgeting and
Management
Technical
Project Conditions
Regulatory
Conceptual Cost estimate
Economics
Phases
Funding
Estimate Quality
Execution Strategy
Project Resources
Small
Large
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Projects are designed and built by people, not companies. People do it singly, or in
multiple groups; and if there are skilled people and good relationships, there is a
chance of success.
If the people and relationships are poor, there is little chance of success.
Greater personnel efficiency and increased
operational quality are essential
requirements in today's difficult business
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requirements in today's difficult business
environment.
The “Bean Counter” Syndrome is a wide
spread practice, where effective cost control
is absent or greatly diminished.
It is a dangerous and unacceptable
practice.

Projects are impacted by, and have impact on, the cultural norms, management
policies, and procedures of the organizations of which they are a part.
The best project managers look for these influences and manage them for the
benefit of the project and the organization.
One of the main forms of influence is how the company is organized.
Project organizations can be as strong as the processes that have been put in place,
but in the end―success is measured by the quality of the leadership and the
PROJECT ORGANIZATION STRUCTURE
but in the end―success is measured by the quality of the leadership and the
members of the project team
Organizational structures can be defined in terms of the project manager's level
of authority.
Types of organizations
Functional organizations
Matrix organizations
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Project Coordination
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(Green boxes represent staff engaged in project activities)
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(Green boxes represent staff engaged in project activities)
Project Coordination
Matrix
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Effective information exchange and efficient coordination of project workload.
More efficiently use resources.
Clearly defined project execution plan (accept, commit to, and work to the agreed
execution plan)
Project manager having inadequate authority.
Matrix Organization
Individual who is doing the work reports to two bosses.
Conflict management.
It needs strong project management culture and effective company leadership.
SO,
The solution was a new approach called Quality Management that was
introduced by Dr. Edward Deming.
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The “matrix” failed

Project Organization structures have become dynamic as a result of the numerous
international perspectives that have been applied.
The successful companies embrace a quality of empowerment and reward,
which allows them to maximize the organizational programs.
Many of these new organizational changes come from the Demingism programs
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Many of these new organizational changes come from the Demingism programs
which developed the Total Quality Management (TQM) philosophy.
Term “Demingism” coined after Dr. Edward Deming’s approach to TQM in the
1960s and 1970s

Demingism and Total Quality Management (TQM)
Criteria for Developing a Quality Management Program ( 6 components of total
quality management)
1. Client satisfaction
2. Understanding and reducing variation
3. “Top-down” management leadership and commitment
3. “Top-down” management leadership and commitment
4. Continuous change and improvement
5. Ongoing training and education
6. A culture of personnel pride and job satisfaction
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Use of TQM for Effective Project Delivery
1. Owner qualification to perform as project manager
2. Organization structure alignment with contracting arrangements
3. Project manager qualification
4. Determine if project manager reports to the client or to projects/engineering
5. Use of project task force (PTF) “Used on larger projects, more efficient communication channels,
challenge of brining individuals from many parts of a company is a substantial task, use of a business
manager”
manager”
6. Correct emphasis on business management
7. Efficient and effective project team
8. Project organization structure
9. Use of project organization charts
10. Establish authority of the project manager
11. Define project controls reporting relationship
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Project Manager Key Qualification and Authority
QULIFICATIONS
Technical
expertise, project
AUTHORITY
Full authority to
make both design
and cost decisions,
experience,
business capability,
leadership ability,
and people skills.
and cost decisions,
with appropriate
limits of authority
and management
reporting
requirements
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Communication
Communication has been identified as one of the single biggest reasons for project
success or failure.
Openness in communication is a gateway to teamwork and high performance.
It improves relationships among project team members and creates mutual trust.
A formal and informal structure of effective communication is absolutely essential for
PROJECT COMMUNICATIONPROJECT COMMUNICATION
successful project execution.
Many company organizations and cultures have poor administrative practices that
also form barriers to project success.
These barriers are common to all companies and are generally referred to as Matrix
Interface Conflicts (MICs).
The total quality management programs sweeping the industry are an attempt to
solve these problems.
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Communication involves the exchange of information:
The sender is responsible of making the information clear unambiguous and
complete, to receiver.
The receiver has to ensure that the information received in understood and
correctly understood.
Communication Model
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Body Language and Personality Types
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Nonverbal Communications
Four key principles:
1. Context is important
2. Observe behavior holistically
3. Watch for changes in body language
4. Watch for congruence (body language and words match)
Positive nonverbal clues
1. Uncrossed arms/legs
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1. Uncrossed arms/legs
2. Open hands
3. Rubbing the chin
4. Moving closer
5. Eye contact
6. Matching (movements of speaker/listener)
Negative nonverbal clues
1. Crossed arms/legs
2. Clenched or hidden hands
3. Moving away

Effective Listening
The receiver should decode the message carefully and confirm the message is
understood.
This includes watching the speaker to pick up physical gestures and facial
expressions, thinking about what to say before responding, and using active
listening, in which the receiver confirms he or she is listening, expresses
agreement or disagreement, or asks for clarification.
agreement or disagreement, or asks for clarification.
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Listening is an important part of
communication.
Listening techniques, both active and
effective give the user insight to problem
areas, negotiation and conflict management
strategies, decision making, and problem
resolution.

Elements of LISTEN
1. Look interested and give the speaker your undivided attention.
2. Involve yourself by responding to show you are listening.
3. Stay on target.
4. Test your understanding of what is being stated.
5. Evaluate the message and respond appropriately.
6. Neutralize your feelings
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6. Neutralize your feelings
Improving Listening
1. Don’t Interrupt
2. Put the Speaker at Ease
3. Appear Interested
4. Cut Out Distractions
5. Periodically Sum Up What Was Said

Top 5 communication barriers
1. Lack of common language
2. Use of slang and terminology
3. Loss of nonverbal communication clues
4. Lack of team interaction
5. Use of information filters
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Communication Dimensions
Internal (within the project) and external (customer, other projects, the media,
the public).
Formal (reports, memos, briefings) and informal (emails, ad-hoc discussions).
Vertical (up and down the organization) and horizontal (with peers).
Official (newsletters, annual report) and unofficial (off the record
communications).
Written and oral.
Verbal and non-verbal (voice inflections, body language).
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Communication Forms
Forms Characteristics Example
Written
Formal
Precise
Transmitted through
the medium of
correspondence
Project Charter, Scope Statement, Project
Plan, WBS, project status.
Complex issues
Contract related communication
Written Email, Notes, Memos, Letters
Written
Informal
Email, Notes, Memos, Letters
Regular communication with team members
Oral Formal High Degree of
Flexibility
Use the medium of
personal contact, group
meetings or telephone
Presentations, speeches.
Negotiations, conflict resolution
Oral Informal Conversation with team members
Project Meetings
Break-room or war-room conversations
Non-verbal 55% of total
communication
Facial expressions, hand movements, tone of
voice while speaking etc.
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Written Communications
Email is now the most common form of written communication
Best practices when writing and managing email:
1. Consider your audience before writing the email.
2. Use the subject line to describe email contents.
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3. Keep email short, concise, and coherent.
4. Do not type in all UPPER case or all lower case.
5. Proofread your document before sending (grammar and spell check).
6. Do not attach files unnecessarily.
7. Be aware that email is not confidential.
8. Do not send emails when you are angry.

Use of Technology for Business Purposes
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Identify Stakeholders
A key first step for effective communications is identifying the stakeholders you
need to communicate with on the project.
Stakeholders are those people who are directly or indirectly affected by the project or
who can affect the project.
Stakeholders can view the project as positive or negative, and can be either internal or
external to the organization.
There are multiple classification models
available such as;
i. Power/interest grid
ii. Power/influence grid.
iii.Influence/impact grid.
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Team Charter
An agreement on operating guidelines and group behavior norms for the team
Covers more than communications
Team member roles/responsibilities
Administrative procedures
Reporting hours worked
Team performance measures
Team performance measures
Decision-making process
Ground rules for team conduct
Dealing with issues and conflict
Meeting commitments
Returning telephone calls and emails
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Virtual teams
Virtual teams have become much more popular over recent years.
A virtual team is a group of geographically dispersed individuals who work across
space and organizational boundaries to complete projects.
Instead, they typically use communication tools to meet online, share
information, and collaborate on deliverables.
Achieving better virtual team communications:
Achieving better virtual team communications:
1. Connect with all team members
2. Prepare e-communication plan
3. Use effective communication tools
More than 66% of business professionals
engage in virtual work, and that number is
rapidly growing
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Labor costs is a variable element of a construction project.
The 3 components of labor costs
1. Quantities installed
2. Production rates
3. Wage rates
The two prevalent construction labor cost control reporting systems are:
1. The Earned Value Method
PROJECT LABOR COST CONTROLPROJECT LABOR COST CONTROL
1. The Earned Value Method
2. The Unit Rates Method
Labor cost control is best achieved by using a feedback loop.
Cost control should be approached as an application of Pareto’s Law.
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80 % of the outcome of a project is determined by
only 20 % of the included elements.

Factors affecting construction craft productivity include the following:
Crew sizes and craft composition
Craft density (area per worker)
Interference with other crews
Scheduling
Material availability
Equipment and tool availability
Equipment and tool availability
Information availability
Rework as a result of design, fabrication, and field errors
Site layout
Weather
Constructability
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Labor cost efficiencies =
(Input) Workhours expended or Labor dollars
(Output) Quantities produced
Input Output
Workhours are measured directly
using cost codes and time cards.
Quantity cannot be measured with a
common unit of measure.
Measuring Inputs & Outputs
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using cost codes and time cards.
Labor Dollars= workhour
expended X the wage rate
The output cannot be measured with a
Examples m3 of excavation, m2 of
formwork, tons of steel, lineal meters of
pipe, ... etc.
Cost control requires matching each unit of output to the input (resources) that was
required to produce it.

Acronym Terms Formula
%
Complete
% Complete (single account) = Actual Qty / Forecasted Total Quantity
BCWP Earned Value = Actual % Complete X Budget for the account
%
Complete
% Complete (multiple accounts) = EV (all accounts) / Budget value (all accounts)
Earned Value Method
The earned value method can be compared to the value of work scheduled as part
of an integrated project control system
Complete
% Complete (multiple accounts) = EV (all accounts) / Budget value (all accounts)
BCWS Schedule Value
= Scheduled % Complete X Budget dollars or Workhours
= Qty scheduled X Budget unit cost or production rate
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CV Cost Variance = Earned value - Actual cost
CPI Cost Performance Index = Earned value / Actual cost
SV Schedule Variance = Earned value – Schedule Value
SPI Schedule Performance Index = Earned value / Schedule Value

EAC
Work from this point forward will
progress at the budget (CPI = 1)
= Actual cost to-date + (Budget - EV)
The performance to-date will continue = Budget / CPI
Uses historical curves that show the normal variation in the CPI as the cost account
progresses
What the cost would have been if the actual quantities were installed at the budget
Terms Formula
Credit Dollars (C$) = Actual Quantity x Budget Unit Cost
Credit Workhours (CWH) = Actual Quantity x x Budget production rate
Unit Cost Index (UCI) = Credit Dollars / Actual Dollars
Productivity Index (PI) = Credit Workhours / Actual Workhours
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What the cost would have been if the actual quantities were installed at the budget
unit rate? Credit Value (Dollars or Workhours)

Unit Rates Method
The advantage of the unit rates method is that the unit costs and production rates
are used for estimating and are therefore familiar to most managers.
EAC
Work from this point forward will progress at budget
unit rates
= Actual dollars or workhours to-date
+ [To go qty X Budget unit rate]
The unit rate prevailing to-date will continue to prevail = Total qty X Actual unit rate
Uses historical curves that show the normal variation in unit rates as the cost account progresses
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Uses historical curves that show the normal variation in unit rates as the cost account progresses
A frequent question is what or who is responsible for the total difference between the
budget and the EAC? Two way variance analysis is one method for answering this
question.
Two way variance analysis
1. Quantity variance
2. Rate variance

Quantity Variance = CQ x PB
Where:
CQ Change in Quantity = QB – QF
QF Forecast Quantity
QB Budget Quantity
PB Budget Production Rate or Unit Cost
Unit Rate Variance (Production Rate or Unit Cost) = QF x CP
Where:
C Change in Production Rate or Unit Cost = P – P
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CP Change in Production Rate or Unit Cost = PB – PF
PF Forecast Production Rate or Unit Cost
PB Budget Production Rate or Unit Cost
QF Forecast Quantity
Estimated Total at Completion (EAC) = QF x PF
Budget = QB x PB
The project manager concentrates corrective efforts on those activities whose actual
performance deviate from the budget.
The effectiveness of the corrective action is monitored by the feedback loop.

Total Budget Duration Elapsed Duration
$1,440 20 days 5 days
Acronym Terms Formula
BCWP Earned Value =(608/2880) x $1,440 = $304
Budget quantity Forecasted quantity Actual quantity Actual cost
2880 2880 608 $288
Example
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BCWP Earned Value =(608/2880) x $1,440 = $304
BCWS Schedule Value = (5/20) x $1,440 = $360
C$ Credit Dollars = 608 x (1440 / 2880) = $304
CV Cost Variance = 304 – 288 = 16
CPI Cost Performance Index = 304 / 288 = 1.056
SV Schedule Variance = 304 – 360 = - 56
SPI Schedule Performance Index = 304 / 360 = 0.84
EAC Estimated at Completion = 1,440 / 1.056 = $1,364
VAC Variance at Completion = 1,440 – 1364 = 76

PB Budget Unit Rate = $1,440 / 2880 = 0.5 $/L.F
PF Cost Performance Index = $288 / 608 = 0.4737 $/L.F
EAC Estimated at Completion = 2880 x 0.4737 = $1,364
CQ Change in Quantity = QB– QF = 2880 – 2800 = 0
Change in Production Rate or
Unit Rates Method
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CP
Change in Production Rate or
Unit Cost = PB – PF
= 0.5 – 0.4737 = 0.0263
VAC Variance at Completion = (0.00 x 0.5) + (0.0263 x 2880) = 76

The project manager must be able to lead, motivate and persuade people to act in
the best interest of the project and must be able to build a team and lead
members to give their best effort to the project.
Effective project managers acquire a balance of technical, interpersonal, and
conceptual skills that help them analyze situations and interact appropriately
Leadership
LEADERSHIP AND MANAGEMENT OF PROJECT PEOPLELEADERSHIP AND MANAGEMENT OF PROJECT PEOPLE
Team building
Motivation
Communication
Influencing
Decision making
Political and cultural awareness
Negotiation
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Leadership
Leadership involves focusing the efforts of a group of people toward a common
goal and enabling them to work as a team.
Leadership is the ability to get things done through others.
Respect and trust, rather than fear and submission, are the key elements of
effective leadership.
Although important throughout
Although important throughout
Effective leadership is critical during the beginning phases of a project when the
emphasis is on communicating the vision and motivating and inspiring project
participants to achieve high performance.
Throughout the project, the project team leaders are responsible for establishing
and maintaining the vision, strategy, and communications; fostering trust and team
building; influencing, mentoring, and monitoring; and evaluating the performance
of the team and the project.
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Leadership styles concepts
Theory “X” Theory “Y”
People inherently dislike work.
People must be coerced or controlled to do
work to achieve objectives.
People prefer to be directed basic human
needs are arranged in a hierarchy.
People view work as being as natural as play
and rest .
People will exercise self-direction and control
towards achieving objectives they are
committed to.
People learn to accept and seek responsibility.
1. Theory of X and Y (Douglas McGregor’s)
People learn to accept and seek responsibility.
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People are self-motivated and will exercise self-direction and self-control toward
achieving objectives to which they are committed

2. Hygiene / Two Factors Theory (Frederick Herzberg’s).
Hygiene factors: A series of hygiene factors create dissatisfaction if individuals
perceive them as inadequate or inequitable.
Motivators: It is
intrinsic factors that
determine satisfaction.
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3. Organization and Human Problem (Chris Argyris)
Advanced some of McGregor’s theories.
Organization may be the source and cause of human problems.
Individual needs and organizational needs were not met effectively in most
organizations.organizations.
Part of the problem was due to bureaucratic and hierarchical structures.
Solution
1. Ad hoc work groups, or project teams.
2. Challenges and opportunities for responsibilities.
3. Open communication and trust are needed.
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4. LIKERT’S 4 systems of Management (Rensis Likert)
The development of an attitude measurement approach known as the Likert -
type scale.
Developed the concept of the linking pin “a person who belongs to two
groups in the organization”.
Four basic styles of leadershipFour basic styles of leadership
1. Exploitive – Authoritative
2. Benevolent – Authoritative
3. Consultative
4. Participative Group
Ideal for a human-concerned organization.
Trust between employees and management.
Widely delegated decision – making.
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5. Managerial/Leadership Grid Theory (Drs. Robert Blake and Jane
Mouton)
open-
minded,
flexible and
one who
inspires
involvement
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doing just enough
to keep their job

Team building
The process of helping a group of individuals, bound by a common sense of
purpose, to work interdependently with each other, the leader, external
stakeholders, and the organization.
Good leadership + Good team building = Teamwork.
Team building activities consist of tasks
(establish goals, define, and negotiate
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(establish goals, define, and negotiate
roles and procedures) and processes
(interpersonal behavior with emphasis
on communication, conflict
management, motivation, and
leadership).

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Cross-Cultural Concerns
By understanding the cultural differences, the project management team is more
likely to create an environment of mutual trust.
Cultural differences can be both individual and corporate in nature and may
involve both internal and external stakeholders.
An effective way to manage this cultural diversity is through getting to know the
various team members and the use of good communication planning.
various team members and the use of good communication planning.
Culture can impact the speed of working and the decision-making process.
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This may lead to conflict and stress in
some organizations, thereby affecting the
performance of project managers and
project teams.

Leading, Managing, Facilitating, And Mentoring
Leadership
Ability to conceptualize the vision, direct the project, and communicate or sell this
vision to the team members and other stakeholders.
Encouraged to ask questions about project purpose and to offer opinions.
Gain credibility and must demonstrate managerial actions and behaviours.
Being the team’s voice to the outside world.
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Being the team’s voice to the outside world.
Communicate actively to address stakeholders in terms of supporting and buying
into the project goals.
Management
Manager role ensures the project is completed on time, within budget, and at
acceptable levels of performance.
Create the administrative procedures and structure to complete the project

Facilitation
Help others get their work done.
It involves communication, conflict resolution, procure necessary resources,
motivate both individual team members and the team as a unit.
The goal is to provide team members with choices, options, and then trust that
the team members will create the desired outcome.
Mentor or Coach
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Mentor or Coach
Being a role model who demonstrates desired skills, behaviour, and attitudes.
Demonstrating personal interest in professional growth of team members.
Think-out-loud with team (suggestions, possibilities, problem solving
approaches)
Assisting team members in identifying and achieving long-term professional
goals.

Leader
Effective Project Manager
Facilitator
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Manager Mentor

Motivation
Project teams are comprised of team members with diverse backgrounds,
expectations, and individual objectives.
Motivating in a project environment involves creating an environment to meet
project objectives while offering maximum self-satisfaction related to what
people value most.
These values may include
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These values may include
Job satisfaction
Challenging work
Sense of accomplishment
Achievement and growth
Sufficient financial compensation
Other rewards and recognition the individual
considers necessary and important.

Motivation Theories
1. Biological Perspective
Actions contribute in preservation and expansion of
the species will produce motivation.
It is appropriate when confined to the more basic
aspects of human behaviour, such as hunger and
thirst, reproduction.
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thirst, reproduction.
2. Drive Theories
Certain behaviors are the result of individuals meeting the requirements of
specific drives.
The goal of reducing tension is to achieve an
internal state of equilibrium or balance.
Motivation by attempts to maintain this balance.
Similar to evolutionary.

3. Incentive Theories
Individual behavior is pulled in certain directions based on the external conditions
in the specific setting
It can work when the manager and team member have the ability and the
resources to identify a desired behaviour that can be awarded.
The incentives must be valued by the group.
The incentives need to be appropriate to the culture of the organization.
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The incentives need to be appropriate to the culture of the organization.
3. Theory Of Needs - Acquired Needs Theory (David McClelland)
People who value the need for achievement
are often those people who are the leaders
in the areas of creativity and economic
growth.
The need to achieve within one’s discipline
can self-motivate many individuals.

5. Fear Of Failure
A strong motivator in situations when the consequences for failure are
especially catastrophic.
It should be employed only in unusual circumstances
6. Maslow’s Hierarchy of Needs Theory (Abraham Maslow)
The basic human needs are arranged
in a hierarchy.
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in a hierarchy.
The lower needs must be satisfied
before the higher needs can be
addressed.
According to this concept, people are
always in some sort of a ‘‘needs’’
state.

7. Career Theory (E. Schein )
A different approach through a model that describes major stages in a personal
career.
An understanding of an individual’s current career stage by the leader can be used in
developing tangible approaches to individual motivation. This model has ten career
stages.
Stage 1&2: life before entering the world of work
Stage 1&2: life before entering the world of work
Stage 3: The first formal entry into the workplace
Stage 4: Training in the concrete application of skills and professional socialization
Stage 5:The individual is observed as having gained full admission into the profession
Stage 6: The individual gains a more permanent membership in the profession.
Stage 7: The natural mid-career assessment or crisis
Stage 8:The career starts to move into its final chapters.
Stage 9: Beginning to disengage from the world of work.
Stage 10: The retirement stage
PROJECT MANAGEMENT

8. Empowerment Theory - J.R. Meredith and S.J. Mantel
A team environment be established in which the members experience a strong sense
of empowerment through the use of participatory management methods.
Empowerment is defined as an approach that stresses individual initiative,
solution creation, and accountability.
The team is then motivated by the opportunity to be self-determinative in creating
the structure and methods to achieve its goals.
PROJECT MANAGEMENT
the structure and methods to achieve its goals.
9. Ethical Theories and Applications
Ethics is an emotionally and intellectually charged word for any professional.
It is science of judging specifically human ends and the relationship of means to
those ends.
It prompts images of moral responsibility and obligation, scholars debating the
intricacies of profound issues, and arguments between professionals and social
commentators about right and wrong behavior.

Quality
Total Quality
Management
QUALITY MANAGEMENTQUALITY MANAGEMENT
Inspection
Allocating blame
Quality
Control
Compliance to
specification
Quality
Assurance
Involvement
Management
Continuous
Improvement
PROJECT MANAGEMENT

People Materials Environment
Equipment Method
PROJECT MANAGEMENT

Conformance to established requirements
OR the degree to which the project fulfills the requirements
Quality Grade
“‫يتقنه‬ ‫أن‬ ‫عمال‬ ‫أحدكم‬ ‫عمل‬ ‫إذا‬ ‫يحب‬ ‫إن‬”What is Quality?
Quality Grade
The combination of all of an entity’s
characteristics that enable the
satisfaction of stated or implied needs.
A category or rank given to entities
having the same functional use but
different technical characteristics.
Low quality is always a problem Low grade may NOT be a problem
QualityQuality MUST BEMUST BE planned inplanned in NOTNOT inspected ininspected in
PROJECT MANAGEMENT

Standard Regulation
A document established by consensus
and approved by a recognized body
that provides, for common and repeated
Is a government imposed
requirement, which specifies product,
process or service characteristics,
Standard and Regulation
use, rules, guidelines or characteristics
for activities or their results, aimed at
achievement of the optimum degree of
order in a given context
process or service characteristics,
including the applicable administrative
provision, with which compliance is
mandatory.
Example: the size of a computer disk
and the ISO standards.
Example: Building codes
PROJECT MANAGEMENT

Juran’s Trilogy
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(PDCA) Cycle
W. Edwards Deming, advocated a similar and now well-
accepted set of steps with his “Plan-Do-Check-Act”

Categorizing quality costs
1. Error-free costs
2. Cost of Quality (COQ)
1. Costs of conformance
1. Prevention
2. Appraisal
2. Costs of non-conformance
2. Costs of non-conformance
1. Internal failure
2. External failure
3. Hidden poor quality costs
1. Postponed profits
2. Lost profits
3. Customer incurred costs
4. Socio-economic costs
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Cost of Quality
Cost of Conformance Cost of Nonconformance
Prevention Cost (Build a quality
product) and Appraisal Cost (Assess
the quality).
Failure Cost.
Prevention
Planning.
Appraisal
Testing.
Internal
(pre customer)
Scrap.
Rework.
Planning.
Training.
Auditing.
Controlling.
Testing.
Destructive
testing loss.
Inspections.
(pre customer)
“Fixes prior to
delivery”
Rework.
Inventory cost.
External
(post customer)
Warranty.
Service.
Recalls.
Money spent during the project
to avoid failures.
Money spent during and after
the project because of failures.
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Cost of Quality before and after TQM
After TQMBefore TQM
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Value
This is a major challenge for executives, and it involves increasing value.
Value is an ambiguous term and can be highly subjective.
A primary responsibility for executives is to create value for the customer while
increasing economic wealth for employees and shareholders—all at the same time!
Value =
Performance
With this math, value increases if the numerator goes up or the denominator goes
down.
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Value =
Performance
Cost
Quality management is an essential element for
managing costs.

Quality EvolutionQuality Evolution
1960s and 19701940s and 1950
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National Standards Institute (ANSI) represents the United States. ISO 9000 is not a
set of standards for products or services, nor is it specific to any one industry.
Instead, it is a quality system standard applicable to any product, service, or
process anywhere in the world.
The information included in the ISO 9000 series includes:
ISO 9000: This defines the key terms and acts as a road map for the other standards
within the series.
within the series.
ISO 9001: This defines the model for a quality system when a contractor demonstrates the
capability to design, produce, and install products or services.
ISO 9002: This is a quality system model for quality assurance in production and
installation.
ISO 9003: This is a quality system model for quality assurance in final inspection and
testing.
ISO 9004: This provides quality management guidelines for any organization wishing to
develop and implement a quality system. Guidelines are also available to determine the
extent to which each quality system model is applicable.
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1 2 3 4 5
Becoming
6
Writing a
policy
Defining
Procedures
Following
them
Getting
everyone
else to follow
them
Everyone
wants to
follow them
Becoming
prevention
oriented
continuously
improving
organization
ISO 9000
TOTAL QUALITY MANAGEMENT
PROJECT MANAGEMENT

Principles of TQM
Customer-oriented
Leadership
Strategic planning
Employee responsibility
Employee responsibility
Continuous improvement
Cooperation
Statistical methods
Training and education
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W. Edwards Deming ““Quality is a management problem”
The 14 Points “standard reference for quality transformation”
1. Create a constant purpose toward improvement.
2. Adopt the new philosophy.
3. Stop depending on inspections.
4. Use a single supplier for any one item.
5. Improve constantly and forever.
Continuously improve your systems and processes. Deming promoted the Plan-Do-
Check-Act approach to process analysis and improvement.
Emphasize training and education so everyone can do their jobs better.
By improving
quality, companies
will decrease
expenses as well as
increase
productivity and
market share.
“Out of Crisis”
1982
Emphasize training and education so everyone can do their jobs better.
Use kaizen as a model to reduce waste and to improve productivity, effectiveness, and
safety.
6. Use training on the job.
7. Implement leadership.
8. Eliminate fear.
9. Break down barriers between departments.
10.Get rid of unclear slogans.
11.Eliminate management by objectives.
12.Remove barriers to pride of workmanship.
13.Implement education and self-improvement.
14.Make "transformation" everyone's job.
Oct.1900 – Dec. 1993
Quality problem (85% management and 15% worker)
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Dr. Joseph M. Juran (The Father of Quality) ““Fitness for Use”
Quality begins with who, how, and why these customers will use it, without
this information any improvement will be guesswork.
In other words, all improvement activities should be customer focused
Juran’s ﬁve attributes for “ﬁtness for use”:
1. Quality of design
2. Quality of conformance (Dec. 1904 – Feb. 2008)
2. Quality of conformance
3. Availability
4. Safety
5. Field use
He development 80/20 principle
Quality is fitness for use.
1Quality Control Handbook, 2Managerial Breakthrough, 3Management of Quality
Control, 4Quality Planning and Analysis, 5Upper Management and Quality, and
6Juran on Planning for Quality.
Needs of the
customers and
Stakeholders are
defined and then
attempted to
satisfy.
“Quality Control
Handbook 1951”
(Dec. 1904 – Feb. 2008)
PROJECT MANAGEMENT

Philip Crosby ““Zero defects and prevention or rework results ”
Zero defects is a way of thinking and doing that reinforces the notion
that defects are not acceptable, and that everyone should "do things
right the first time".
The idea here is that with a philosophy of zero defects, you can
increase profits both by eliminating the cost of failure and increasing
Defects are not
acceptable, and
that everyone
should "do
things right the
first time“
“Quality is free
1979”
revenues through increased customer satisfaction.
Zero defects is NOT about being perfect. Zero defects is about
changing your perspective. It does this by demanding that you:
1. Recognize the high cost of quality issues.
2. Continuously think of the places where flaws may be introduced.
3. Work proactively to address the flaws in your systems and
processes, which allow defects to occur.
Quality is conformance to requirements.
Jun.1926 - Aug. 2001
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Kaizen Philosophy ““Continuous Improvement”
Apply continuous small improvements to reduce costs and ensure consistency.
Kaizen (Ky’zen) is meaning “change for the better” in Japanese.
改改改改
In united Stated and most of Western Europe, improvements are thought of as big improvements.
In Japan, improvements are thought of as small improvements.
善善善善
PROJECT MANAGEMENT

VALUE ENGINEERINGVALUE ENGINEERING
Value Engineering
Value engineering has the goal of lowest lifecycle costs.
Value engineering Benefits
Value Engineering for complex projects much more beneficial than simple
projects.
Pareto’s Law of Optimality states that 80% of the costs come from 20% of
the items therefore to achieve maximum benefit we should focus on those high-
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the items therefore to achieve maximum benefit we should focus on those high-
cost areas.
Value engineering can prove to be a
powerful tool in an increasingly-
competitive world market that every
dollar spent on value engineering, a
return of from three to four dollars
can be expected from this activity.

Factors causing poor value
1. Poor attitudes
2. Poor habits
3. Poor ideas
4. Poor information
5. Time constraints
6. Temporary circumstances
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6. Temporary circumstances
7. Mistaken beliefs

Value Types
Cost Value Exchange Value Use Value Esteem Value
Refers to the totality of
labor, material, equipment
, and overhead costs,
involved in actually
Refers to the
characteristics of the
project, product, or
service which allow it
Refers to the
characteristics of
the project,
product, or service
Refers to the
characteristics of
the project,
product, or
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producing and bringing
to market the project,
product, or service.
to be traded for
something of
value, such as
currency.
which enable it
to accomplish
its intended
purpose.
service which
make
ownership
attractive.

Level of Influence Curve
Early application of value
engineering techniques in the
design phase makes the most
sense.
VE application during the
construction process can be
PROJECT MANAGEMENT
construction process can be
problematic.
Engineering/design – High
influence on costs with low
expenditure
Procure/construct – Low
influence with high expenditure

Project Schedule
Optimum project duration results in the lowest life cycle cost
PROJECT MANAGEMENT

Functional Analysis Systems Technique (FAST)/Functional Approach
Identify unnecessary costs
Use an active verb and measurable noun
Identify primary functions and secondary functions
Use “Why” and “How” to stimulate thinking
Value Engineering study team
Diversified team members
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Diversified team members
Variety of relevant specializations

Value Engineering job plan
Information Phase
Speculation Phase
Analysis Phase
1
2
3
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Analysis Phase
Development Phase
Basic design
1. Follow-up and
Implementation Phase
4
5
6

PROJECT MANAGEMENT

Value Engineering success steps
1. An organized creative approach to cost reduction
2. Target fonctions versus technique
3. Targets areas of unneeded costs
4. Enhance the value of the product or service
5. Same level, or improved performance level, at reduced cost
6. Does not harm quality or reliability
PROJECT MANAGEMENT
6. Does not harm quality or reliability

Contract
A contract is a mutually binding legal agreement that obligates the seller to provide
the specified products, services, or results, and obligates the owner to
compensate the contractor.
A contract is a legal relationship subject to remedy in the courts.
The difference between a contract and an agreement is the element of legal
enforceability.
CONTRACTING FOR CAPITAL PROJECTSCONTRACTING FOR CAPITAL PROJECTS
PROJECT MANAGEMENT

Requirements of a Contract
1. An offer
2. Acceptance
3. Consideration (Something of value, not necessarily money) to warrant performing the work
4. Legal capacity (Separate legal parties, competent parties) Legal and mental capacity
5. Legal purpose (You cannot have a contract for the sale of illegal goods or services)
5. Legal purpose (You cannot have a contract for the sale of illegal goods or services)
PROJECT MANAGEMENT

Parties to a Contract
There must be a minimum of two parties in a contractual arrangement.
1. Owner (the first party)
2. Contractor (the second party)
3. Related parties
4. Third parties
PROJECT MANAGEMENT
4. Third parties

Mistakes that Make Contracts Defective
Nature of the transaction the property is not zoned for such
a facility
Identity of a party
Identity of the subject matter location at which Facility A
cannot be constructed
Existence of the subject matter facility is destroyed by fire
PROJECT MANAGEMENT
Mistakes that Do Not Make Contracts Defective
Value, quality or price
Terms of the contract
Other Factors Affecting Enforceability of Contracts
Statutory or regulatory provisions
Valid contractor’s license
Valid professional engineering or land survey
registration

Contents of a Contract
Invitation to Bid or Request for Proposal
Instructions to Bidders
Addenda Issued During the Bid Period Bid or Proposal
Contract
Bonds
General Conditions
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General Conditions
Special or Supplemental Conditions
Scope of work (Technical Requirements of the Contract)
It define what work is to be accomplished by which party, when, and to what
level of quality.
Disagreement over what in/out scope is one of causes of disputes.
Change orders or contract modifications
Permits, environmental agreements, geotechnical reports, technical requirements

Contract
Types of Contract
Guaranteed Maximum
Price [GMP] contracts
Fixed Price–
Lump Sum
Fixed Price
With Economic
Adjustment
Fixed Price
With Incentives
Fixed Price -
Unit Price
Cost
Reimbursable
Direct Costs
Indirect Costs
(Overhead
Costs)
Mark Up Costs
Target
Contracts
PROJECT MANAGEMENT
Types of Costs

Advantages Disadvantages
Fixed-Price/
Lump-Sum
Contracts
Final Cost are known and the
selection of contractor is fairly
easy
Lowest risk and minima
supervision (mostly quality /
schedule)
Contractor quickly solve his
Changes are difficult and costly
Contractor chooses cheapest solutions
Bidding time and design time make early
start not possible
Contractor include high contingencies in
price
PROJECT MANAGEMENT
Contractor quickly solve his
problem
Fixed-Price/
Unit Price
Contracts
Flexibility (scope and quantity
can be varied).
Good design definition is not
essential. typical drawings are ok
Very suitable for competitive
bidding
Final cost is not known since BOQ
estimated on incomplete engineering.
Staff needed to measure, control, and
report on the cost / status of the work.
Biased bidding and front end loading
may not be detected.

Advantages Disadvantages
Cost
Reimbursable
Contract
Early start can be made.
Flexibility in dealing with
changes.
Owner control all work
aspects.
Final cost is unknown.
Difficulties in evaluating proposals.
Contractor has little incentive for early
completion or cost economy.
Contractor may assign its “second
division” personnel to the job.
Owner carries most of the risks and faces
PROJECT MANAGEMENT
Owner carries most of the risks and faces
the difficult decisions
Target
Contract
Early start can be made.
Flexibility in dealing with
changes.
encourages economic and
speedy completion
Final cost initially unknown
No opportunity to competitively bid the
targets.
Variations are difficult and costly once the
target has been established

PROJECT MANAGEMENT

Project Delivery Method
1. Design-Bid-Build
Project is fully designed before contractor is employed.
Owners who employ fixed price contract that choose this type to know the
cost before construction.
PROJECT MANAGEMENT
cost before construction.
2. Design-Build
Engineering-Procurement-Construction contract (EPC), fast track, flash track,
or turnkey methods.
Construction can start prior to the completion of the design.

3. Indefinite Quantity Contract
Task Order Contracting, or Job Order Contracting.
Utilized on repetitive work such as routine repair and maintenance projects.
Owner and contractor establish set prices for labor, equipment, markups, etc.
As a result, scope does not need to be fully known prior to commencing
PROJECT MANAGEMENT
work.

Contracting Arrangements
1. Single Prime Contractor Organization
Design-bid-build.
Owner contracts with a design
professional.
Owner contracts with a single
contractor ASA design complete.
limited extent from claims or disputes
arising from vendors, suppliers, and
PROJECT MANAGEMENT
2. Multiple Prime Contractor Organization
arising from vendors, suppliers, and
subcontractors.
Series of contracts to several
contractors.
Construction is more quickly.
Coordination Risk.
Conflicts, delays or
coordination problems.
Consequently, claims to the
owner.

3. Design Build Organization
4. Agency Construction Management Organization
Shorten delivery time
Single point of responsibility for both design and
project execution.
A variation of the typical Design-Build Contract
is a Turnkey Contract
PROJECT MANAGEMENT
Project management or program
management contracting.
Owner contracts directly with designer
and contractor.
Owner retains independent construction
manager (Coordination and overseeing
the activities)
Construction manager has limited
authorities.

5. Construction At-Risk Organization
Employs construction
manager, project
manager or program
manager in lieu of a
general contractor.
All trade contracts are
issued by the
PROJECT MANAGEMENT
issued by the
construction manager.
The construction
manager executes a
contract with a firm
fixed price―lump sum

Contractor Prequalification
Owners may find themselves in a position of having to prequalify contractors.
Prequalified bidders can be assured that they are bidding against relatively equal competitors
understand the work and will estimate rationally.
An owner benefits as there is some degree of assurance that all contractors submitting bids
are qualified and capable of successfully performing.
If an owner chooses to prequalify contractors, an objective, rational system must be
established―such that all potential bidders can easily determine whether they are, in fact,
PROJECT MANAGEMENT
established―such that all potential bidders can easily determine whether they are, in fact,
qualified.
Such objective measures may include the following:
Past experience on projects of similar size, complexity, technical and schedule
requirements.
Past experience with the design build team proposed on this project.
Current financial capability.
Safety ratings on past projects.
Experienced project team, etc.

Decision to Bid
1. Expertise
No similar projects and spread risk.
2. Financial Capability
Insurance or bonding requirements, Payment provisions.
3. Bonding Capacity
Performance or payment bond and bonding capacity.
4. Personnel
PROJECT MANAGEMENT
Owner staff has sufficient experienced personnel to perform the work.
5. Equipment
If a project requires specialized equipment to perform the work.
6. Specialized Knowledge
Owner has requisite skills and knowledge to successfully perform the work.
7. Risk Analysis
Determine how project risk is allocated under the contract.
8. Workload and Other Potential Projects
Impact equipment, key personnel, logistics, bonding and financial capabilities.

Key Contract Clauses
1. Audit
2. Changes
3. Contractor Responsibilities
4. Delays
5. Differing Site/Changed Conditions
6. Dispute Resolution
12. Limitation of Liability
13. No Damages for Delay
14. Order of Precedence
15. Owner Responsibilities
16. Payments
17. Quantity Variations
PROJECT MANAGEMENT
7. Force Majeure
8. Governing Law
9. Indemnification
10. Insurance
11. Late Completion Damages
18. Schedules
19. Suspension of Work
20. Termination
21. Time of the Essence/Time of Performance
22. Warranty

Total Cost Management Framework
The sum of the practices and processes that an enterprise uses to manage the
total life cycle cost investment in its portfolio of strategic assets.
The practices are called Cost Engineering and the process through which the
practices are applied is called Total Cost Management (TCM).
Asset Management sub-process of Total Cost Management (TCM).
Strategic Asset
STRATEGIC ASSET MANAGEMENTSTRATEGIC ASSET MANAGEMENT
Any physical or intellectual property that is of long term or ongoing value to an
enterprise.
Strategic assets may vary from industrial plants to transportation systems to
software programs; essentially anything that an enterprise makes significant
investments in can be considered a strategic asset.
Each asset has a life cycle. For example, a building owner evaluates designs, builds, leases,
maintains, renovates, and eventually demolishes a building during its life cycle―at each stage
of the building’s life the owner makes cost investments in it that must be managed.
PROJECT MANAGEMENT

In the building example, Strategic Asset Management is the process where
the building owner measures the building’s operating performance, assesses
improvement ideas, and conceives, evaluates, and initiates building investment
projects.
The Strategic Asset Management and Project Control sub-processes are
linked in TCM.
Project System
The bridge or link between the owner’s Strategic Asset Management and
Project Control processes.
It is a subset of the Strategic Asset Management process that includes the
steps for planning asset investments, implementing investment decisions, and
then measuring project system and asset performance.
PROJECT MANAGEMENT

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Levels of Goals/Plans and their Importance

PROJECT MANAGEMENT
The Total Cost Management Process

PROJECT MANAGEMENT
The Strategic Asset Management Process

PROJECT MANAGEMENT

The asset owner performs the following steps for each asset in their portfolio, and for
their project system.
1. Performance Measurement
Measurements (e.g., safety, cost, operability, etc.) are taken of how well existing
assets and the project system is performing.
2. Performance Assessment
Performance measurements of assets and the project system are compared to
PROJECT MANAGEMENT
Performance measurements of assets and the project system are compared to
strategic plans.
3. Planning
Considering the enterprise’s objectives and requirements, asset portfolio and
project system improvement ideas are conceptualized, evaluated, and converted
into plans for investing resources in new or improved assets or project systems.
4. Implementation
Investment plans and requirements are communicated to and executed by project
teams.

Asset and Project System Performance Measurement
1. Asset performance measurement
Safety
Cost
Quality
Operational efficiency
Resource consumption (e.g., materials, labor, energy, etc.)
PROJECT MANAGEMENT
Resource consumption (e.g., materials, labor, energy, etc.)
2. Project system performance measurement
Safety
Cost
Quality
Schedule

Asset Planning
Owner identifies asset investment and Project System options, defines and evaluates
them, and decides upon which options to move.
Investment options identification step, finds ways to improve asset or Project
System performance.
Implementation
Based upon the decision process to implement an asset or Project System
improvement idea
Planning focus on developing the technical scope and execution plans
PROJECT MANAGEMENT
Planning focus on developing the technical scope and execution plans
Formal documentation inclusive of budget and operating cost should be added to
the capital budget
During implementation, the asset is reviewed continually on its technical scope
and execution plan
Project definition is also known as the front-end loading (FEL) phase
With good FEL, late changes in scope are minimal
At completion of FEL, project has a detailed budget and schedule that serve as
the basis for
project control during execution

Application - Capital or Fixed Assets
Includes items such as manufacturing plants and equipment, buildings, roads,
utilities, and similar items that are not easily moved and have significant-useful
lifespans
Generally created, modified and retired through a project process
List of opportunities and challenges identified by strategic planning is long
Review improving technology against plans, basis and
PROJECT MANAGEMENT
Review improving technology against plans, basis and
assumptions
Process application is reviewed against estimating,
historical data, schedule, risk, value engineering and
then results in the decision analysis
Documentation and decision analysis are key to the
process

Application - Product
Include such as items as manufactured goods and similar items that have a
limited useful lifespan
Products are created through an ongoing, discrete or continuous manufacturing
or production process, rather than a project process
Teams should develop a flow chart of business operations that reviews flow of all
backgrounds
PROJECT MANAGEMENT
backgrounds
Process for products is similar to capital planning
Application—Software
Difficult to classify software as either a capital asset or product
May or may not have a limited-useful lifespan
May not be fixed depending on installation in a particular device
Software estimates deal with configuration and coding activities versus
construction or actual assemblies

Change Management Overview
Projects have always involved change. However, they tend to have varying
degrees of change management approaches.
Change management is the process for identifying, resolving, reporting, and
administering changes to a project that affects its scope, cost, or schedule.
Change management and control has proven to be an essential part of controlling a
project and is critical to the project team’s ability to successfully manage the work
CHANGE MANAGEMENT PRACTICAL GUIDECHANGE MANAGEMENT PRACTICAL GUIDE
project and is critical to the project team’s ability to successfully manage the work
effort.
The change management methods, if appropriately applied, will more clearly identify
project change the degree of change impact on risk, and the potential
consequences.
Successful application of these methods will save money and minimize the
effects of negative events identified through the change management process.
PROJECT MANAGEMENT

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TCM Process Map for Change Management

PROJECT MANAGEMENT
Project Change Management Procedure Sample “30
days from notice to proceed”

PROJECT MANAGEMENT
Change Management Flow Chart – Contractor’s Perspective

Project Variance Notice (PVN)/Change Request
The form is a summary level document and should be supplemented with any
additional information needed to understand and justify the variance.
1. Section 1: “Title”
2. Section 2: “Change Information” Assign a sequential number to the PVN, log it into
the change register.
3. Section 3: “Approvals”
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4. Section 4: ”Distribution” The PCM/CCM, or project controls person, will check
the appropriate blocks and arrange for distribution.
PVN Review Meeting
The contractor project manager will conduct periodic PVN review meetings to keep
the project team fully informed of the status of each new and pending variance.
1. Periodic Internal Review, weekly
2. Special Internal Review, impact which cannot wait for the periodic meeting.
3. Client Review.
Microsoft Office
Word 97 - 2003 Document

Client Change Procedure
1. Change Request
i. Any variance is to be processed into a PVN and change request.
ii. 3 working days approval.
iii. The contractor will prepare an order of magnitude analysis.
iv. The client will have a reasonable period to approve or reject any change
PROJECT MANAGEMENT
iv. The client will have a reasonable period to approve or reject any change
request.
v. The client may respond as follows:
a) Reject the proposed change request
b) Approve the proposed change request immediately as a
change order.
c) Direct that a more detailed analysis of the change be
made and that it be resubmitted as a change proposal.

2. Change Proposal
i. Upon request by the client, the contractor will prepare a change proposal.
ii. The client shall bear the cost of preparing any change proposal.
iii. The client shall have a reasonable period of time to approve or reject any change
proposal.
iv. The client may respond as follows:
a) Reject the change proposal.
PROJECT MANAGEMENT
a) Reject the change proposal.
b) Approve the change proposal as a change order.
Change Order
Approved change request or a change proposal – by client.
Officially and Written.

Contractor Internal Change Procedure
This procedure is not dependent upon contract type, and should be followed for all
projects:
1. Project Manager’s Evaluation
2. Reject the PVN
3. Approve the PVN
Disputed Change
PROJECT MANAGEMENT
Disputed Change
For any change, the contractor project manager must perform the following:
1. Consult with the contract and legal departments.
2. Explicitly follow the contractual change procedure and associated change
management protocols.
3. Dispute the change in writing.
4. Receive written instruction from the client defining the course of action.
5. Maintain separate and complete records of the time spent

Change Register
The contractor will maintain a change register containing all PVNs, change requests.
Logs will include the PVN number, the change request, change proposal
The contractor will issue the change register to the client as specified in the contract.
Pending Change Order
Each pending change order is to be maintained in a change log.
The cost of the pending change must be considered in the forecast.
PROJECT MANAGEMENT
The cost of the pending change must be considered in the forecast.
The detailed cost distribution for the change should be tracked separately.
When approved by the client, the current budget and revenue is to be updated.
Change Order Identification
Identify each change order consecutively, using a three character numeric block.
Note that more than one variance may be included in a single change order.
If there is a client change order numbering convention, it should be cross referenced
to the contractor character number system.

Changes/Variations
A frequent occurrence on virtually all contracts is change/variation.
It is incumbent upon both the owner/employer and the contractor to establish formal
systems to identify changes/variations as soon as they arise and to estimate and
negotiate the full scope, time, cost, and impact of the change/variation as quickly as
possible.
All such elements of changes/variations should be dealt with as promptly as possible
OVERVIEW OF CONSTRUCTION CLAIMS AND DISPUTESOVERVIEW OF CONSTRUCTION CLAIMS AND DISPUTES
in order to avoid later disputes.
PROJECT MANAGEMENT

Contract Claims
Frequently, disagreements over contract requirements arise, which cannot be
resolved through the change/variation order process.
Typically, such disputes are referred to under the rubric of a claim.
Many design and construction contracts have clauses that address disputes or claims
and the notices required in order to properly assert a dispute or claim.
Claims, like changes/variations, should be addressed promptly and resolved in
Claims, like changes/variations, should be addressed promptly and resolved in
accordance with the terms of the contract.
PROJECT MANAGEMENT

Claim Change/Variation Order
A written demand or assertion by one of
the contracting parties seeking, as a matter
of legal right, payment of additional money,
adjustment to the time of performance
and/or some other change/variation to the
terms of the contract, arising under or
A directive from the owner/employer, or
their representative, to the contractor
directing him or her to perform work
differently or perform different work than
contracted.
PROJECT MANAGEMENT
related to the contract.
“Requests for additional time and/or
money”

Universe of Claims
There are only 11 types of claims in most contracts ….. As per causes!
1. Owner/Employer Directed Changes/Variations
2. Constructive Changes/Variations
3. Differing Site Conditions/Unforeseeable Site Conditions
4. Directed Suspension of Work
5. Constructive Suspension of Work
PROJECT MANAGEMENT
5. Constructive Suspension of Work
6. Force Majeure
7. Delay
8. Directed Acceleration
9. Constructive Acceleration
10. Termination for Convenience
11. Termination for Default

Directed
Changes
Resulting from owner/employer directed change/variation.
Involving a dispute over the time, cost and/or impact. Bilaterally or Unilaterally
Constructive
Changes
Resulting from owner unintended change that requires the contractor to
do more than is required by the contract.
Results in additional cost or time being incurred.
Comments on shop drawing submittals or Ambiguous contract
requirements.
PROJECT MANAGEMENT
requirements.
Differing Site
Conditions
Encounters with latent (hidden) physical conditions at the site differing
materially from the conditions indicated in the contract documents.
a) Type 1: Latent (hidden) physical conditions at the site is different (Rock,
subsurface water, and Buried pipes).
b) Type 2: Unknown physical conditions at the site (Archaeological or
paleontological finds).
c) Type 3: Material unexpected encounters with hazardous or toxic
materials (Presence of waste oil deposit).

Directed
Suspension of
Work
An owner directive to stop some or all of the work of the project for a
limited period of time.
The contractor is performing the work in an obviously unsafe manner,
otherwise the contractor can claim.
Constructive
Suspension of
Work
Accidental or unintended work stoppage caused by owner.
Delayed approval of shop drawings or issuance of changes/variations or
delivery of owner/employer furnished items.
Unforeseeable events caused by third parties or acts of God. Beyond the
PROJECT MANAGEMENT
Force Majeure
Unforeseeable events caused by third parties or acts of God. Beyond the
control of both parties.
Fires, Floods. Earthquakes, Tsunamis or Acts of war or terrorism
Delay
An impact to the contractually specified completion date or the adjusted
contract completion date (7 types of delay on projects).
Most contracts deal with the following 4 types of delays.
a) Excusable, Non-Compensable Delay (Third party/FM), No Cost & NO LD’s
b) Excusable, Compensable Delay (Owner), time extension ok.
c) Inexcusable Delay (Contractor), Make up be him or LD’s
d) Concurrent Delay

Time Extension & Cost
& NO LD’s
Case B: Contractor Delay
Employer Delay
Time Extension only
due delays out of
parties control
Case A: Contractor Delay
Employer Delay
Others
Concurrent Delay / Overlapping delay
NO Time extension &
LD’s
& NO LD’s
Case C:
Time Extension & Cost
For Employer’s delays
portion only
Case D:
Contractor Delay
Employer Delay
Others
Employer Delay
Others
Contractor Delay
Employer Delay
Others
PROJECT MANAGEMENT

Directed
Acceleration
Owner direct the contractor to complete earlier in order to maintain a
completion date despite an acknowledged delay. Voluntary acceleration
Constructive
Acceleration
Inadvertent owner action or failure to act, which results in a contractor
being required to complete earlier than required.
Termination for
Convenience
Owner action to end work in whole or in part.
Termination for
PROJECT MANAGEMENT
Termination for
Default
End work due to a material breach of the contract.
Claims Categorize
Contractual Claims
Extra- Contractual
Claims
Ex gratia Claims
Have a basis in the
contract itself where
provision can be quoted
giving rise to entitlement
These claims have no
basis in the contract but
entitlement stems from
the governing law
Ex gratia (“Out of Kindness”)
claims are those where a
contractor is seeking something
more tangible than sympathy.

Late
Completion
Damages
The owner/employer has the right to assess and collect damages for late
completion of the work caused solely by the contractor without any
owner/employer involvement.
a) Actual Damages: The owner/employer as the claimant would have to
keep careful track of all actual damages where incurred. Mutually waive.
b) Liquidated Damages: Stipulated amounts, usually on a daily basis,
agreed to at the time the contract is executed. Not need to be proven.
False or If a claim can be proven to be false or fraudulent as defined in various
Owner/Employer Claims; 3 types of claims
PROJECT MANAGEMENT
False or
Fraudulent
Claims
If a claim can be proven to be false or fraudulent as defined in various
statutes, recovery may include restitution, civil penalties, costs, punitive
damages and attorney’s fees.
Design
Deficiency or
Standard of
Care Claims
The basis for many contractor claims against owners/employers lies in the
deficient performance of the Architect/Engineer (A/E).
In turn, some owners/employers seek recovery from the A/E for the
damages the contractor may recover from the owner/employer.
Consequential
Damages
Sometimes called Special Damages, are damages that arise as a result
of the failure of the owner/employer or the contractor to live up to their
obligations under the contract.

Burden of Proof
The basic equation of a successful claim is summarized as follows:
1. Notice
Formal, or sometimes informal (e.g. constructive notice)
Communication from one party that potentially will be seeking time and/or cost
relief for an issue that has arisen.
2. Liability/Entitlement
PROJECT MANAGEMENT
An event or circumstance has occurred during project performance such as a
change/variation, delay or differing site condition.
3. Causation
The event or circumstance such as some portion of the work is revised and
performed differently than originally planned and work has to be re-sequenced as
a result.
4. Damages /Quantum
The work costs more and/or takes longer than planned.

Damages
1. Direct Costs
2. Indirect Costs
a. Field office overhead
b. Home office overhead
3. Delay Costs
4. Impact Costs
PROJECT MANAGEMENT
5. Other Contractor Damages
6. Other Owner/Employer Damages

Claims and Project Delivery Methods
1. Unit Price, change in the number of units installed
2. Design-Bid-Build improper design, lumpsum
3. Design-Build, ambiguities in contract language
4. Fast Tack Construction, coordinate the interfaces between the multiple contracts
5. Multiple Prime Construction, multiple lots, coordination
6. Construction Management at Risk (CM@R)
PROJECT MANAGEMENT
6. Construction Management at Risk (CM@R)
7. Alliance Contracting/Integrated Project Delivery (IPD)
8. Public Private Partnership (P3)

Analysis of a claim
1 2 3 4
Entitlement
and Causation
Analysis
Delay Analysis
Damage
Analysis
Settlement
Negotiations
Complete the analysis,Baseline and updatedIdentify issues, evaluate
PROJECT MANAGEMENT
Determine costs
and calculate
damages
Complete the analysis,
negotiate settlement
with the other party,
use an independent
mediator or third-
party-neutral.
Baseline and updated
schedules, compare
as-planned, updates
and as-built,
determine delays,
associate claim issues,
perform a detailed
analysis, and Identify
the party responsible
for the delay(s).
Identify issues, evaluate
all relevant contract
language, establish issue
files, analyze issues,
determine potential for
contractual entitlement,
magnitude, and request
additional information.

Dispute Resolution
NegotiationNegotiation MediationMediation ArbitrationArbitration
PROJECT MANAGEMENT
LitigationLitigation
AlternativeAlternative
DisputeDispute
ResolutionResolution

1. Negotiation
Between project teams or elevated in both the owner’s and the contractor’s
organizations.
The concept is to discuss the disputed issue face-to face and mutually arrive at
an acceptable solution.
2. Mediation
A structured negotiation between the parties utilizing the services of an outside,
PROJECT MANAGEMENT
voluntary, neutral facilitator (the mediator).
The mediator’s only power is the power of persuasion.
3. Arbitration:
More formalized procedure by an outside organization operating under a
national/international set of rules.
There may be a single arbitrator or a panel appointed by one of these
organizations.
Arbitrator’s ruling is enforceable at law in a court of competent jurisdiction.

4. Litigation:
A formal lawsuit in federal court according to contract terms and under the rules
of the jurisdiction.
Lawsuits are time consuming, lengthy, and very expensive.
The outcome may rest more on legal technicalities than on fact or circumstance.
A party submitting a dispute to litigation retains no control over process or
outcome.
PROJECT MANAGEMENT
5. Alternative Dispute Resolution
There are numerous other forms of Alternative Dispute Resolution (ADR)
available to the parties involved in a dispute,
Many are voluntary and need not be mandated by contract.

PROJECT MANAGEMENT
Dispute Resolution Staircase

1. Financial & Cash Flow Analysis
2. Practical Corporate Investment Decision-Making Guide
3. Statistics & Probability
4. Optimization
5. Risk Management Fundamentals
ECONOMICECONOMIC ANALYSIS, STATISTICS, PROBABILITY AND RISKANALYSIS, STATISTICS, PROBABILITY AND RISK
5. Risk Management Fundamentals
6. Risk Management Practical Guide
7. Total Cost Management Overview
8. The International System of Units (SI)
PROJECT MANAGEMENT

CCP_SEC5_ Project Management

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