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Project Management
 

01) The Owners' Perspective

Page 02 of 02 Chapter 01

02) Organizing For Project Management

Page 02 of 02 Chapter 02

03) The Design And Construction Process

Page 02 of 03 Chapter 03
Page 03 of 03 Chapter 03

04) Labor, Material, And Equipment Utilization

Page 02 of 03 Chapter 04
Page 03 of 03 Chapter 04

05) Cost Estimation

Page 02 of 03 Chapter 05
Page 03 of 03 Chapter 05

06) Economic Evaluation of Facility Investments

Page 02 of 03 Chapter 06
Page 03 of 03 Chapter 06

07) Financing of Constructed Facilities

Page 02 of 03 Chapter 07
Page 03 of 03 Chapter 07

08) Construction Pricing and Contracting

Page 02 of 03 Chapter 08
Page 03 of 03 Chapter 08

09) Construction Planning

Page 02 of 03 Chapter 09
Page 03 of 03 Chapter 09

10) Fundamental Scheduling Procedures

Page 02 of 03 Chapter 10
Page 03 of 03 Chapter 10

11) Advanced Scheduling Techniques

Page 02 of 03 Chapter 11
Page 03 of 03 Chapter 11

12) Cost Control, Monitoring, and Accounting

Page 02 of 03 Chapter 12
Page 03 of 03 Chapter 12

13) Quality Control and Safety During Construction

Page 02 of 03 Chapter 13
Page 03 of 03 Chapter 13

14) Organization and Use of Project Information

Page 02 of 03 Chapter 14
Page 03 of 03 Chapter 14

 
Folder 12. Cost Control, Monitoring and Accounting-03

12.6 Schedule Control

In addition to cost control, project managers must also give considerable attention to monitoring schedules. Construction typically involves a deadline for work completion, so contractual agreements will force attention to schedules. More generally, delays in construction represent additional costs due to late facility occupancy or other factors. Just as costs incurred are compared to budgeted costs, actual activity durations may be compared to expected durations. In this process, forecasting the time to complete particular activities may be required.

The methods used for forecasting completion times of activities are directly analogous to those used for cost forecasting. For example, a typical estimating formula might be:

(12.5)(12.5)

where Df is the forecast duration, W is the amount of work, and ht is the observed productivity to time t. As with cost control, it is important to devise efficient and cost effective methods for gathering information on actual project accomplishments. Generally, observations of work completed are made by inspectors and project managers and then work completed is estimated as described in Section 12.3. Once estimates of work complete and time expended on particular activities is available, deviations from the original duration estimate can be estimated. The calculations for making duration estimates are quite similar to those used in making cost estimates in Section 12.3.

For example, Figure 12-2 shows the originally scheduled project progress versus the actual progress on a project. This figure is constructed by summing up the percentage of each activity which is complete at different points in time; this summation can be weighted by the magnitude of effort associated with each activity. In Figure 12-2, the project was ahead of the original schedule for a period including point A, but is now late at point B by an amount equal to the horizontal distance between the planned progress and the actual progress observed to date.

Figure 12-2  Illustration of Planned versus Actual Progress over Time on a Project

Figure 12-2  Illustration of Planned versus Actual Progress over Time on a Project

Schedule adherence and the current status of a project can also be represented on geometric models of a facility. For example, an animation of the construction sequence can be shown on a computer screen, with different colors or other coding scheme indicating the type of activity underway on each component of the facility. Deviations from the planned schedule can also be portrayed by color coding. The result is a mechanism to both indicate work in progress and schedule adherence specific to individual components in the facility.

In evaluating schedule progress, it is important to bear in mind that some activities possess float or scheduling leeway, whereas delays in activities on the critical path will cause project delays. In particular, the delay in planned progress at time t may be soaked up in activities' float (thereby causing no overall delay in the project completion) or may cause a project delay. As a result of this ambiguity, it is preferable to update the project schedule to devise an accurate protrayal of the schedule adherence. After applying a scheduling algorithm, a new project schedule can be obtained. For cash flow planning purposes, a graph or report similar to that shown in Figure 12-3 can be constructed to compare actual expenditures to planned expenditures at any time. This process of re-scheduling to indicate the schedule adherence is only one of many instances in which schedule and budget updating may be appropriate, as discussed in the next section.

Figure 12-3  Illustration of Planned versus Actual Expenditures on a Project

Figure 12-3  Illustration of Planned versus Actual Expenditures on a Project

12.7 Schedule and Budget Updates

Scheduling and project planning is an activity that continues throughout the lifetime of a project. As changes or discrepancies between the plan and the realization occur, the project schedule and cost estimates should be modified and new schedules devised. Too often, the schedule is devised once by a planner in the central office, and then revisions or modifications are done incompletely or only sporadically. The result is the lack of effective project monitoring and the possibility of eventual chaos on the project site.

On "fast track" projects, initial construction activities are begun even before the facility design is finalized. In this case, special attention must be placed on the coordinated scheduling of design and construction activities. Even in projects for which the design is finalized before construction begins, change orders representing changes in the "final" design are often issued to incorporate changes desired by the owner.

Periodic updating of future activity durations and budgets is especially important to avoid excessive optimism in projects experiencing problems. If one type of activity experiences delays on a project, then related activities are also likely to be delayed unless managerial changes are made. Construction projects normally involve numerous activities which are closely related due to the use of similar materials, equipment, workers or site characteristics. Expected cost changes should also be propagated thoughout a project plan. In essence, duration and cost estimates for future activities should be revised in light of the actual experience on the job. Without this updating, project schedules slip more and more as time progresses. To perform this type of updating, project managers need access to original estimates and estimating assumptions.

Unfortunately, most project cost control and scheduling systems do not provide many aids for such updating. What is required is a means of identifying discrepancies, diagnosing the cause, forecasting the effect, and propagating this effect to all related activities. While these steps can be undertaken manually, computers aids to support interactive updating or even automatic updating would be helpful.

Beyond the direct updating of activity durations and cost estimates, project managers should have mechanisms available for evaluating any type of schedule change. Updating activity duration estimations, changing scheduled start times, modifying the estimates of resources required for each activity, and even changing the project network logic (by inserting new activities or other changes) should all be easily accomplished. In effect, scheduling aids should be directly available to project managers. Fortunately, local computers are commonly available on site for this purpose.

Example 12-6: Schedule Updates in a Small Project

As an example of the type of changes that might be required, consider the nine activity project described in Section 10.3 and appearing in Figure 12-4. Also, suppose that the project is four days underway, with the current activity schedule and progress as shown in Figure 12-5. A few problems or changes that might be encountered include the following:
  1. An underground waterline that was previously unknown was ruptured during the fifth day of the project. An extra day was required to replace the ruptured section, and another day will be required for clean-up. What is the impact on the project duration?
  2. To analyze this change with the critical path scheduling procedure, the manager has the options of (1) changing the expected duration of activity C, General Excavation, to the new expected duration of 10 days or (2) splitting activity C into two tasks (corresponding to the work done prior to the waterline break and that to be done after) and adding a new activity representing repair and clean-up from the waterline break. The second approach has the advantage that any delays to other activities (such as activities D and E) could also be indicated by precedence constraints.
  3. Assuming that no other activities are affected, the manager decides to increase the expected duration of activity C to 10 days. Since activity C is on the critical path, the project duration also increases by 2 days. Applying the critical path scheduling procedure would confirm this change and also give a new set of earliest and latest starting times for the various activities.
  4. After 8 days on the project, the owner asks that a new drain be installed in addition to the sewer line scheduled for activity G. The project manager determines that a new activity could be added to install the drain in parallel with Activity G and requiring 2 days. What is the effect on the schedule?
  5. Inserting a new activity in the project network between nodes 3 and 4 violates the activity-on-branch convention that only one activity can be defined between any two nodes. Hence, a new node and a dummy activity must be inserted in addition to the drain installation activity. As a result, the nodes must be re-numbered and the critical path schedule developed again. Performing these operations reveals that no change in the project duration would occur and the new activity has a total float of 1 day.
  6. To avoid the labor associated with modifying the network and re-numbering nodes, suppose that the project manager simply re-defined activity G as installation of sewer and drain lines requiring 4 days. In this case, activity G would appear on the critical path and the project duration would increase. Adding an additional crew so that the two installations could proceed in parallel might reduce the duration of activity G back to 2 days and thereby avoid the increase in the project duration.
  7. At day 12 of the project, the excavated trenches collapse during Activity E. An additional 5 days will be required for this activity. What is the effect on the project schedule? What changes should be made to insure meeting the completion deadline?
  8. Activity E has a total float of only 1 day. With the change in this activity's duration, it will lie on the critical path and the project duration will increase.
  9. Analysis of possible time savings in subsequent activities is now required, using the procedures described in Section 10.9.

Figure 12-4  A Nine Activity Example Project

Figure 12-4  A Nine Activity Example Project

Figure 12-5  Current Schedule for an Example Project Presented as a Bar Chart

Figure 12-5  Current Schedule for an Example Project Presented as a Bar Chart

As can be imagined, it is not at all uncommon to encounter changes during the course of a project that require modification of durations, changes in the network logic of precedence relationships, or additions and deletions of activities. Consequently, the scheduling process should be readily available as the project is underway.

12.8 Relating Cost and Schedule Information

The previous sections focused upon the identification of the budgetary and schedule status of projects. Actual projects involve a complex inter-relationship between time and cost. As projects proceed, delays influence costs and budgetary problems may in turn require adjustments to activity schedules. Trade-offs between time and costs were discussed in Section 10.9 in the context of project planning in which additional resources applied to a project activity might result in a shorter duration but higher costs. Unanticipated events might result in increases in both time and cost to complete an activity. For example, excavation problems may easily lead to much lower than anticipated productivity on activities requiring digging.

While project managers implicitly recognize the inter-play between time and cost on projects, it is rare to find effective project control systems which include both elements. Usually, project costs and schedules are recorded and reported by separate application programs. Project managers must then perform the tedious task of relating the two sets of information.

The difficulty of integrating schedule and cost information stems primarily from the level of detail required for effective integration. Usually, a single project activity will involve numerous cost account categories. For example, an activity for the preparation of a foundation would involve laborers, cement workers, concrete forms, concrete, reinforcement, transportation of materials and other resources. Even a more disaggregated activity definition such as erection of foundation forms would involve numerous resources such as forms, nails, carpenters, laborers, and material transportation. Again, different cost accounts would normally be used to record these various resources. Similarly, numerous activities might involve expenses associated with particular cost accounts. For example, a particular material such as standard piping might be used in numerous different schedule activities. To integrate cost and schedule information, the disaggregated charges for specific activities and specific cost accounts must be the basis of analysis.

A straightforward means of relating time and cost information is to define individual work elements representing the resources in a particular cost category associated with a particular project activity. Work elements would represent an element in a two-dimensional matrix of activities and cost accounts as illustrated in Figure 12-6. A numbering or identifying system for work elements would include both the relevant cost account and the associated activity. In some cases, it might also be desirable to identify work elements by the responsible organization or individual. In this case, a three dimensional representation of work elements is required, with the third dimension corresponding to responsible individuals. More generally, modern computerized databases can accomadate a flexible structure of data representation to support aggregation with respect to numerous different perspectives; this type of system will be discussed in Chapter 14.

With this organization of information, a number of management reports or views could be generated. In particular, the costs associated with specific activities could be obtained as the sum of the work elements appearing in any row in Figure 12-6. These costs could be used to evaluate alternate technologies to accomplish particular activities or to derive the expected project cash flow over time as the schedule changes. From a management perspective, problems developing from particular activities could be rapidly identified since costs would be accumulated at such a disaggregated level. As a result, project control becomes at once more precise and detailed.

Figure 12-6  Illustration of a Cost Account and Project Activity Matrix

Figure 12-6  Illustration of a Cost Account and Project Activity Matrix

Unfortunately, the development and maintenance of a work element database can represent a large data collection and organization effort. As noted earlier, four hundred separate cost accounts and four hundred activities would not be unusual for a construction project. The result would be up to 400x400 = 160,000 separate work elements. Of course, not all activities involve each cost account. However, even a density of two percent (so that each activity would have eight cost accounts and each account would have eight associated activities on the average) would involve nearly thirteen thousand work elements. Initially preparing this database represents a considerable burden, but it is also the case that project bookkeepers must record project events within each of these various work elements. Implementations of the "work element" project control systems have typically fondered on the burden of data collection, storage and book-keeping.

Until data collection is better automated, the use of work elements to control activities in large projects is likely to be difficult to implement. However, certain segments of project activities can profit tremendously from this type of organization. In particular, material requirements can be tracked in this fashion. Materials involve only a subset of all cost accounts and project activities, so the burden of data collection and control is much smaller than for an entire system. Moreover, the benefits from integration of schedule and cost information are particularly noticeable in materials control since delivery schedules are directly affected and bulk order discounts might be identified. Consequently, materials control systems can reasonably encompass a "work element" accounting system.

In the absence of a work element accounting system, costs associated with particular activities are usually estimated by summing expenses in all cost accounts directly related to an activity plus a proportion of expenses in cost accounts used jointly by two or more activities. The basis of cost allocation would typically be the level of effort or resource required by the different activities. For example, costs associated with supervision might be allocated to different concreting activities on the basis of the amount of work (measured in cubic yards of concrete) in the different activities. With these allocations, cost estimates for particular work activities can be obtained.

12.9 References

  1. American Society of Civil Engineers, "Construction Cost Control," ASCE Manuals and Reports of Engineering Practice No. 65, Rev. Ed., 1985.
  2. Coombs, W.E. and W.J. Palmer, Construction Accounting and Financial Management, McGraw-Hill, New York, 1977.
  3. Halpin, D. W., Financial and Cost Concepts for Construction Management, John Wiley & Sons, New York, 1985.
  4. Johnson, H. Thomas and Robert S. Kaplan, Relevance Lost, The Rise and Fall of Management Accounting, Harvard Business School Press, Boston, MA 1987.
  5. Mueller, F.W. Integrated Cost and Schedule Control for Construction Projects, Van Nostrand Reinhold Company, New York, 1986.
  6. Tersine, R.J., Principles of Inventory and Materials Management, North Holland, 1982.

 

 
 
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Cost Control, Monitoring and Accounting-03