PSEG experience in "just-in-time construction" – an effective way to minimize project expenses
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Is it always desirable to finish a project earlier than scheduled? Absolutely not. Ideally, Customer should receive exactly what he ordered, without gold plating. This paper describes how to achieve this goal.
Every project has a time constraint (a scheduled service date), which should be met satisfying a cost constraint (budgeted funds). Sometimes, there is an incentive in completing the project ahead of schedule. But more often, it is not required. In this case, the most beneficial approach is “just-in-time” construction that provides a significant improvement of project cost and time management. The main principle of this approach is to meet project time constraints without any unnecessary schedule improvement. To achieve this goal, initial resource allocation should be based on a minimum overtime construction work. During the course of construction, constant project control has to be provided to monitor progress and add resources only when it is required to meet a project service date.
Tools and Techniques
In accordance with A Guide to the Project Management Body of Knowledge (PMBOK® Guide 1996), the effective tools and techniques for project control are performance reviews and earned value analysis. Performance reviews are meetings held to access project progress. The main output of these meetings is the current earned value, or budgeted cost of work performed (BCWP). For every phase I of the project, earned value BCWP(I) should be compared with budgeted cost of work scheduled for the same phase of the project BCWS(I). The result of this comparison is the schedule variance SV(I) = BCWP(I) – BCWS(I) (PMBOK® Guide 1996, 108).
The positive value of SV(I) means, that project is ahead of schedule. Project manager may decide to take measures to avoid further unnecessary project acceleration: for example, eliminate overtime, or assign some project team members to other projects.
Negative value of SV(I) indicates, that project is behind schedule. Additional resources may be added to put it back on track.
Obviously, SV(I) in both cases should reach a significant value (at least, 10% of BCWS(I)) may be recommended as a ballpark number) before project manager takes any steps in either direction. The whole decision-making process is shown in Exhibit 1.
Real Project Experience
Public Service Electric & Gas Company of New Jersey (PSEG) successfully used just-in-time construction on several projects, finishing all of them on time and under budget. The most recent project is “230 kV Circuit Breaker Replacement at Waldwick Switching Station.” The need for this project arose when existing breaker failed the tests. Project started on Monday. Load Dispatcher requested a new breaker to be in service no later than Friday of the 3rd week. In the past, similar projects were completed in a shorter time span, but it required a sufficient overtime construction work. This time, decision was made by a Project Team to schedule all work based on five-day weeks with no overtime, and monitor the progress every day to define if any resources should be added. As a result, project was done “just-in-time,” with overtime worked only two last days and cost about 20% less than expenditures of similar project done in the past.
Exhibit 2 shows work day duration in the course of the project.
Exhibit 3 shows an old 230 kV breaker, which was replaced by a new one shown in the Exhibit 4.
Experience shows, that “just-in-time” construction is more suitable for small projects (less than one million dollars), which are less rigid than more complicated projects and allow changes to be implemented in a very short period of time. Cost reimbursable contracts (PMBOK® Guide 1996, 126) should be used instead of fixed price contracts (PMBOK® Guide 1996, 126) for projects, which are selected for “just-in time” construction and management approach, because they allow flexibility to crash (PMBOK® Guide 1996, 68) the Project, adding resources when it is critical for success of the work.
Project Management Institute. 1996. A Guide to the Project Management Body of Knowledge (PMBOK® Guide). Newton Square, PA: Project Management Institute.
Proceedings of the Project Management Institute Annual Seminars & Symposium
November 1–10, 2001 • Nashville, Tenn., USA