Managing the project




Kaiser Engineers

Ed note: The Northern California Chapter of PMI has conducted an ambitious lecture series designed to provide a forum for evaluating project management approaches and methods. These state-of-the-art lectures present existing techniques as developed within major engineering and construction firms. As this lecture series presents a unique opportunity to learn the latest project management methods, they are being published in Project Management Quarterly for the benefit of all the membership. The following is the sixth in the series.

Organization, Operations, and the Role of the Project Manager

Kaiser Engineers’ organization has the classical form of marketing, operations, and administration groups.

Under operations, we have the usual divisional separation of engineering, procurement, project management, field operations and international operations. In our divisional setup under projects, we have separated our activities into various industrial groups as a means of developing specialized know-how and building teams that relate to industry needs. These industry divisions, each under a vice president, include:

• Aluminum and Chemical

• Energy Sources

• Minerals

• Steelmaking and Fabrication

• Power in all its forms

• Transportation

• Commercial and Institutional

• A division called “Advanced Technology,” which includes all aspects of environmental control, advanced concepts of facilities for the Department of Defense, work in connection with ERDA, work for NASA, and many other specialties, such as water sources and desalination.


At Kaiser Engineers, we believe in the advantages of the task force approach to projects on major jobs. That means we structure the team so that the project manager has responsibility for all facets of the program; he has the authority.

Our company supports the project manager with various services necessary for him to accomplish his total program. This most generally includes—on turnkey projects—engineering, design, procurement, and construction. In addition, it may include many special services in economics, in market analysis for the industry involved, in financing, in public awareness programs and a whole host of other types of services.

The Project Manager Today

The present-day project manager performs his duties in an ever more complex environment. He must be a true professional. He must address many new dimensions in today’s projects, such as the public awareness and governmental relations factors. We are all familiar with the delays which are caused today by resistance of special interest groups, involvement in the courts, the multiplicity of new regulations and guidelines, and the complications of international politics and government-to-government relationships. Today, these factors take on the same degree of importance to the success of the program as many of the fundamental technical skills.

Figure 1-1 illustrates, building block by building block, some of these factors. There was a day when the project manager was concerned in the typical turnkey program with managing, engineering, design, procurement and construction activities. These are the fundamentals to the job—the foundation blocks on our pyramid. However, other blocks have been added.

The additional assignment of proving economic feasibility requires understanding the business methods and business climate of our client’s industry.

The environmental control aspects of a project have been factors for some time, but today they constitute a substantially larger proportion of the work effort to comply with environmental impact programs.


Figure 1-1.

Financing is becoming an increasingly prominent factor in the successful program. The project manager must learn to work with bankers and understand the banking approach.

Additional attention is being demanded for a broader horizon of resource management, including the proper deployment of labor skills, and the impact of housing and medical care. Also included is prudent management of materials and logistics. And, today, the proper control of energy consumption.

Public support — or lack thereof — is one of the prime concerns on major programs. We have had assignments recently in which part of the scope of activities was to handle the total interface between our client and the public. This is a very interesting and new area, requiring unusual ability on the part of our project manager.

Governmental relations are always with us. Just to provide an example of added complexity, one of the large projects in which we have been involved for several years started out with the assessment that some 60 permits were required at various governmental levels. Before that project could get off the ground, that number had multiplied to 200 permits and approvals.

There is also a block shown for owner-employee training, which is becoming more and more important in developing countries.

Socioeconomic issues and cultural issues are receiving increasing attention in job planning. We find that we have to tailor the types of construction procedures to fit the social issues of the host country. A case in point: In one country where we are now working, our client has dictated that hand construction methods be used so as to provide employment. Compliance with the cultural practices and observation of traditions clearly affect planning and scheduling in the methodology of getting a job done. We have had the experience of negotiating with tribal chiefs for permission to employ local labor, to provide proper housing, and food for work forces — good food means productivity.

There are many blocks that are not shown in the figure, but it illustrates the point that a large number of factors must be considered, understood, and dealt with as the project manager faces his total job of carrying out the program for inception to completion. The project manager today must bring to bear a whole new array of talents and skills.

Elements of Project Management

Four major elements to consider when discussing project management are:

• Project Fundamentals

• Changing Requirements

• The Project Manager

• Corporate Management’s Role

Anyone who is involved in the business of project management might offer a different view of each of these subjects. There are many ways, for instance, of viewing the task force approach to projects. There is agreement, however, that if the project is not completed within the schedule and under the budget, everyone on the force will be taken to task.

As a general point, it should be emphasized that project management means dealing with people; while controls, procedures and systems are absolutely essential, they are useless without adequate personnel and without effective communication among project groups.

Project Fundamentals

Figure 2-1 shows a solid line which is identified as “MA”, and a dotted line which is identified as “$” or cost. The ordinate for the dotted curve is “dollars” and for the MA curve is “ergs”. The abscissa for both curves is “time.” In the beginning or START period the solid curve rises to an extreme peak, drops off during the RUN period, and then in the third stage or STOP period rises to another peak.

“MA” means mental anguish, and represents the relative level of project effort. The process can be likened to the energy required for getting an automobile in motion, driving along the highway, and then coming to a halt.

Now to briefly touch upon the three phases of the MA curve:


The difficult first part requires hard work, imagination, skill, knowledge of the project, and organizational ability. It must include the following four basic elements:

• What is it?

• How long will it take?

• How much will it cost?

• Who are the players and what are the rules?

What is it? or job definition, is accomplished in what can be called project criteria. These constitute a living document for control of the project. In it are spelled out the processes, general layout, area arrangements, equipment lists, bar chart preliminary schedules, construction methods, and all those details which communicate between the project manager and his various departments the details and intentions regarding the carrying out of the job. This document must be set up for continuous monitoring; after the first issue, any changes must be carried out on a rigidly controlled revision system which becomes the basis for change orders to the project. With this first document, the manager creates the entire method of managing his project.

How long will it take? or job schedule, begins with the preparation of the bar charts mentioned in the project criteria, but from that point it proceeds into the CPM or Critical Path Method of diagramming, and the more complete the job is, the more value the schedule will be to the project manager. In this instance, each of the project enginneers or other participants in the project should be brought into the preparation of the CPM, even though a specialist may be doing that work.

How much will it cost? is the cost of the project and this, of course, is the estimate. Again, the criteria are the bases for a good estimate. They communicate the full intentions of the job to the estimating group so that they thoroughly understand the scope of the job. In addition to using the project criteria as the bases, an estimate should be put together in such a way that all background information is available with the estimate. This provides the field with guidelines which will be useful to them when they are preparing their estimates to completion for each monthly issue of the Cost and Comparison report.


Figure 2-1

Who are the players, and what are the rules? is an outline of procedures which establishes the communications links, the agreed control systems, the understanding of use of accounting, purchasing, legal, design and construction inputs on the job. The outline should be just what it says — an outline only; the detailed procedures should be left to the individual participants in each area of activity, should be set up in a file, and be referred to the outline of procedures.

RUN Phase

This is the second phase of the project; as was noted before, this is the simple part of the job. The team utilizes the documents which have been prepared, the control procedures which have been established, and communicates in the way it was agreed in the very first stage of the project.

STOP Phase

Some preparation for this portion of the job should have been made during the first two stages; one of the most important items is a Startup and Acceptance Manual. This document should identify the individual sections of the project in the order in which they should be completed and prepared for dry runs and testing preliminary to operation. These activities should be diagrammed and supplemented with whatever verbal description is necessary to acquaint everybody with the desired steps. A schedule of the activities is necessary including dates for assignment of the owner’s operating personnel who will be participating in the acceptance procedures and who will ultimately be assisting in the startup preparatory to actual operations.

Included within this manual should be the detailed schedule of arrival of vendors’ representatives at the job-site for special equipment. Included also must be an understanding of the coordination of electrical systems within an existing system, or the placing in operation of all electrical systems for a new plant, including the owner’s standard method of tagging out equipment and locking out equipment to prevent accidents. It should include a lubrication section which spells out all the materials required for the different equipment and identify responsibility for furnishing those lubricants and placing them in the equipment.

A program should be developed for finalizing accounting on the project, closing out inventories and construction materials, selling off for construction equipment and plant. The final procedures will require much attention and a determined effort to avoid continued revisions to the job which may be initiated by the owner because he has decided process changes might be helpful. These should be identified to determine whether they are within the scope of the original project or simply additions; this will be determined by reference to the project criteria prepared in the first phase.

There will be final cost reports, validation of tax items, certification of items such as EXIM financing and countless other items.

Changing Requirements

There is a tendency to think that domestic and overseas projects are entirely different. This is not true, but admittedly they have their own special problems. In general, they will have similar problems in logistics, mobilization of personnel, housing, taxes, public relatios, and climate. The most common problem in all projects is that today both domestic and overseas jobs are increasing exponentially in their complexity. Just as a matter of interest let us look at five Kaiser Engineers’ projects more or less in chronological order:

The first was a sand and gravel plant in the State of Washington that was done in 1953. In this project our problems were design and construction. We did not have much in the way of industrial relations problems, there were virtually no environmental restraints, public relations was not a problem, and relocation of employees was relatively simple.

In 1958, KE was responsible for the design and construction of a coal fired steam plant in Pennsylvania. On this project there were labor problems, which cost some loss of time and increased the cost of the project slightly. Environmental problems were very limited and consisted mainly of checking with the County Water Commission to assure that sewage would not go into the local streams, and although the Ohio River was already feelng the effect of thermal pollution, the problem was mainly to be sure that enough water would flow through the condensers to do the job.

In 1968, KE built an aluminum reduction plant in the State of Kentucky. There were serious labor problems here. There were also major environmental problems, because this was the beginning of the effort to control the effluents of fluoride from aluminum plants. KE became involved in the preparation of documents and methods for financing the project, and assisted the owner in a major way in developing a program of financing through industrial revenue bonds which were available at that time. KE became part of the owner’s public relations effort in the area. We participated in local meetings to explain the project, to indicate to the local people what might be expected from the influx of workers, and what benefits might accrue from the permanent plant. We became involved in a substantially more complex program to obtain permits for the building, sewage plant, and cleanup of all effluents from the process areas of the plant, and combined this with the major effort to control the fluoride effluents.

In Ghana, we began a project in 1963 and are just completing additions to it in 1977. Actually the work in Ghana was in two separate projects; one was an earth fill dam and power generating plant, and the second was an aluminum reduction plant.

KE utilized two methods of constructing these projects. The hydro-electric project was done on the construction management concept, taking international tenders for furnishing of equipment and other tenders for the construction and installation of the facilities. On the aluminum reduction plant, design and construction were done on a turnkey basis using our own construction organization.

In these two projects, KE was responsible for recruitment of personnel for both expatrate supervisors and local workmen; we were required to develop housing, schooling, training facilities, fabrication shps for structural steel, piping, and electrical equipment, and we established a government relations group as well as a labor relations group. Public relations efforts were necessary to ensure that we presented a proper image to , the local people. For the benefit of our personnel, we established a completely equipped commissary to provide the kinds of foods to which expatriates from different parts of the world were accustomed. We also set up a mess hall with about a 250-meal capacity. The nations from which these people came included Germany, Italy, Greece, Spain, Portugal, England, India, the United States, the Philippine Islands, Australia, Japan and Turkey. We also built an entertainment area which included a bar and restaurant, a club house with movie screen, a swimming pool, tennis courts, and a mini golf course.

One new complication this year is the new tax law. In the past we have carefully worked out satisfactory tax arrangements with our employees, but now the tax base is changing and will make a major difference because it adds materially to the cost of sending American nationals overseas. The addition will vary depending upon circumstances; it could be between 30 and 70% of the previous annual cost of maintaining an American on an overseas project. We will feel this additional cost in the increasingly competitive overseas work.

We have been involved in a project which for some six years has been moved to three different locations, increased in cost by 50%, suffered through a series of ever more stringent environmental requirements, and have become involved in local politics and public relations to a degree never experienced before. We have learned it is difficult to volunteer assistance by the engineer, and that it is necessary for us to make it clear to the client that we do, in fact, have expertise in all these problem areas and can be of help if he will let us become involved. This project is not started yet, but it does represent a serious challenge to the engineer/constructor in seeing to it that he is prepared to assist in a variety of ways and in a number of different disciplines, and can now offer such services along with engineering and construction.

The conclusion is that all of us must be aware of the changes being thrust upon us by our society and the environment, and be prepared to cope with these problems in such a way that we can provide a full service to our clients.

The Project Manager

We must recognize that there is a variety of types of project managers in this business just as in any other business. We have those who wish to run everything on a project, and those who really do not want to run anything. We have those who delegate and those who do not. Somewhere within this range of characters is the perfect project manager.

What are the duties of a project manager? It might be said that he is a coordinator, he could be called a teacher, he could be called a delegator, he may be a pusher, or he may be a leader, he might even be a father confessor, or he might be a detail man. His duties really are very simple: it is his job to coordinate a diverse group of people to work with management, engineering, accounting, financing, public relations, construction, purchasing, design, and all other groups, with the end objective of creating a project on schedule and within the budget. This is a simplified statement of the duties but it brings us to the next step.

What does it take to be a project manager? We can identify at least three basic requirements, the first of which is education.

The first item of education would most certainly be engineering or technical education. This, of course, includes the classic strength of materials, calculus, etc., all of which are a standard curriculum for a degree; however, there is an increasing need for education in fields other than strict technical or engineering disciplines. Included in this are public relations, public speaking, finance and business. Although there is probably not room for a complete course in these fields, there should be at least some coverage included within the curriculum of an engineer. This will then help prepare the project manager for some of the new problems he must face in today’s engineering and construction profession.

The second requirement is experience; and this includes experience in a broad array of activities. Active participation in construction in the field is a very necessary part of a project manager’s learning process. Office experience is an essential element as well, and should include enough design experience to understand that aspect of the work and, if possible, contact or work with accounting, legal, and sales. This, of course, may impinge upon the argument of whether an engineer should diversify his experience or concentrate it into specialties. If the engineer is intending to be a project manager, it is almost axiomatic that his experience must be broad rather than specialized because he must deal with a wide variety of problems in carrying out his duties.

The third area in project management is training. In this category we must include actual on-the-job training under experienced project managers who can provide the kind of background and guidance to introduce the trainee to the various categories of work on a project. It is advisable to structure project organizations in such a way as to provide an opportunity for people to work their way through the different positions into the final position of project manager, so that each step is a reasonable one allowing the participant to gain experience progressively.

The other part of training can come from corporate classes in which management principles are discussed and in which corporate procedures are carefully illustrated.

Corporate Management’s Role

A great deal could be said on this subject, but it may be summarized very quickly by saying that a project manager is most effectively supported by corporate management if the corporation has a strong image in the industry. A good reputation and acknowledged success provide a good atmosphere in which the project manager can operate. The corporation should have qualified legal, financial, accounting, construction, design, publications and public relations groups within the company upon which the project manager may rely for professional assistance. It is also important to have a qualified marketing division whereby the continuity of work can be maintained to avoid ups and downs in the company’s business. Coordination between the marketing group and project management should be encouraged, and cooperation between these groups should be promoted by corporate management.

Finally, a skilled personnel organization that recruits, trains, promotes, and develops personnel policies is a vital part of management’s role because it is essential to provide a continuity of qualified new personnel to fill the vacancies created as other people move up in the organization to higher level positions.

Planning and Managing the Construction Effort

Successfully planning and managing construction projects requires skills in all phases of the project life cycle including preliminary planning, detail design, and procurement as well as in the actual building process.

Basic Management Decisions

Before any project can proceed in an organized manner, managers must make some basic decisions. The client, the engineer, the engineer-contractor or the contractor may share in the decision making.

One of the major factors influencing the choice of the overall management concept, type of contract, and project organization is the amount of time available for project completion. Figure 3-1 shows the relationship between a sequential schedule and a phased — or fast track — schedule. If early completion represents a significant client objective, a phased construction program would probably be best.

Alternative management concepts are shown in Figure 3-2. These overall approaches to project management include the traditional single contract concept favored by the Associated General Contractors of America (ACG); the turnkey or design-construct concepts favored by the National Constructors Association (NCA); the owner-builder method favored by certain utilities and manufacturing organizations with continuing construction requirements; and the emerging professional construction-management concept featuring a three party team.

The particular management concept and the importance of minimizing the overal design-construct time schedule heavily influences the type of contract. Clients generally choose a single lump sum contract when sufficient lead time is available to permit completion of design before the start of construction. When an owner cannot assume any risk of cost overruns, the sequential form of project management is successful providing major changes or significant changed conditions are not encountered. We can use the single negotiated contract to permit the traditional approach to achieve the earlier completion associated with a phased construction or fast track program.

We can execute the turkey, design-build or design-manage concept using a lump sum, guaranteed maximum price, or cost-plus-fixed-fee contracting methods. This approach is generally associated with a phased construction program.

Owner-builders may elect to perform some of the work with their own forces or may elect to contribute management know-how only, with all work being performed by independent contractors.

Another method, professional construction management, can achieve the early completion associated with phased construction and also utilize a number of fixed price contracts. This method involves the three party team of owner-designer-manager.

Team organization concepts include the functional organization, the task force organization, the line and staff organization, the matrix organization, and various combinations of the above. For complicated new projects such as major design-construct industrial developments, the task force is a favored method of organization. The weakness of the task force is that it has no corporate memory or checks and balances unless accompanied by a functional staff of individual experts who have knowledge of the past successes and failures associated with similar undertakings. Matrix organizations depend upon increased communication and interchange at the working levels to achieve superior performance. The professional construction management approach preserves the accountability and discipline strengths of the functional organization, while achieving many of the advantages of the task force for certain individual projects.


Figure 3-1.



Figure 3-2.

Management of Construction

In any major program we must obviously obtain the facts, then plan and organize the program, execute the plan, and maintain control of the project throughout its life cycle. We do this by measuring actual accomplishments against planned objectives.

Getting the facts for a major design-construct or construction management program includes meeting with the owner representatives, designers, administrators, government representatives, and others in order to understand the objectives of each party and the constraints that his objectives may place on the program. The site visit determines area practice, peculiarities of the site, favored methods of doing business in the area, and availability of transportation and utilities. Much additional information is of equal importance to all of the management concepts, including traditional, turnkey, owner-builder, and professional construction management. Development of information concerning the availability and skills of local contractors and subcontractors is vitally important if we are to successfully develop management programs. Reviewing availability and skills of the local labor force is equally important.

Planning the program must take into account the information derived from the fact finding studies. A work plan for the project includes estimates, schedules, proposed work packages, proposed local contractors, outline of organizational concepts and key personnel, and fundamental responsibilities of all involved. The plan must be sufficiently detailed to constitute the standard of comparison of actual accomplishments against planned objectives as implemented by the project control system.

The project life cycle includes the conceptual and design phase, the procurement phase, the field construction phase, and the startup phase. On a complex design-construct or professional construction management project, all of these phases overlap one another.

The field construction phase is dependent upon the choice of management concept and upon plans and objectives set in the previously described phases. Major items include mobilization, detail construction planning, permits, field procurement, schedule, quality and cost control, and startup program planning.

The startup phase must be planned, organized, and carried out, often under extremely trying conditions. Operator training, equipment checkout and operation, demobilization, and surplus sales are some of the major steps involved.

Management Control Tools

We can separate management control tools into two categories — planning tools and control tools. A monthly report comparing actual accomplishment to planned objectives is also helpful, provided it is issued at a summary level and concentrates on broad, major project objectives. This section summarizes some of the major tools that are effective in aiding the project management team.

Planning tools are used to develop an overall work plan for the project. Planning tools must include a means to measure accomplishment of the major objectives of the program. A somewhat simplified work plan might consist of a budget estimate, precedence diagrams, work package tabulation, contracting program, resource allocation, CPM control schedule, and a procedure outline.

Figure 3-3 shows a summary control schedule showing theoretical progress under the assumption that each operation is started at the early start, called the early start curve. Also shown is a late start curve which is based upon the assumption that each operation starts at the late start. Both curves assume that actual accomplishment and duration are in accordance with the CPM precedence diagram. In actual practice no project can start each operation on the early start. If all operations are postponed until the latest theoretical start, there is almost no chance that the overall schedule can be accomplished. The two curves therefore form a band within which we can accomplish a well-run and successful project.

Control tools are designed to compare actual results with the goals developed during the planning phase. The Cost and Comparison to Estimate Report shows the overall status of the project. The Unit Cost Report shows the unit costs and unit productivity compared to the budget estimate. Figure 3-4 shows an overall look at labor productivity for the project. Since productivity cannot be measured against broad national standards which do not exist, productivity is defined as man-hours estimated for a project or for an individual operation divided by actual man-hours expended. A project completed for the exact man-hours estimated would have a productivity of 100%. Productivity measures more than just the amount of work performed by the craftsman. It is an overall measurement of management as well as labor performance based upon the budget estimate as a standard

This chart compares the actual physical progress with the early and late start schedules.



Figure 3-3

The physical Progress Report computes the physical progress for a given period. Using estimated installation man-hours for the weighting this report helps integrate estimates, schedule and progress.

One of the most important control tools is the Monthly Report which summarizes the overall status of the project. A monthly report for a $5-million project would generally have the same format as a report for a $500-million project. A monthly report would be organized as follows:

A management summary showing a one page digest of all the important conclusions of the report; status statements for design engineering, procurement, construction; a cost and comparison to estimate report; a schedule summary showing actual progress compared to the late start and early start envelope; and a summary of the results of a value engineering program.

Value engineering has had considerable claimed success in the governmental agencies but has not achieved a commensurate status in the private sector.

Typical Jobsite Organizations

Jobsite organizations will be affected by the amount of work performed in the home office, by the complexity of the project, and by the extent of the work which is contracted. Inspection and quality assurance or quality control requirements will also result in varying numbers of personnel at the jobsite level.

Figure 3-5, shows an outline field organization for an industrial construction project and Figure 3-6 shows a similar project constructed using the construction management method using a number of independent contractors.

Problems of the Industry

Productivity continues to be reasonably good on small to medium sized projects in certain areas of the country. However, on large major projects in many areas, schedules and cost estimates have proved to be unrealistic when compared to results. Productivity is more than the effectiveness of the jobsite craftsmen. It encompasses the entire range of management, work force, governmental, and industry effectiveness.

Our management problems include choosing the organizational approach which will prove most effective for a specific project, and the special people and productivity problems that are occurring on the billion dollar projects. We have to take the human element into account when staffing projects as well as the lack of appropriate management skills in many cases at top and middle management levels.

Work force problems are usually the ones which get the most publicity. On large projects, many individual craftsmen have lost the incentive to demonstrate the pride of accomplishment in both quantity and quality of work which was evident throughout the construction industry for many years. On smaller projects, where relationships are felt at a more personal level, much of this pride remains. No-strike clauses for major employers during wage negotiations have sometimes proved counterproductive by making local bargaining ineffective in controlling wage increases. Work output limitations, foreman-journeymen ratios, coffee breaks, and other restrictive work practices have further lowered productivity in many areas.

Governmental requirements are becoming increasingly restrictive in the construction industry. Viable projects are suffering years of delay while obtaining environmental impact reports and an increasingly large number of special permits from overlapping government agencies.

Industry problems contribute to fragmented bargaining all over the country. Employer groups such as the NCA, AGC, NECA, and others have not been able to collaborate effectively in areas of common interest while preserving their individual objectives. There is a fluctuating workload in the industry, due to both climatic and business conditions, which results in a boom or bust climate in many areas.

Hope for the Future

What about the future? An encouraging trend is the effort being made by the overall construction industry to communicate internally to solve industry problems. Joint discussions between the AGC and the NCA are trying to develop a common objective in negotiating with labor. Organizations such as the PMI, the ASCE, the American Association of Cost Engineers, and others are having some success in applying technical solutions to underlying problems without destroying the inherent competitive nature of the industry.

This chart shows the labor efficiency (productivity) for doing the work as compared to what was allowed by the budget.



Figure 3-4.



Figure 3-5.



Figure 3-6.

The emergence of trained construction managers with a sound background in construction management skills is beginning to become a reality. Feedback from construction people is increasingly apparent in our schools. However, industry must appreciate that emerging young managers must receive practical experience coupled with individual responsibility on a planned basis if their full potential is to be realized.

The construction industry has grown in the past decade at an unparalleled rate. If the industry is to prosper in the future, productivity increases must become the concern of everyone including contractors, subcontractors, suppliers, labor unions, government regulators, and owners. We must have the courage to explore new methods, new management techniques and new associations, and to encourage the development of less costly methods at all levels of our industry. The industry future will depend upon our success.



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