ministry of transport urrap-training of trainers for contractors and coordinators project management...
TRANSCRIPT
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Ministry of Transport
URRAP-Training of Trainers for Contractors and Coordinators
Project Management and PlanningDAY 1- Friday August 02, 2013
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OutlineOutline
Introduction
Overview of the Construction Industry
Project Management Framework
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OutlineOutline
The Role of Effective Project Manager
Leadership and Human Resource Management
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OutlineOutline
Contemporary themes of Construction planning
◦Scheduling
◦Resourcing
◦Monitoring and Control
◦Cash flow forecast and Control
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IntroductionIntroduction
The prevailing facts of the road sector
◦Cost overrun
◦Time overrun
◦Quality reduction
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IntroductionIntroduction
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IntroductionIntroduction
Considerable shortcomings are related with failure of the contractor’s performance in all over project management
(Abd. Majid and McCaffer, 1998, Frimpong et al. 2003, Assaf and Al-Hejji., 2006).
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IntroductionIntroductionInefficiencies and ineffectiveness are part
in day today activity in the construction sites
◦ weak site organization;
◦ Improper construction method;
◦ Work discontinuity;
◦ Rework: 10-15% contract value;
◦ Improper resource allocation( Human, material, equipment) and under-utilization;
◦ Poor cash flow: not to utilize advances properly, not to raise sufficient payment;
◦ Attitude: not being self-contained…in identifying material sources, inaccurate setting outs, incomplete approval requests, resistance for changes…etc.
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Overview of the Construction Overview of the Construction IndustryIndustry
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Overview of the Construction Overview of the Construction IndustryIndustry
High work demand in the market… 100s of thousands Kms
Less fragmented ( Specialized firms are growing so slowly)
Loose coupling between the industry and the supply chain
developing financial market
Relay on importation
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Overview of the Construction Overview of the Construction IndustryIndustry
The Public sector is the major Client
Traditional procurement approach is predominant
Limited administration capability in most of the organizations, both private and public
Less focus on Research & Development
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Overview of the Construction Overview of the Construction IndustryIndustry
Local Contractors and Consultants are taking the major share of the construction market
Limited financial and technical capability
Less focus on quality delivery
Less focus on organizational learning
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What is a project ?What is a project ?
A project is a temporary endeavour undertaken to create a unique product, service, or result.(Source: Source: Project Management Institute ,PMIBoK)
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What is Project Management ?What is Project Management ?
Project management is the application of knowledge, skills, tools and techniques to project activities to meet project requirements.(Source: Source: Project Management Institute ,PMIBoK)
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The Three Main Pillars of Project Management
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.... and emphasise on people !.... and emphasise on people !
“Projects do not succeed just by assiduous adherence to a mechanistic process”
(BS 6079 Part 1: Guide to project management)
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Triple Constraints of ProjectsTriple Constraints of Projects
Cost
Time
Scope
Start End
Project Management
Project Management
What happens if the planwas based on the wrong assumptions
!
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Another View of the Triple ConstraintsAnother View of the Triple Constraints
Scope
Cost
Time
Project
BudgetContingency
Contingency
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Why do we have projects ?Why do we have projects ?
Business Goals
Projects
Outputs
Outcomes
Benefits
•Profitability•Market share
•Competitive advantage
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Projects Take up Projects Take up InvestmentInvestmentThe Firm: An organization that bring
together different factors of production such as labor, land and capital to produce a product or services which it hoped can be sold for a profit
Firm Entrepreneurs: Profits are a rewards of the
Entrepreneurs to take risks
Managers : hire ,fire , organize the business
Workers20
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Projects Take up Projects Take up InvestmentInvestmentNormal profit : minimum level of reward to
keep/attract the entrepreneur in the particular economic activity
Profit = total revenues- total cost
Economic profit : considers alternative use of all resources
Economic profit= total revenues – total opportunity cost of all inputs used
Economic cost= explicit cost and implicit cost21
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Projects take up Projects take up investmentinvestment
Opportunity cost of Capital : concerns the rate of return on the capital as all other business of similar risk are willing to pay
Degree of risk and difficulty involved
Opportunity cost of Labor: concerns rate of return on the opportunity cost of time of doing similar job
Opportunity cost of land: concerns the rate of return on the capital as all other business of similar risk are willing to pay
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Projects Take up InvestmentProjects Take up Investment
Project duration
Start EndGoal = Finish As Soon As
Possible
Investment
Return on Investment
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Goal of the firm: Profit maximization is a target
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Project Management FrameworkProject Management Framework
Project Integratio
n Managem
ent
Project Time
Management
Project Cost
Management
Project Quality
Management
Project Human
Resource Managem
ent
Project Communicati
on Management
Project Risk
Management
Project Procureme
nt Managem
ent
Project Scope Management
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Project Management Framework– Construction Extension Project Management Framework– Construction Extension
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ProjectProject Scope ManagementScope Management
Processes required to ensure that the project included all the work required and only the work required to complete the project
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Project ManagerProject Manager
Is the single integrative point of responsibility for the project
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TThe Role of Project he Role of Project Manager Manager
The planning and coordination of a project from inception to completion on behalf of a client, to deliver the client's objectives in terms of Function, Time and Cost
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Project Manager’s ResponsibilitiesProject Manager’s Responsibilities Liaison with the client/sponsor Develop and maintain project plans Team leadership/Teambuilding ability Cost effective work progress control Cost control Planning and technical decision
making Quality and safety management Business and administrative aspects
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Higher Order ObjectivesHigher Order Objectives
Complete all projects efficiently & profitably
Balance long & short term priorities
Supply & allocate resources
Integrate multiple projects with other activities
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Balance in ProjectsBalance in Projects
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Managing ClientsManaging Clients
Agree project objectives – deliverables
Initial start up meetingInterim reporting & reviewsProblem resolutionManage the relationshipUnder promise & over deliverAlways negotiate
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Establish Client's objectives + Establish Client's objectives + priorities priorities
Business aims Project aims + scope Priorities - quality, time, cost Timescales Understand uncertainty + risks
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Design an Organisation Design an Organisation Structure Structure participants relationships decision points, key +
operational reporting integrating + coordinating
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Common forms of Common forms of structurestructure
FunctionalProduct basedGeographicalDivisionalisedMatrix
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11 FunctionalFunctional
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22 DivisionalDivisional
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33 MatrixMatrix
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44 TeamsTeams
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Selection + appointment of Selection + appointment of project team project team
Scope + terms of reference Selection criteria PM's own appointment Appointment agreements Procurement route
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Develop brief for project Develop brief for project team team translate client's objectives state in terms of needs +
outcomesalternatives + evaluation clarity + communication
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Uncomfortable FactsUncomfortable Facts
Left alone people will tend toward;◦First come – first served◦Enjoyable / familiar tasks first◦Easy rather than difficult tasks◦Simple vs complex tasks◦Gain easy wins –short term rewards◦Not favour releasing key resources /
people◦Provide the answer you want to hear
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Establish Information and Establish Information and Communication Structure Communication Structure
Measurement of data + presentation
Communication channels Meetings Reporting mechanism
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Facilitate the Decision Facilitate the Decision Making Making What? By whom? When? At what Cost?
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Question – in groupsQuestion – in groups
Reference the distirbuted ‘direction finder’, how would you apportion your time (%) on a project?
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Projects – Direction FinderProjects – Direction Finder
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P. O. L .C. MODELP. O. L .C. MODEL
PLANNING
LEADING
ORGANISINGCONTROLLING
Establishing objectives & planning work
Setting standards and assessing success in achieving objectives
Influencing and motivating team members in doing the
work
Organising people, materials and scheduling
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Leadership involves:Leadership involves:
Challenging the status quo
Inspiring a shared vision
Empowering others to act
Modelling the way
Motivating others
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ENVIRONMENT
Working conditions
Interpersonal relations
Job Security
Salary
Status
Policy
MOTIVATORS
Recognition
Responsibility
Achievement
Advancement
Work itself
Growth
MOTIVATION FACTORS
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Take risks
Gain knowledge, and
Develop new skills
Empowered Individuals:Empowered Individuals:
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Goal setting
Communication
Trust
Accountability
Leadership – The 4 Basic Building Blocks
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Communication
Involves the transfer of information
and understanding
o Are you really communicating
when you talk?
o How can you be sure?
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Communication
Communication breaks down due to:
• Biases and assumptions
o Biases predetermine reality of how
things or people are
o Assumptions are about why people
do things
• The language used
• Status
• Not really listening
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Takes time
Involves conscious effort
Requires a structure
Overcoming Communication Barriers
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Team Communications
Could include:
memos
minutes
circulars
notices
meetings
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Why do we have meetings?Why do we have meetings?
Exchange Information
Discussion on important issues
Make Decision
Team Building
… Management
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Planning Meetings:Planning Meetings:
Conducting a meeting without a plan
is much like trying to build a house
without a plan. It can be done but is
likely to take much longer and have
many more problems
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Planning Meetings:Planning Meetings:
1 Determine the objective:
- Why do I want to hold this meeting?
- What do I want to achieve? - Is it necessary?
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2 Determine who should participate:
3 Prepare the Agenda:
. Venue
. Date
. Start and Finish Times
. Agenda Items - What, Who, Timing
Planning Meetings:Planning Meetings:
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Delegation
Advantages:
• Builds trust
• More people can do more things
• Staff are more involved and committed
• Staff grow and develop
• Skills and knowledge of staff are used more fully
• Individual performance can be measured
• Opportunity for recognition
• The manager has time for managing
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Delegation
Barriers:
• I don’t have time
• I don’t know how
• I don’t know to whom I should delegate
• It’s easier to do it myself
• I don’t want to lose control
• My staff lack experience and competence
• My team members resist responsibility
• My staff are not smart enough
• My staff cannot be trusted to work on their own
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Delegation Principles
1. Delegate the whole task to one person
2. Select the right person
3. Specify the required result
4. Delegate the responsibility and authority
5. Check for understanding
6. Set a date to review progress
7. Maintain open lines of communication
8. Don’t take the project back
9. Evaluate and recognise good performance
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Benefits of Effective Work Assignment
For the Individual:
• Has a clear understanding of what is required
in doing the work
• Is motivated and has ownership of the work
• Is able to measure and adjust achievement
towards the goal
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Benefits of Effective Work Assignment
For the Manager:
• Management is more effective due to a disciplined
process of assignment
• Fewer performance problems
• A better base of coaching/help staff
• A better base of monitoring staff performance
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Work Assignment
The process:
Step 1 Explain the purpose and relevance… (Why)
Step 2 Explore the current situation
Step 3 Define the work [Description, Scope, Means]
Step 4 Specify authority and responsibility
Step 5 Ensure system and personal capability
Step 6 Agree performance management of the work
Don’t forget to check for understanding and agreement!
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Performance Management
Includes:
• Performance Measures
What is being measured – outputs, outcomes or a mix
• Performance Standards
Apply to a role or a process eg ‘response within 1 week’
• Performance Monitoring
How and how often will information on performance be collected
and reviewed
What reporting is required
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Work Assessment - Feedback
The process of providing staff with information
with respect to their actual performance
Should be used to not only get staff member
back on track but to confirm that they are on
the right track.
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7 Reasons for giving feedback
1. Correction and consolidation
2. System improvements
3. Coaching
4. Learning and Development
5. Recognition and reward
6. Discipline
7. Evaluation
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Elements of effective feedback
• Be specific
• Be honest
• Stick to the facts
• Maintain self-esteem
• Listen and respond with empathy
• Separate the problem from the person
• Involve the employee
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Feedback
Critical, Complex and Difficult:
Because it provides staff with information with which
they can evaluate and modify their performance
You have to be the task expert managing the
technical aspects and, at the same time, manage a
difficult person-to-person interaction
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Main stages of a construction Main stages of a construction projectproject
InceptionFeasibilityDesignPreconstructionConstructionCommissioning and occupation
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Handover
New Project
Project Timescale
Scale of enthusiasm
The project ‘moodograph’
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Contemporary Themes of Contemporary Themes of PlanningPlanningConstruction is Complex system
◦Uncertainty ◦Interdependency of operations
Sequencing of activities Resource
Construction a Chaotic system: ◦dynamic ◦non uniform environment
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Contemporary Themes of Contemporary Themes of PlanningPlanning
It demands frame work
◦To structuring and managing the complexity of a project
◦To coordinates activities
◦To control the interfaces and delivery
◦To control effective use of resources
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Contemporary Themes of Contemporary Themes of PlanningPlanning
‘If you fail to plan, then plan to fail’
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Contemporary Themes of Contemporary Themes of PlanningPlanningPlanning in management concept
◦Assists Objective setting and monitoring progresses
◦Avoidance of Sub-optimization
◦Facilitating communication and collaboration
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Contemporary Themes of Contemporary Themes of PlanningPlanningPlanning in Construction
Assists PM setting guide line for project
Execution, coordinationForecast uncertaintiesIdentify constraintsMonitoring progress
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Effective Planning Effective Planning Contributes...Contributes... a disciplined approach a crucial communication aid identification of project risks preparation of risk mitigation
measures formulation of contingency plans fundamental project progress
monitoring anticipation of project delivery issues evaluation of remedial options confirmation of achievements
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Planning in ConstructionPlanning in Construction
A multi-staged process performed by different people at different stages for various purpose
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Planning in ConstructionPlanning in Construction
80
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Planning ViewPlanning View
81
schedule
costsquality/scope resources
planningview
projectview
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Space
Preceding Activities
Materials
EquipmentCrew
Information
Activity
Preconditions and Preconditions and stabilitystability
Safe environment
82
External Conditions
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Preconditions and StabilityPreconditions and Stability
Condition Reliability ?
Preceding task
ROW cleared site
Equipment
Crew
Information
Materials
External conditions
Overall Reliability
Reliability Reliability
83.3% 95%
83.3% 98%
83.3% 96%
83.3% 96%
83.3% 95%
83.3% 100%
83.3% 95%
<30% 70-80%
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Planning ProcessPlanning Process
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Planning Encompasses...Planning Encompasses...schedule management
◦recording planned activities and dependencies
◦testing plan logic◦highlighting critical activities◦recording activity progress
achievement projectionsresource managementcosts managementexploring what-if scenarios
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S.M.A.R.T. goalsS.M.A.R.T. goals develop a series of goals to define a logical
sequence of achievements that, cumulatively, build towards successfully delivering the required project outcomes
goals should be SMART… Specific Measurable Agreed Realistic Time-based
include these goals in the project plan as milestones
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Preparation of PlanPreparation of Plan
Major Steps required to develop a schedule ◦Establish work breakdown structure (WBS) ◦Sequencing of activities by analysing their
interrelations / interdependencies ◦Allocation of resources to activities ◦deciding time required for each activity ◦developing the overall time schedule of
the project NB: The above are not a onetime done
activity, need iterative process till optimal solution is obtained.
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Resources planning: ◦Determining the labour requirement ◦Determining the material requirement ◦Determining the number of equipment
required ◦Determining the cash requirement ◦Schedule the ordering of material,
equipment, recruitment of labour and cash requirement together with the provision of lead-time for all.
Preparation of PlanPreparation of Plan
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Preparation of Plans ….Preparation of Plans ….Major Major componentscomponents
A) Work method selection
B) Scheduling
Critical Path Method Critical Chain Method Location based/Repetitive
Scheduling The Last planner concept
C) Cash flow forecast89
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Preparation of PlansPreparation of PlansWork Method Selection
◦ Analyzing the project scope: including quality assurance requirements against the time and cost implication
◦ Understanding the whole process: mapping the process and pin point the required information
◦ Reviewing the construction technique that goes with the company ability and the work demand
◦ Defining the natural work flow within the sub-sequent work units 90
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Preparation of PlansPreparation of Plans
The Method Selection needs to provide Efficiency and Effectiveness, i.e.:-
◦Economical: too much focus on least expensive activity may adversely affect productivity and quality of works
◦Site specific
◦Safe
◦Reasonably considered social and environment issues
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Preparation of PlansPreparation of Plans
The Selected Method : address issues like:◦The What? …. The activities◦The Where?..... The location◦The When? …. The duration◦The How?...... The Construction Technique
Typically done either simultaneously or in a series of iterations.
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Scheduling Techniques:◦Tools for construction planning and
control ◦Used to estimate of overall duration◦Basis for resources allocation & cost
estimation◦Control timing of activities thereby
ensuring the timely completion of project
Principal scheduling techniques◦Bar chart◦Network Methods◦Time-space diagram
Preparation of PlanPreparation of Plan
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Bar chart◦Easiest to understand◦Most commonly used◦List of activities shown as “bar” plotted against time scale (start, duration, Finish)
Preparation of PlanPreparation of Plan
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ActivityDuration
(days) A 4 B 8 C 4 D 4 E 2 F 2 G 2
0 4 8 12 16 20 24 Duration (days)
EXAMPLE OF SIMPLE BAR CHART
Preparation of PlanPreparation of Plan
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Advantages of bar charts◦Very simple presentation, easily
understood◦Good form of communication to non-
technical personnel ◦Requires little training to use◦Suitable to be used for planning
time-phased resources (labor, material, equipment, budget)
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Preparation of PlanPreparation of Plan
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Disadvantage of bar charts◦ Can not show interdependencies among the
various activities ◦ Critical activities that need attention and
floats for non‑critical activities are not shown (complex projects).
◦ Change in schedule requires redrawing of the chart.
Despite its disadvantages the bar chart is the most commonly used tool for planning and control
Preparation of PlanPreparation of Plan
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Network method◦ Suitable for large complex projects having
many interdependent activitiesTwo commonly used network methods are
◦ Arrow‑diagram ◦ Precedence‑diagram
Main difference◦ Arrow diagram represents activities on arrows
and the node represents the event at a time◦ Precedence diagram shows activities on nodes
and the logical sequence of activities with arrows
Preparation of PlanPreparation of Plan
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Construction PlanningConstruction Planning(Cont.)(Cont.)
99
1
2 3
Act. 1
2weeks
Act. 2
5weeks
Act. 4
3weeks
Act. 5
6weeks
Act. 3
5weeks
EXAMPLE OF ARROW DIAGRAM (ACTIVITY ON ARROW)
EXAMPLE OF PRECEDENCE DIAGRAM (ACTIVITY ON NODE)
ACT.3
SS 2 weeks
ACT.1 ACT. 2 4
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Steps in developing a network diagram◦ Listing all project activities using WBS◦Prepare an arrow‑diagram following
the logical sequence of activities ◦Estimate activity duration◦Calculate the time for events and
determine floats and critical‑path (time analysis using forward and backward pass)
Preparation of PlanPreparation of Plan
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Critical Path Method: Critical Path Method: Scheduling Scheduling conceptconcept
101
Predecessor• controls the start or finish of another
activity Successor
• depends on the start or finish of another activity
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ActivityActivity relationships relationships
Finish to Start (FS)
when A finishes then B can start
(this is the default relationship type)
A
Predecessor
B
Successor
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ActivityActivity Relationships Relationships
103
Start to Start (SS)
when A starts then B can start
A
Predecessor
B
Successsor
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ActivityActivity Relationships Relationships
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Finish to Finish (FF)
when A finishes then B can finish
A
Predecessor
B
Successor
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ActivityActivity Relationships Relationships
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Start to Finish (SF)
B cannot complete until A starts
A
Predecessor
B
Successor
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ActivityActivity Relationships Relationships
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Finish to Start with Lag/lead
....daysB
Successor
A
Predecessor
Should be carefuly reveiewed inorder to avoid miss use / overlapsIt may bes better to deffine the activity itself inorder to avoid confusionAnd better control…specially for people who are not familiar withThe hidden structure Concerete cure time
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ActivityActivity Relationships Relationships
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Start to Start with Lag/lead
A
predecessor
B
successor...days
Excavation and pipe laying
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Scheduling conceptScheduling concept
108
Forward Passcalculates the early dates for each
activity
early dates are the earliest times an activity can start and finish once its predecessors have been completed
the calculation begins with the activities without predecessors
(Early Start + Duration) - 1 = Early Finish
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109
55
1010
1111 2525
11
11
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Scheduling conceptScheduling concept
110
Backward Pass
• calculates the late dates for each activity
• late dates are the latest times an activity can start and finish without delaying the end date of the project
• the calculation begins with the activities without successors
(Late Finish – Duration) + 1 = Late Start
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111
25251111
101011
101066
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Float- definitionsFloat- definitions
Float generally is the amount of time an activity can slip from its early start without delaying the project
Total float: Time available before being critical
◦ Late Dates - Early Dates = Total Float
Free float: Time delay without delaying subsequent activities
Independent float: Time delay without impact on preceding or succeeding activities
Activities with zero total float are critical
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Critical
Critical P
ath Path
00
00
55
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ActivityDuration
(days) A 4 B 8 C 4 D 4 FLOAT E 2 F 2 G 2
0 4 8 12 16 20 24 Duration (days)
ACTIVITIES A, B, C, E, F and G are criticalACTIVITY D is non critical and has a float of 8 days
Preparation of PlanPreparation of Plan
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Advantages of network methods ◦ shows the logical interdependencies among
activities and the effects of their changes on one another
◦ shows critical activities and floats for non‑critical activities
◦ estimates project duration more accurately by splitting the project into smaller activities (work contents)
◦ doesn't require redrawing for changes ◦ Resources levelling can be done by shifting
around non‑critical activities
Preparation of PlanPreparation of Plan
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Disadvantages of network methods
◦ Requires proper skill & training
◦ Difficult for supervisors on site to easily understand and get necessary information. This normally leads to the use of network based bar charts on construction sites.
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Preparation of PlanPreparation of Plan
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Time space diagram◦ Suitable for linear construction projects like highways,
cannels, tunnels, sewer lines
117
km Cut & Fill Protection Works 100 Legend: Drainage
Sub-base80 Base course
AC Bridge B60
Culvert 240
Culvert 120
Bridge A
0 5 10 15 20 25 30Time (Months)
TIME CHAINAGE DIAGRAM
Preparation of PlanPreparation of Plan
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Advantages of the method◦ Easily understood by all levels◦ Good means of communicating information to
non-technically trained personnel◦ Varying performances can be clearly seen from
the diagram i.e. change in slope◦ Location of the work along the project length
can easily be seen at any given time
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Preparation of PlanPreparation of Plan
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Disadvantages of the method ◦ Interdependencies among activities are not
shown◦ Critical and non-critical activities are not shown◦ Its use is limited to linear construction projects
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Preparation of PlanPreparation of Plan
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Plan Information DiffusionPlan Information Diffusion
Plans have to be communicated clearly and ‘no doubt should be left as to what is to be done and when’.
A well informed employee is committed to the plan which facilitates the monitoring and controlling process.
Clear information also increases commitment of subcontractors.
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Cost Flow ForecastingCost Flow Forecasting
Cash is a life-blood of any business
Cash inflow is not an income: money entering -money leaving the firm
.
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Cost Flow Forecasting …. Cost Flow Forecasting …. ContCont
Helps to :
To provide timely warnings…to take corrective actions
They also allow you to analyze whether a project will be sufficiently profitable to justify the effort put into it.
Be useful for analyzing owners’ personal finances. This is useful when making difficult financial decisions.
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Cost Flow Forecasting …. Cost Flow Forecasting …. ContCont
The Process of Cash flow forecast is similar to the process of production(Single Project)
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Operations
( break into manageable
size)
Revenue
Cash operation expense
Operation Income
Working capital
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Cost Flow Forecasting …. Cost Flow Forecasting …. ContCont
The basic steps in cash flow forecasting are:
Set the period of forecast
Prepare manageable activity break down
Prepare a spreadsheet identifying revenues, costs and total cash flow
Estimate/forecast the corresponding values and calculate
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Factors affecting project Factors affecting project cash flowcash flowRevenue factors
◦ Advance payment: proper utilization to support the cash flow
◦ Progress payment: timely delivery of the work and timely collect the payments
◦ Interest on Payment: Sub clause 60.8◦ Retention release◦ Acceptable cost claims
Cost factors◦ Direct cost of factors of production: ( labour,
material, equipment, finance...)
◦ Indirect cost Overhead and Profit, (Performance and other payment
guaranties)◦ Subcontractors◦ Escalation...etc 12
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Factors Affecting Project Factors Affecting Project Cash flowCash flowTime
◦Project schedule: delays/ accelerations, change of work
◦Holidays and non-working days
Terms of the contract◦ Minimum amount of payment for IPC◦ Retention deduction◦ Advance recovery◦ Payment on remaining % for General
Provisions◦ Unbalanced bids and the BoQ quantity
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Factors affecting project cash Factors affecting project cash flowflow
Material related variables◦ Storage, lead time of procurement,
credit terms, discount rate
Depreciation◦Helps to recover fixed capital early
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Implementation of Plan and Implementation of Plan and ControlControl
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◦ Planning facilitate project implementation control
◦ Firms has to Methodically and Continuously measure and evaluate the performance
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Implementation of Plans and Implementation of Plans and ControlControl• Project performance measurement
should evaluate
◦Productivity(efficiency)
◦Effectiveness of how the activities were done, i.e. no rework
◦Improved relations and communication
◦Overall satisfaction
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Implementation of Plan and Implementation of Plan and ControlControl
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◦The performance monitoring system: Timeliness Standard, Honest and Clearly showing divergence
◦managers must evaluate the performance, and take corrective action when the project runs away from the plan.
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Dynamics of PlanningDynamics of Planning
The employed performance measurement must lead to plan revision when there is divergence:
Project plans are subjected to re-planning either due to project goal change by the client or plan change by site management due to influence of project micro and macro environment.
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Dynamics of Dynamics of Planning…….Planning…….Cont.Cont.Planning needs timely and frequent
updating during construction due to following reasons:◦ Resources not available as planned ◦ Productivity may be less than assumed◦ Unanticipated extra quantities◦ Design changes etc.◦ Unusual weather conditions◦ Differing site or soil conditions◦ Untimely payment for completed works
In such ever changing and dynamic environment plans age early:
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Implementation of Plans and Implementation of Plans and ControlControl
Earn Value Management has become an industry standard way to Performance management and forecast
measure the progress of a projects if accomplished is as planned in terms of Cost & Schedule of the work performed
identify schedule and budget variances throughout the life of a project
forecast its completion date and final cost
Value is “earned” as it is completed, based upon the WBS budgeted cost of work completed
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Earn Value ManagementEarn Value Management
Time
Cost
Timeoverrun
Costoverrun
ACWP
BCWPBCWS
EAC
BAC
Now
SVCV
• ACWP – Actual Cost of Work Performed (spent cost)
• BCWP – Budgeted Cost of Work Performed (Earned Value/Achieved Cost)
• BCWS – Budgeted Cost of Work Scheduled (Elapsed Cost/Baseline Cost to Date)
• BAC – Budget at Completion
• EAC – Estimate cost at Completion
• CV – Cost Variance
• SV – Schedule Variance
EAC
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Earn Value ManagementEarn Value Management
• SPI: Schedule Performance Index (“Did a month’s of schedule produce a month of progress?”)– SPI=BCWP/BCWS– SPI<1 means project is running behind schedule
• CPI: Cost Performance Index (“Did the progress we made cost what it should?”)– CPI= BCWP/ACWP– CPI<1 means project is going over budget
• CSI: Cost Schedule Index (CSI=CPI x SPI)– The further CSI is from 1.0, the less likely project
recovery becomes.
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Earn Value ManagementEarn Value Management
• Predicting future cash flow Simple extrapolation
Final cost = cost of work done + (work left/past performance)
Assumes future performance is same as past
(generally true)
EAC=ACWP + (BAC-BCWP)/CPI
EAC=ACWP + (BAC-BCWP)/CSI
How far is the Completion predictable
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Securing Smooth Cash Flow Securing Smooth Cash Flow At Tender stage:Having as accurate estimate as
possible Load money into early items such as excavation and substructures
Construction stage: from project activities Submit interim application on time Deal with defective work quickly to avoid
delayed payment Delay some activities Value materials on site Frequent inventory to spare parts and idle
resources Manage maintenance and other expenses Agree in the value of variations as soon as
possible Keep good records and submit claims early
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Securing Smooth Cash Flow Securing Smooth Cash Flow
◦Timely avail finance from other sources Long term borrowing: has to be invested in capital assets Short term borrowing: should be invested as working
capital Bank loans, Bank overdrafts Trade creditors: make maximum use of credit facilities..etc
◦Post-construction stage : to assure profit is maximized: agree on final account and collect outstanding retentions
on time
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Thank you
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