help with controlling changes
John E. Canepari, Sr. Vice President, PACO Group, Inc.
Changes are, and will continue to be, an inevitable part of the design and construction of any project. Even the best set of design plans and detailed contract specifications are no guarantee that a particular construction project will not experience numerous changes. This is particularly true when the scope involves a large-scale, multicontract, multiphased complex project. The major causes of changes to design and construction projects relate to changes to design standards, changes to the project scope, unforeseen complexities or site conditions, dynamic environmental and community requirements, and lastly, difficulties or delays in the project implementation. Project managers, to help control the impact these changes can have on cost, schedule, and performance, are beginning to see the value in using the principles of configuration management.
A recent study (Christiansen 1999) compared the cost growth on a sampling of projects completed during the 1990s. The study reviewed 21 large construction projects, domestic and international, public and private, and concluded that though cost growth varied, no project was immune. Exhibit 1 summarizes the results of the study. The projects consisted of airports, light and heavy rail, sports centers, and office and industrial buildings. Of the 21 projects, nine were privately financed with the remaining 12 being financed through public funding. Six of the projects were megaprojects, originally estimated to cost $1 billion or more. The percent over the original estimate for private the projects averaged 72%, while public projects in the survey were over budget by an average of 48%. These were average percentages and not all projects experienced a cost growth of this magnitude, but all projects did have cost growth.
The data in this and other studies demonstrates the need for a project manager to monitor project baselines in a clear and consistent manner in order to mitigate the inevitable impact change can have on the final cost of a project. Configuration management is a process that includes established methodology, systems, and procedures to control the elements of the change process. The discipline of configuration management has been practiced for years. It first was developed and used by the defense industry here in the United States. The emphasis started with life safety issues help assuring weapons and aircraft safety, more recently moving into applications on projects possessing a large degree of uncertainty. The nuclear industry also adopted configuration management to help track code and equipment changes that affected operational safety. We are all probably more familiar with the computer industry's use of configuration management where the principles apply to tracking modifications to computer applications and equipment.
There are many different definitions of configuration management, but in general terms configuration management is a process that accommodates changes and perpetually documents how a physical system is configured. Configuration management complements the process of project management, which also requires the involvement of various entities each charged with different responsibilities. To this end, a project manager develops processes and procedures that address responsibilities and authorities for price and time modifications on a project. When combined with the technical criteria and the configuration management procedures, the project manager has a complete set of tools with which to manage his or her project.
The key benefits of configuration management are as follows:
• Early identification and accommodation of changes
• Assures all requirements remain clear, concise, and valid, which provides the project team with the ability to mitigate impacts of changes
• Records chronology of events and issues (audit trail)
• Provides an internal feedback mechanism to assure that project performance criteria are being met.
The process of configuration management is dependent on overall project management policies and procedures being in place. The overall management plan must be developed first. Therefore, one of the project manager's initial tasks is to develop the project's Project Management Plan to provide the organizational and management approaches for the project. The Project Management Plan should be a living document that is revised and updated as necessary.
Specifically the Project Management Plan:
• Defines the management responsibilities and roles of project staff
• Identifies the interactions between project staff, consultants, and contractors
• Specifies the general procedures and management tools that will be used to provide effective management, administration and control of the project.
The Project Management Plan is important to the project capital budget because it provides the management framework and overview of the required project policies and procedures to develop the budget and then control costs against the budget during project implementation. To do this the budget needs to reflect the total cost of the project categorized by its specific deliverable components. Project managers use a Work Breakdown Structure (WBS) technique to identify the component parts that make up the total scope (technical baseline) of a project (PMBOK® Guide 1996). A WBS is a hierarchical logical breakdown of the project's scope into successive levels of detail. The number of WBS levels required depends upon the size and complexity of the project.
The lowest, most detailed, level of the WBS consists of a series of work packages. Cost estimates may then be prepared for each work package to provide the detailed components of the project budget. Rolling up the work package budgets through the WBS provides summary level project budget subtotals and ultimately the total budget for the project. The project's budget is thereby developed and then controlled against the elements of the WBS. The WBS work packages may also be cross-referenced to corresponding activities on the project's schedule in order to place the work packages out in time. In this way a project commitment schedule and cash flow may be developed and the budget calculated in both constant and escalated dollars. Configuration management formalizes the procedures to follow in order to track changes to the cost baseline.
Also at the outset of a project the owner makes a number of key organizational decisions that will determine how the project will be organized and the work carried out. These decisions have significant consequences on the project's capital budget. For example, the owner may choose to make use of a general engineering consultant, program management consultant and/or construction manager. The owner decides how the work will be carried out and may choose to adopt a conventional design-bid-build approach or a design-build approach.
Project Controls Interfaces
Generally accepted project management practice requires that the project baseline budget be maintained unchanged throughout project implementation so that it may be used as the yardstick to measure project cost performance. The first step in managing by contract is to assign a budget for each contract award. If the actual contracts awarded correspond identically with the planned (budgeted) contracts, then there is a one-to-one relationship between the planned and actual contracts and their budgets. Unfortunately, in practice this is usually not the case and the project team must develop an additional level in the WBS to account for either multiple awarded contracts per a planned contract or a single awarded contract that crosses several planned contracts. As the project progresses management of the actual contract costs against budget requires contracts to be managed at the contract line item detail level, i.e., by contract work order for professional service contracts and by bid item for construction contacts. The configuration management process adds to that by requiring certain cost elements be controlled by line item, namely the line item commitments, approved changes, incurred costs, pending changes, trends and forecast final cost. The basic cost control principle is to keep the sum of the line item forecast final costs within the contract budget. For a line item the forecast final cost is the sum of the original commitment plus approved changes, pending changes and trends.
Capturing incurred costs for a project cost management system is frequently a challenge because an owner's accounting system is usually geared to operational needs and is not set up to provide project cost information by contract line item detail and by WBS work package. Consequently the capture of project costs usually requires investment in enhancements to the accounting system and/or a separate cost capture procedure. The goal is to be able to report contract line item commitments, changes, incurred costs and forecast costs cross-referenced back to the budgets established for the planned contracts and the planned scope as reflected in the WBS.
Contract Management and Change Control
A project's Project Management Plan must specify the contract management and change control organization usually defining a contract manager and a contracting officer, each having clearly defined responsibilities for contract actions. The contract manager is responsible for exercising project line decisions with respect to contract actions and is accountable for making certain the contract deliverables are delivered on schedule and within budget. The contracting officer is responsible for making certain that contract actions are consistent with the contract terms and conditions, meet applicable legal and regulatory requirements, advising the contract manager accordingly and maintaining the executed contract documents. The Project Management Plan should also call for the contract manager and contracting officer to be supported by configuration and records management staff. Their responsibilities are to maintain contract record files, track the processing of pending contract actions and make certain that the project's cost management, configuration management and change control systems were updated to reflect the current status of the contract and pending contract actions.
However, the issues of contract management and change control cannot be addressed without first establishing the methods and procedures for identifying and maintaining the project baseline documentation. Accordingly a project manager needs to develop a configuration management plan and records management plan to make certain that:
• Design and contract documentation are identified and a system is established to monitor/track any revisions throughout the design, bid, procurement, construction and close out phases of the project
• All project correspondence and contract submittals are processed and filed effectively and systematically
• Requests for change to any contract are tracked and that reviews and responses from the owner are timely
• Complete audit trails for each change request are provided in a clear and concise manner
• Records of decision and all other documentation regarding contract documents and baselines are maintained, and easily retrievable.
As previously stated, the configuration management plan sets the groundwork for developing a set of configuration management procedures that explain how the tracking of the project baselines will work. The actual configuration management requirements must be integrated with the other project processes and procedures. Therefore the configuration management procedures need to make reference to the design, construction and operations management requirements, and be complimentary with the project's contract administration and control procedures.
Configuration Management Tools
To implement the configuration management plan in the most effective manner, a database system should be used to automate and support the project's contract management and change control procedures. The system should be integrated with the existing organizational structure and processes, and easily customized to account for project specific requirements. In selecting or developing the appropriate system the project manager and the owner's team should meet to discuss the desired system requirements, existing and proposed MIS/IT infrastructure, and the expected system functions and reports to be included. The next step is to survey the market for existing applications that might best meet the specific project requirements. A typical system module layout is illustrated in Exhibit 2. The system should support the following contract management and change control processes:
• Requests for information/change
• Design/consultant contract changes
• Configuration control for design documents
• Construction changes
• Contract submittal tracking/review
• Action item/issues tracking
• Claims management
• Records management.
This paper suggests that the following steps are helpful in complying with generally accepted project management practice for minimizing cost, schedule, and performance impacts due to changes to a project's baselines:
• Plan the project implementation strategy and organization
• Specify the project's management approaches in a Project Management Plan
• Use a WBS to define the project's scope and develop the baseline budget
• Cast the WBS work packages to correspond to the baseline cost estimate (budget) for planned contracts
• Cross reference the WBS work packages to the project schedule so that the budget may be expressed in both current and escalated dollars, and the timing of project commitments and cash flow established
• Maintain the project baseline budget unchanged during project implementation to provide a yardstick to assess project cost performance
• Use budget transfers to develop and maintain a current budget, with an audit trail to reconcile to the baseline budget, to accommodate differences between planned and actual contract packages and contingency transfers
• Manage project implementation by contract, at the contract line item level, in order to minimize cost growth, claims, and schedule slippage
• Use a cost management system that provides both WBS and contract reports that reconcile to each other and the project baseline budget
• Create procedures that define organizational responsibilities and authorities for contract management and change control
• Closely track requests for changes, proposed contract modifications, proposal negotiations, change orders, and rejected changes
• Use a configuration management system to support contract tracking and control and facilitate responding to changes on the project.
Christiansen, Jeffrey. 1999. Study of Cost Growth on Construction Projects. Los Angeles, CA: Los Angeles County Metropolitan Transportation Authority.
Project Management Institute (PMI). 1996. A Guide to the Project Management Body of Knowledge (PMBOK® Guide). Upper Darby, PA: Project Management Institute.
Proceedings of the Project Management Institute Annual Seminars & Symposium
November 1–10, 2001 • Nashville, Tenn., USA