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How are you doing project control?

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Morph T
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Hello

We are trying to implement a project cost control structure in our company using P3, so it will be useful for me to understand how state of the art companies are doing that ;-)

Actually we have a structure for financial accounting; it makes a monthly report of cash flow, but the boss want to use EVMS.

Our projects are in road construction so tasks are rather repetitive and have long duration,
- How many times are you updating the project ( daily, weekly…)
- Don’t you think it’s very hard to get the cost and hours spent and materiel utilization for each activity in every project, we need a full time man doing that for each project?



Hope my English is not so silly for your ears

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mimoune djouallah
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Oh

my 5 years old thread is still alive, rafeal as usual  passionate about bashing EVM :)

Rafael Davila
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Beware CPI is flawed, if you do not know it don't worry it took decades for the US Government to figure it out and they still specify flawed CPI, will take them another four decades to react.

From;

http://www.earnedschedule.com/Docs/Earned%20Schedule%20Leads%20to%20Impr...

" ...EVM has three major deficiencies:
1) The performance indicators are not directly connected to project output. For example, milestone completion or delivery of products may not meet the customer’s expectation, yet EVM indicator values are acceptable.
2) The schedule indicators are flawed. For projects completing late, the indicators always show perfect schedule performance.
3) The performance indicators are not explicitly connected to appropriate management action. Even with EVM data, the project manager remains reliant upon his intuition as to any action needed. The first two deficiencies cited are reasons as to why EVM is generally regarded as a cost management tool; the information relating to schedule performance is inadequate. In fact, there are many knowledgeable users who express the opinion that the prediction of project duration from the use of the schedule indicators is an exercise
in futility."

On the unit price contracts common in road construction EVM is of not much value to the contractor as budget quantity is a variable as well as costs. Unit cost might be under, over or as budgeted but total costs do not necessarily follows. As a matter of fact if a wise contractor correctly unbalanced the unit prices the more variation the more earnings.

Your boss is flawed, may I say NUTS, he wants to distance form his workers and staff that know about intuitive unit cost terms but nothing about the EVM terms. What, is he is going to explain the terms to the new guy on every meeting?

Seems like EVM cannot correctly relate costs and time nor costs and units. Unit costing is a step above budgeting without volume of work, the key is on relating volumes of work and cost. About time, it is a more complicate thing for wich Earned Value nor Earned Schedule are good enough on unit-price contracts. 

rowstone fausto
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Gents,

P3 is not the complete tools for Project Management Information System (PMIS), you were dealing with Cost control right and need of EVMS to measures project performance. Upgrade your PMIS to P6, this is fit to help project managers in monitoring and controlling as well as cost control process, identifying cost performance index (CPI) either your project is on- cost, behind or over cost. Track your schedule variances, schedule performance index (SPI) either your project are Behind or on schedule. So, this component helps you to measure your project against performance measurement baseline. It can help you also to forecast the budget completion of project Estimate at completion (EAC) and Estimate to Complete (ETC).

 

Have a nice day,

-rowstone

Mehdi Rashidi Ala...
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You must define resource pool in excel and convert into uniforms data and link to p3
Tom Farmer
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It’s been my pleasure. I truly enjoyed my time in Algeria and expect to return one day, if not for work, for vacation. I still keep in contact with many of our project team. All the best to you and your family.
Morph T
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Hi Tom

Absolutely we are always faced with this dilemma, making great profit and risking the bid, or just covering the cost and get the contract, then PM keep moaning all the time that the prices are so low so he can’t make profit ;-)

That was great, thanks really, unfortunately you go home, I hope you enjoyed your experience here in Algeria.

Regards
morph

Tom Farmer
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I personally don’t find cost control difficult when one uses a process. By it’s nature, EPC has more risk. With unit priced work, in my opinion, management needs to be concerned with productivity as well as quantities being installed. Less than planned productivity may cause delay to other subcontractors or follow-on activities and potentially cause slippage to the project end date. Any increases in project duration result in increased cost of general conditions (project management and running the site) and may result in liquidated damages. Similary, my formula for profit on unit priced work is a little different. Profit = Unit Selling Price the sum of (Unit Subcontractor Cost + Unit indirect costs + Unit company Overhead, General and Administrative costs). Indirect costs include costs such as subcontractor management and supervision, quality control, safety, etc.

Yes, the junior planner was local. With the experience gained, now he not so junior.

As for profit rate, I have see between 3 and 12%; however, it is often a function of company requirements for return on investment and the desire to win the job over the competition. One theory states the greater the risk, the greater the profit should be. In a competitive environment the question is how much profit can I estimate and still win the job.
Morph T
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Hi Tom

Thanks for your response, Please just another questions?

- Don’t you think cost control is rather simple in the case of EPC business as you subcontract all work( except design and management of course), all you have to do is to make sure the unit price for subcontractor are less then the original value( the difference is the net profit) ?
- From your last response I assume the Jr PP is local ?

[ offtopic question]

- In road, infrastructure industry, what is the average net profit (in % term)a contractor expect to get, I am speaking about simple to medium size project, not necessary for your actual company, as it is rather specialized in high value complicated project.


Regards
Morph

Ps; Sorry for name confusion
Tom Farmer
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This is Tom, not James.

The contract was a lump sum design-build; however, most activities were defined by unit prices. So the quantities and unit prices established the majority of the contract price. While nobody wanted extras, they were a fact of life for getting the overall project built. For us, the contract price was established with using the drawings and descriptifs from the esquisse phase of design.
The project management team was local with exception of the Engineering Manager (US) and the Project Controls Manager/Senior Planner (UK). The project site was 20 minutes from our head office, so everyone but the construction manager and his support team were based out of the office. Visits by project staff located in the head office staff were made to the site at least weekly.
The quantity surveryor and material control were located on site and supervised by the Construction Manager. A scheduler was also site and attended weekly production / coordination meetings with the CM and superintendents for the major trades. Month reports were prepared and analyzed by the head office staff.
Sorry for my process description to seem long, it is actually very abbreviated. We also did not start the project that way - we evolved into over several months. But it worked well once we took lead in planning the works for ourselves and our subcontractors.




Morph T
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Hi James

That’s what I call detailed response, thanks really, but I miss (or did not understand ;) some details, just to further my knowledge.

1-What is exactly the type of contract do you have with the owner, in our case we have a simple paradigm unit price listing equal work activity so all extra (missed) is assumed by the contractor, I mean we only construct the available bill of quantities, if actual work surpass the previous quantity it is ok, as long as the unit price is available. We nearly get all our contract after public bidding, so owner (state agencies) tend to minimize extra works (to avoid unethical action by owner representatives)

2- All the process you described is done in local office (on site) or in head office.

BTW, the management staff you worked with are expat , or local ?

Regards
Morph

Ps; as American are not famous to be fluent in foreign languages, I wonder if I should be proud about my English been better then your French and Arabic ;)
Tom Farmer
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Hi Morph,

I’ll try to keep my reply focused on your basic questions; however, I’ve come to believe that you cannot separate work process and control from the context of the team’s culture. While profit for companies (non-government)in the west translates into dollars, I sensed the PDG of our Algerian JV viewed "profit" as including economic benefit to the employees (job security) and to the local suppliers as well as improvement of the country’s infrastructure. With that in mind "cost control" on unit price work was most importantant to the owner so he had an idea of what the cost at completion would be because we had target budgets set in the contract. Additionally, the owner needed to know when the job was going to be complete. Here’s how we did it:
1)We assigned an experienced full-time quantity surveyor for quantifying all work activites from the unit price listing. This helped to identify items of work that were missing from the unit price listing. The missing items list was submitted with forecast quantities to the owner, prices negotiated, and then added to the contract.
2) With self-performing the work, even when cost overruns will just be written off, production control is critical to forecasting completion of work. With the WBS established, our project planner, loaded the work activity list into P3. Quantities, crew-sizes, and production rates were loaded for each activity.
3) Our Superintendents prepared daily reports to document events of their crews for the day to include resources used for the day (number of men by type - such as Dump Truck Operator or laborer - and equipment), materials delivered, inspections performed, testing, etc. The report was distributed to the Site Manager, Quantity Surveyor, Planner, Qaulity Control Supervisor and Site Safety Supervisor. (Yes we had a copier on site to simplify sharing of info, but we could have just posted the reports for all to see).
4) Our quantity surveyor used the daily report info to ensure all activities in progress were progressed. Some items required same day verification of installed quantitites (for example, underground piping) and some installed items were measured at the end of the week. As a minimum we progressed active activities weekly. Material consumption was based on material delivery tickets.
5) Each week, the quantity surveyor used his original take-off and compared it to work installed. As you noted, we often found the quantities actually installed exceeded our original take-off because of work not shown on the drawings. The quantity remaining to install was updated. If you don’t do this you will find you can achieve more than 100% progress. So progress was calculated as Installed Quantity divided by the sum of Installed Quantity plus Remaining to be Installed.
6) Each month, the quanity surveyor prepared the backup data sheets for our monthly progress invoice and walked the job with the owner for verification of installed works.
7) The planner used to the daily report to extract Actual start and Actual completion dates for activities in the schedule. The planner used the monthly progress reports to update installed works based on quantities. Actual progress was compared against the baseline to see if our forecast production rate was valid. If not, an analysis was performed to determine why - did we not have the number of resources planned, etc. The results of the analysis went to the Construction Manager and Project Manager for discussion on how we were going to address the issue - accept slippage, get more manpower, work more days, etc. Based on the decision taken by the Project Manager, the team responded accordingly, the schedule updated. And yes, at times we kept the completion date fixed which drove resource requirements beyond what was available, but that’s what Ops wanted to see. So they saw what they wanted, but we knew what the solutions were.

Sorry for this to be long. I hope this gives you some ideas. And your English is far better than my Arabic or French combined. :)
Morph T
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Hi Tom

Sorry for the lag,

First we do all the work for ourselves, IMHO it is better to have a unit price contract then lump sum.
1-     Due to poor detailed design,
2-     Bill of quantity are not so accurate
With the first type there is a less risk, anyway for state civil works this the most used type of contract.

Regards
Morph

Tom Farmer
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Mekaoui,

To give a good response to your question relative to EVMS, is your company self-performing all works or subcontracting? Being your in Algeria, is it safe to think your contract is unit priced rather than lump sum?
Zhang Haixiang
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Hello,
IMO P3 is not designed for full cost control.
Most of the time we use it to get a trend rather than the figure.
Generally we load resource into p3 schedule for cost calculation. But a lot of cost items can not be easily put into P3, such as office fee/stationary, a lot of VOs, a lot of claims,even the salary of the PM.

In some companys, scheduler only control the time, cost control is done by commercial guys, and PM will do a balance.
Peter Holroyd
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You only control costs at the point of commitment not afterwards.
Work out how you want the system to do first with a user spec, then look at your existing set up, work out what the important gaps are, do some process re-engineering on system to ensure it is as efficient as possible, then implement changes in your current system to fix the gaps and then finally look around for the best fit software for you needs (which could be P3, accounting upgrage, or not).
Treat it as a project, Client - specs - method statements -implementation - sign off acceptance