Project Management Institute

About delays, overruns & corrective actions

Sargent & Lundy Engineers

In engineering and construction projects, there is often a great deal of preoccupation with safety and regulatory requirements, and with the technical-technological aspects. Soon before it is realized, time has passed by, inflation and escalation have made the cost unbelievably high, and probably the socioeconomic and industrial environment has changed considerably, so that the original scope of the project must be reassessed.

It becomes imperative that a sensitive mechanism is devised to identify and understand delays and overruns, and to prevent them or to minimize their impact, and to arrive at corrective measures effectively. For the sake of convenience, this discussion is directed at field construction operations.

What Do The Owners Want?

The owners of industrial processing plants, or utility companies commissioning large fossil/nuclear power plants, have made it crystal clear to architect-engineer-constructor manager firms what they expect from the mechanism for forestalling delays and overruns.

Here are some typical questions confronted by the architect-engineer/construction manager (AE/CM) at the time of bidding for industrial projects, or during post-proposal inquiries:

1. Provide definitive information and illustrate how your cost and schedule control plans and methods will specifically be applied to our project.

2. Discuss the methods and any special analytical tools used to monitor, schedule and cost as construction progresses. Describe in detail the manner in which surprises are avoided.

3. Indicate quantitative information on two recently completed projects concerning performance on cost control, schedule control, monitoring, forecasting and controlling labor productivity. These projects should be chosen for relevancy to our project.

4. Could you be more specific on how variances in cost and schedule control systems are displaced, and what corrective methods are used to identify activities that are overrunning?

5. What reports—progress, cost, schedule, variance, etc.—do you propose to supply for this project in both engineering and construction areas? What is the schedule for these reports?

6. How do you account for person-hours and costs related to each item of work in the field? How do you account for engineering person-hours?

7. a. Discuss the type of cost and schedule control, and management information system which you would propose using to ensure proper control of the project.

b. Provide representative examples of input requirements and output reports; and illustrate the effectiveness of the system as evidenced in two or more related projects completed by you.

c. How do you propose to obtain computer services? Do you plan to use your own facilities or our company-owned computer? If your computer installation is employed, what is the estimated cost for this service?

As can be easily seen, the thrust is on cost and schedule control, on utilizing some form of computer system, and on very specific answers. There is no way in which the respondent could get away with any ambiguous statements or generalities!

This mounting interest in the construction industry in effective information and control systems certainly is justified, in view of several pressing reasons such as escalation of all costs and tough money market conditions.

Depending on the zest and appreciation for computer sophistication at the upper management level, and depending on the imaginativeness and abilities prevailing at the middle management level, today’s typical engineer-constructor firm possesses definite information system capabilities for project management and control purposes. Most AE/CM firms have computerized CPM/PERT scheduling systems, developed by themselves, or canned programs available from their computer suppliers. These scheduling systems are often operated independently, or sometimes in conjunction with cost control systems. Some firms have even reached the sophistication of integrated cost/schedule or project management systems.

These computer systems provide a variety of status and exception reports When coupled with manually prepared CPM or schedule analyses/critiques, and cost reports, they clearly point out whenever and wherever variances and overruns are found. These reports are used by the project team to review problem situations, and institute remedial measures as applicable.

Delays and Overruns

The variances, or overruns, are watched very carefully in costs, productivity and schedule. The prime responsibility to oversee these is that of the project manager. He or she may delegate this task to an assistant project manager, a project control engineer, a control and coordination superintendent, a cost and schedule supervisor, or a cost schedule analyst.

The person who is charged with this important responsibility must work closely with construction discipline supervisors (civil, mechanical, etc.) on a routine basis, for continuous planning, updating, measuring and monitoring of the project activities.

The variances in cost are essentially a consequence of variances in productivity and schedule; and of course, of factors such as bad weather, wage increase gains by labor unions, changes in safety and other design criteria by regulatory bodies, and enlarged scope of work. Corrective action, therefore, is necessary to improve productivity, to regain lost schedule, and to provide for increased budget, as applicable. Changes in the scope of work, as and when warranted, are initiated at the project control group, or construction supervisory and resident engineer level, and approved or followed up with the client or owner at the project manager level.

Productivity and schedule variances are closely intertwined, and are caused by one or more of the following factors which are continually monitored:

  • Poor unit performance, i.e., excess person-hours are expended for one unit of work to be done.
  • Poor production, i.e., the quantity of work done during a time period is less (even though the craft crew may be performing satisfactorily) than required. This may happen when there are physical restraints of space, the place is not vacated by the previous craft, or when the material or equipment to be used/installed has not arrived at the location of work.
  • Poor supervision, when either a relatively less experienced or new supervisor is assigned temporarily to a new location.
  • Poor performance by equipment vendors and material suppliers, which may not meet the timely requirements at the site location.
  • Poor planning, coordination, and expediting, which may inadvertently result from oversight, or in some extreme cases, from neglect.
  • Poor support or cooperation, and lack of timely decisions by the client, which could be a consequence of preoccupation with problems of greater magnitude, and of cash flow restrictions.
  • Added scope of work, new regulatory requirements, or changes in design criteria, which may necessitate rework/extra work, thus affecting cost and schedule.

Corrective Actions

The corrective actions depend on the nature of variances/overruns, and for all practical purposes, may involve some or all of the following:

  • Scrutinize the criticalities of various activities and verify the work plan, or activity network logic. Adjust priorities and prerequisites for construction activities as found necessary. Reevaluate milestone targets.
  • Identify present or potential problems in engineering, design and procurement activities.
    Prepare for, or make provision in anticipation of the inevitable such as: concrete placements or structural steel erections that may become unavoidable during sub-zero winter conditions; or procuring concrete from outside market—if the batch plant would not be ready on time, or the mass concrete requirements are likely to exceed the batch plant capacity.
  • Adjust activity/account cross-references, if correlation is established between the activity network and the chart of work accounts. Examine validity of craft mixes, detailed breakdown of resources against each account code number, and resource allocation against each activity.
    Whether the system has resource allocation/levelling features or not, the considerations are invariably made for factors mentioned here, in a formal or indirect, manual or automated manner. Much may also depend on the level of detail at which the activity networks are composed.
  • Review quantity reductions in case of critical work items; ascertain proper unit performance and person-hours forecasts.
  • Reconsider or reinforce work assignments of craft crews and supervisors. Discuss problem areas in review meetings, and exert better coordination and expediting efforts wherever required.
  • Consider the need and possibility of stepping up production by longer workdays or workweeks, and adding extra workshifts. Consider alternative, economical and/or expeditious method of construction to deal with the circumstances that arise, or appear likely to arise. For instance, going ahead with enclosing a structure with a temporary opening to bring in heavy equipment later, as an alternative to waiting for a delayed delivery and installation prior to the enclosure as planned.
  • Prepare regularly a schedule critique, or CPM analysis report for review by the project team, and/or the management.
    This critique or analysis would enumerate various critical activity paths in decreasing order of criticality (or “slack”), and highlight the specific action item that causes the criticality in each case. It would also include proposed corrective action, and identify the particular individual or discipline who may be responsible for it. This report becomes a working tool for discussion and decision-making.
  • Initiate necessary procedure for identifying and preparing any out-of-scope work proposal if necessary, and pursue it for prompt approval decision.

Levels of Planning and Management

It is important to identify various levels of planning and control at which appropriate levels of management would feel concerned, or would participate and be responsible for implementation.

Figure 1, titled the Extent of Responsibility or Participation, presents a matrix of levels of planning and execution against identifiable management levels such as: working, supervisory, responsibility, middle and top management. As is apparent, the working level personnel, like planning and cost engineers or craft foremen, have heavy participation in planning and execution activities at the lowest level of detail (Level 1). The top corporate/client management, in contrast, will have no concern for the minute Level 1 details, and will have heavy interest in the overall project schedule and budget (Level 5).

The work breakdown structure for the total project, and corresponding code numbering scheme for the chart of accounts, provide bases for relating the planning and cost control functions to appropriate levels of work execution and management.

The project control system could either be an integrated management information system embracing cost, accounting, schedule, allocation of resources, performance, productivity, and variance analysis, or could be a combination of numerous manual/computerized stand-alone systems and procedures. But in either case, it must have the built-in facilities of:

  • defining which project work item belongs to which specific level
  • identifying departure from what is planned at the lowest practical level of operation
  • sorting out such departures, compiling them by each level and summarizing the results progressively up to the higher levels
  • pointing out the impact of variances for review and remedy at appropriate level of control.

It should be noted here that, in this business of project planning and control, care and judgment have to be exercised in avoiding an over-kill. That is, the manageability or desirability of having adequate expansion of operational details, and the computerization for various reports should match with the size of the project, and with the company’s organizational set-up. Additionally, staff training and indoctrination for the system implementation—accompanied by good documentation of procedures—must be given close attention.

Construction project planning, at the field level, to be effective in the control of field manpower, material, tools and equipment usage during construction, must undertake study and analysis in the following basic areas of operation, or functions:

  • Construction methodology
  • Allocation and availability of resources
  • Preparation and distribution of work instructions/assignments
  • Measurement and analysis of production and productivity on work in progress and upon completion.
  • Preparation of schedule critiques, cost variances and summary level status reports
  • Evaluation of reports and necessary corrective action
  • Proper documentation of system procedures, and implementation plan.

The effectiveness of organizing project control by levels concept becomes quite apparent, when the above-mentioned factors are taken into account in the planning update and review process.

Planning and Review Meetings

The administrative or implementation mechanism, used in practice for dealing with the overruns and corrective action items, is effectively found in the planning and review meetings that are continuously conducted at various levels on daily, weekly, monthly and quarterly bases. A typical mechanism may follow a pattern described below in the context of the levels concept.

Levels 1 and 2 planning and progress meetings are held on daily and weekly bases. The daily work assignments (Level 1), and the actual progress made are discussed every day on somewhat impromptu basis among the craft foremen and construction engineers, and reviewed with the planning and scheduling engineer, and the craft supervisor for any necessary changes to the next day’s work assignments. Any unusual, conditions and circumstances encountered during the workday are recorded on the daily work assignment sheets, and notified to the responsible supervisory personnel.

Weekly meetings are held to review the progress on work orders or work packages (Level 2), individually for each work package, and also collectively for the entire project.

These work orders/packages may be conveniently structured to cover work in a particular area, building or system broken down further by elevation, etc. so that supervisory staff can be assigned to them for more or less independent execution. Naturally, these work packages should be prepared in compliance with the established work breakdown structure and the chart of accounts.

The review meetings are aimed at translating latest work status, and critical problems into a specific action plan to be followed week after week. The construction discipline supervisors and the cost/schedule supervisor maintain intimate involvement with the progress of work under daily and weekly schedules. Weekly reports, prepared to reflect the actually accomplished and forecasted quantities of work and corresponding man-hours, serve as agenda items in the weekly meetings. Through the analysis made for determining actual manpower distribution and material/equipment usage, the allocation and availability of resources are adjusted.

The resident engineer, construction superintendents and safety/quality control engineers, who are placed at the responsibility Level 3, attend the weekly meetings on as-required basis. They regularly join the monthly meetings convened by the project superintendent. Critical matters requiring immediate as well as long-run decisions are highlighted through monthly progress reports.

During the monthly meetings, the quarterly plans are studied and carried forward by a month, every month. The monthly progress reports provide a basis for action during the coming month/quarter. The quarterly work plan (Level 3) is adjusted according to whatever changes Levels 1 and 2 may have undergone.

It is at the quarterly review meetings, convened by the project/construction manager, that major issues are reviewed for high impact sensitivity. This kind of routine review procedure does not preclude involvement by the middle or top management at any time when crises arise. The annual and total project profiles (Levels 4 and 5) are determined on a quarterly slide-on basis, so that the top management is able to examine the latest trends in physical accomplishments and resources expenditures. Major delays/overruns and bottlenecks that surface during quarterly and year-ending reviews are analyzed, and presented to the corporation officers and client management. Recommendations for alternate action plans to alleviate problem situations, and for policy decision-making are acted upon at this high management level.

On a routine, on-going basis, all decisions and corrective actions taken at Levels 1, 2 and 3 are carried on into the annual schedule (Level 4), and further up in the total project summary schedule (Level 5). This process does require extensive efforts at the hands of experienced planning/scheduling and cost/construction engineers. Their painstaking efforts at initial stages of formation of plans at various levels pay off when reflected in continuous update and revision process, smoothly carried out level by level.

Conclusions

Delays, overruns and corrective actions are as much a part of the industrial construction (and for that matter, of all) projects, as these projects are of our professional life. While there is no way of eliminating them altogether; there are ways of minimizing the damaging effects they have on costs and schedules.

Effective project control is achieved when the workload and action-decision responsibilities are distributed in accordance with identified levels of project planning and execution. A matching management information system ensures complete success.

LEVELS OF PLANNING AND MANAGEMENT EXTENT OF RESPONSIBILITY OR PARTICIPATION

MANAGEMENT LEVELS LEVELS OF PLANNING/EXECUTION*
LEVEL 1 LEVEL 2 LEVEL 3 LEVEL 4 LEVEL 5

1. WORKING LEVEL
   PLANNING & SCHEDULING    ENGINEERS
   COST ENGINEERS
   CONSTRUCTION ENGINEERS
   CRAFT FOREMEN

HEAVY MEDIUM LOW NIL NIL
         

2. SUPERVISORY LEVEL
   COST & SCHEDULE    SUPERVISOR
   CONSTRUCTION DISCIPLINE    SUPERVISORS

HEAVY HEAVY MEDIUM LOW NIL
         

3. RESPONSIBILITY LEVEL
   SAFETY & QUALITY    CONTROL    ENGINEERS
   RESIDENT ENGINEER
   CONSTRUCTION SUPERINTENDENTS

LOW MEDIUM HEAVY MEDIUM LOW
         

4. MIDDLE MANAGEMENT LEVEL
   PROJECT SUPERINTENDENT
   PROJECT/CONSTRUCTION    MANAGER

NIL LOW MEDIUM HEAVY HEAVY
         

5. TOP MANAGEMENT LEVEL
   CORPORATE OFFICERS
   CLIENT MANAGEMENT    PERSONNEL

NIL NIL LOW MEDIUM HEAVY

*NOTE:

LEVEL 1: DAILY ASSIGNMENTS LEVEL 3: QUARTERLY PLANS LEVEL 5: TOTAL PROJECT
LEVEL 2: WEEKLY ACTIVITIES LEVEL 4: ANNUAL SCHEDULE
This material has been reproduced with the permission of the copyright owner. Unauthorized reproduction of this material is strictly prohibited. For permission to reproduce this material, please contact PMI.

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