The organization and controls of project management
Bechtel Power Corporation
Donald P. Schultz
Bechtel Power Corporation
Ed note: The Northern California Chapter of PMI has been conducting 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 will be published in Project Management Quarterly for the benefit of all the membership. The following is the second in the series.
Power projects are now so complex, last such a long time, and draw upon so many specialized skills that it is no longer possible as it once was to manage them informally. The working environment has also changed. The “boss” no longer knows every phase of the operations and must rely on a team of specialists to provide the necessary project management structure. The following discussion of project management is based upon methods used within the Bechtel San Francisco Power Division to manage the engineering and construction of nuclear and fossil fueled power plants.
Prior to 1970, Bechtel power projects had no project managers per se. However, projects were smaller and simpler, and organizations were smaller and were made up of people who had worked together for many years. The project manager provided the lead project direction during the design phase, and after major construction was underway this role shifted to the project superintendent. The division manager fulfilled the function of our present-day project managers by providing the interface management needed to obtain overall project objectives. During the last few years we have consolidated our project management under the now-familiar concept of the matrix organization (see Figure 1, Typical Project Team Organization).
THE PROJECT MANAGER
Central to the coordination of project management is the project manager. Within the matrix organization, he is the leader of a key group of project people who make up what is called the project team. Typically, this team includes a project engineer, field construction manager, construction coordinator, project procurement manager, cost/schedule supervisor, and startup engineer.
To ensure satisfactory project performance, the project manager provides the necessary direction to, and integration of, the project team. He represents the overall project and thus is the focal point for the client and the project organization. He is an extension of the division manager for a project. He is the direct communication's link between the client and the corporation, and establishes the appropriate channels of communication between the client's organization and both engineering and construction. The project manager has three major goals: to keep the project
- within budget
- on schedule
- acceptable to the client and the corporation.
The use of project managers has not inhibited the role of the functional organizations that provide the specialization required by projects. Modern project management preserves the prerogatives of the functional groups yet allows the “shaping” of the organizational efforts around the project. The functional organizations (e.g., engineering, construction, services, and procurement) are free to develop specialized groups, standards, techniques, and computer programs to maximize the use of available human resources and total capability. This organizational technique generates more consistency among the projects and reduces error.
THE PROJECT TEAM
Under the project management concept, services are brought together in a team, on an as-required basis, to meet project needs. Thus, the functional organizations provide the basis for carrying out the project-oriented activities, and the project manager provides the management function necessary to integrate the team efforts to meet project and client objectives. The authority of the project manager cuts across functional and organizational lines. As the focal point for project work, the project manager determines the “when” and the “what” of activities. The functional managers, who support many projects, determine “how” the work will be done. We are able to separate and define the responsibilities of both the functional departments and the project team members by means of the responsibility interface document. This important control tool consists of a set of matrices which defines specific project actions. Responsibility interface documents are developed for each project in terms of a generic document maintained by the division manager, and deviations from the generic document require his approval.
Initially, the matrix management concept met some resistance. Many found the complexities of modern project management hard to accept. But today, the project manager integrates and simplifies management activities from the earliest stages of contract negotiations to project completion.
The project manager is usually assigned during the precontract phase of negotiations. Once a letter of intent is received, he assumes leadership of the project and supports the business development department in contract negotiations. At this stage, the project manager
- Assists business development representatives in arranging and conducting meetings with representatives of all departments,
- Assists business development in preparing and issuing the budget for the precontract effort, and
- Is responsible for preparing the project schedule.
In the San Francisco Power Division, Bechtel Power Corporation, project control activities begin for the project manager as soon as management and client attempt to define the job requirements, the scope of work, overall schedules, and order of project magnitude. A relatively new control tool, the project parameter guide, has recently been developed to help define these broad objectives. This guide helps both the client and the corporation determine some of the essential parameters required for project definition early in the life of the project . This guide is meant to be used during both project negotiation and the initial project mobilization period to identify client preferences, plant operating characteristics, plant appearance, client organization involvement, project timing, and priorities.
After the project parameters have been defined, important control documents are established to guide and monitor the project during its planning and implementation phases. These documents include:
- Scope of Services Manual — which establishes a baseline for identifying changes in services and a definition of engineering, home office support, and field nonmanual services that will be performed by Bechtel in execution of the contract
- Division of Responsibility Document — which describes the project responsibilities of Bechtel, the client, and the major suppliers
- Project Procedure Manual — which defines the procedures involved in interface activities among Bechtel, the client, and the major suppliers with respect to engineering, procurement, construction, preoperational services, quality assurance, quality control, project control, and communication
- Technical Scope Document — which describes the project's physical plant, establishes design basis, and provides input to civil-structural, architectural, plant design, mechanical, electrical, and control systems disciplines.
THE PROJECT CONTROL SYSTEM
The San Francisco Power Division of Bechtel has developed a unique set of project control tools. During the life of the project, our project managers now coordinate activities by means of the project control system (Figure 2). The main objective of this system is to develop a monitorable project plan that reflects the planned performance of the contract work and provides the information necessary for the project team, corporation management, and the client to identify problem areas and initiate corrective action. The essential elements of the system are:
- A PROJECT PLAN, including project scope and schedule, cost budgets, functional responsibilities, and project procedures
- A CONTINUOUS MONITORING SYSTEM that measures performance against the plan through the use of modular and interrelated monitoring tools
- A REPORTING SYSTEM that identifies deviations from the plan through trends and forecasts
- APPROPRIATE ACTIONS, documented by management reports, to correct adverse deviations.
The Project Plan: Stages of Development
The project plan is the first essential element of control. The plan is developed at the beginning of the job and defines the scope of work and services, including functional responsibilities and procedures, and provides an estimate of costs, schedule, and corresponding budget for the work. There are three stages in the development of the plan: the proposal stage, the preliminary stage, and finally the project plan itself.
The Proposal Stage
After our business development group is contacted by a prospective client, first a proposal plan is made which includes, generally, a rough estimate of the Cost/kW. The basis for this estimate is a client request which specifies the type, size, and general location of the proposed project.
The Preliminary Stage
A preliminary plan, updating the proposal plan, and consistent with the preliminary safety analysis report and/or environmental report is developed next. This estimate and schedule, based on the revised plan, consists of descriptions of major equipment, preliminary system flow diagrams, plant arrangement drawings, site facilities, specific project location, site condition data, and some quantity take-offs.
The Final Project Plan Stage
Finally, the project plan itself is developed. It is the basis for the most comprehensive project estimate and schedule from which all detailed cost and schedule budgets are developed. This estimate is prepared when certain minimum criteria have been met: usually, when engineering is approximately 40 to 50 percent complete and equipment and materials are approximately 50 percent committed.
Following the development of each of the plans, the primary steps of the project control system are:
- Preparing budgets based on the approved plans and integrated by a standard numbering system
- Monitoring budgets continuously by measuring performance against the plan
- Reporting progress against the current budget and projecting by trending and forecasting
- Controlling by taking corrective action as necessary
- Updating the plan and starting the budget-monitoring-reporting-control cycle again.
This system provides an evolutionary process by which each level of the plan is expanded and updated as engineering design progresses and more information becomes available. The effectiveness of the system is improved by early project definition.
The Project Plan: Elements
At every stage of the project, control is improved by the continuous revision of the three elements of the project plan: scope, schedule, and cost (Figure 2).
The basis for cost, schedule, and material control is a definition of the technical scope of the project, the scope of services to be provided, project procedures, division of responsibility, and a material assignment schedule. During the early phases of the project, the scope definitions will naturally be brief and general. More detailed descriptions are prepared as the work progresses. The technical scope document defines plant design and project scope; the scope of services describes the services the engineer/constructor will provide for the project; the material assignment schedule identifies who will perform the work; and the project procedures and division of responsibility identify the responsibilities of engineer/constructor and their interface procedures.
Project schedules are developed on a cascading basis and include a milestone summary, engineering and construction summaries, and intermediate and detail schedules (Figure 3). The milestone summary schedule is the project's master schedule. It is used as a status and forecast summary report and provides the basis for monitoring schedule trends. It serves as a communication vehicle for senior management and the client and gives a complete and simple picture of the overall project schedule.
The milestone summary schedule is prepared immediately after project award and is developed within the framework established by the proposal schedule. This summary provides the constraints for developing schedules and intermediate logics. The milestone summary schedule lists approximately 50 items of work, and each item is further divided into its major engineering, procurement, construction, and startup activities. Approximately 500 activities appear on this schedule.
Estimates of the total project cost and schedule are prepared to provide the basis for project planning and control. The basis for cost, schedule, and material estimates are the technical scope document, which defines plant design and project scope for our project team, and the scope of services document, which describes the nature and extent of services that will be provided for the client's project.
The primary purpose of the budget is to provide a project management device for monitoring decisions. The budget is based on earlier estimates of expenditures and is designed to display the plan for the use of resources and expenditures for a particular period of time. A budget is prepared for each project at its inception. It is kept current to reflect changes in the scope of work and is in sufficient detail to allow monitoring of the work as it is performed. A project budget defines quantities, unit manhours, unit costs, total manhours, total dollars, and total time required to perform the work. Budgets, like estimates, are developed within the framework of the project code of accounts.
Continuous Monitoring Tools
Specific monitoring tools are used continuously to monitor the progress of a project and to identify potential deviations from budgets. Potential deviations, made visible by continuous monitoring, can be watched closely to ensure that the corrective action initiated is adequate. The following discussion will emphasize those tools (Figure 4) which are related to scope and schedule on the project and to their integration with the monitoring of progress and cost of performing the work.
Engineer Control System
An engineering control program provides the team with specification, drawing status, and engineering task information. This program is used to develop and update the engineering schedules so that they support construction requirements and identify design constraints. All specification logs, engineering drawing logs, etc, derive their schedule release dates from the construction and engineering schedules; therefore, these detail engineering activities in the engineering control program are tied directly to the activities in the engineering and construction schedules and are responsive to the construction startup needs for materials, procedures, drawings, and specifications.
Quantity Tracking System
The quantity tracking system is used to identify, indicate status, and quantify equipment and materials on each project. The quantity budgets, take-offs, and Status of the design and installation of the commodities are the basis for job reporting and for the control systems.
Permanent plant equipment and bulk materials budgeted, uniquely identified, quantified from drawings, and tracked from design through procurement, receipt in the field, installation, testing, startup, and acceptance. The quantity tracking system is generally computerized. The major material items included in the system are:
|Concrete related materials||Valves|
|Mechanical equipment||Pipe hangers|
Bulk quantities and their status tie the cost and schedule reporting systems together and provide the basis for progress measurement. Quantity take-offs are initiated when engineering design is sufficient and continue until completion of engineering. Each discipline on the project team requires this information to be presented in the way in which the work is performed. Startup is oriented by engineered system, construction by facility/module, procurement by specification/purchase order, and engineering by system/facility. The information logs provide the detail, summary, and exception status and orientation necessary for each discipline in terms common to that discipline.
Intermediate and Detail Schedules
The milestone summary schedule establishes the framework for developing more detailed engineering, procurement, construction, and startup schedules (Figure 3). At the next level, engineering, procurement, construction, and startup activities are expanded into intermediate logics to assist our group supervisors in developing detail engineering work plans. There are approximately 3000 activities on the engineering summary schedule. The construction intermediate logics are also expanded to approximately 3000 activities to assist construction managers plan their detail schedules.
In the preceding discussion the schedule hierarchy has been discussed, demonstrating how each level of the scheduling effort is successively developed and expanded from the project's overall plan.
Horizontal integration establishes the scope of activities and their priorities, and allows monitoring and continuous review of the status together with required feedback (see Figure 5).
Construction needs, what is needed and when, are of prime importance. Because construction works by facility and engineering works by system, it is essential that construction facility requirements are accurately matched to engineering system requirements to enable proper sequencing of specifications, drawings, purchases, and procedures that will support plant construction and startup. This can be most effectively achieved at the intermediate and detail level of scheduling through the quantity tracking system program (QTS).
Figure 5 also displays the methodology used to incorporate this information in schedules and in the QTS. Display of construction's identification of needs in their Intermediate Schedule with coincident recording in the QTS provides engineering with this information translated into system requirements. The engineers can then review construction requirements against their planned development and established engineering design releases, modifying them as appropriate to provide proper delivery of equipment, material, specifications, and drawings to the jobsite.
Progress Curves (see Figure 6) provide visibility to management of basic plans and progress and are used for monitoring all measurable functions of engineering, procurement, and construction. The curves are used as a basis for work planning and are monitored to observe progress and to indicate those schedule components which require corrective action by management.
When the project plan is established, the engineering discipline supervisors and managers and the construction foremen and superintendents monitor the status of the work with the detail schedules, progress curves, and quantity tracking reports. As discrepancies develop, a monthly report is issued that provides management visibility to items critical to the accomplishment of certain major milestones on the project. These major milestones are those on the critical path of activities leading to fuel load or turbine roll, etc. An item is first reported when only 2 to 6 weeks of float in the schedule remain. Some action is then necessary to stop the trend of continuing delay, and hence delay of plant completion.
Field Manhour Control
A major factor in keeping work on schedule is the performance of labor. A weekly labor performance report is used to display actual labor performance versus planned performance (budget). This report provides visibility and an early warning to superintendents and management of deviations from the plan and allows for corrective action before adverse field labor trends become fixed. Exception reports for both quantity and manhour overruns are also produced weekly, and deviations from the budget are reported for corrective action.
Trending and Change Control
The trend program (Figure 7) is our control tool for tracking and monitoring project scope, and cost and schedule. The trend program provides a mechanism for identifying changes in (1) the project scope, (2) the scope of services to be provided, (3) the intended plant quality, and (4) the current plan for engineering, procurement, and construction of the project. The key activities of a successful trend program include:
- Establishing an initial budget immediately after award of a project
- Holding regularly scheduled bi-weekly project team trend meetings to discuss potential budget deviations
- Documenting all potential budget deviations through the participation of all project team members
- Providing a monthly summary report of trends.
Once established, the trend program signals a need for action by the project team. Changes in scope are monitored by means of a scope change program.
Project forecasting is designed to report the current status of project scope, and cost and schedule. Forecasting is a technique for systematically revaluating, usually semiannually, the project cost and schedule to avoid surprises, allow necessary replanning of project activities, and provide a basis for continuous project control.
The primary management device for communicating the status of the project to the client is the project progress report. This report links progress, performance, quality of work, and planned schedule compared to forecast schedule together with problems and proposed solutions in the context of overall completion of the plant. Each progress report contains a transmittal letter, status display, executive summary, production summary, detailed discussion of progress by discipline, and progress photographs if construction is part of the project.
Planning and monitoring identifies deviations and provides the client and management with information necessary to take meaningful and prompt action. The action taken by project management and the client is the most important aspect of our project control system. This action minimizes detrimental deviations and takes advantage of beneficial trends.
Project Financial Analysis
Recently we developed an important control tool called the Project Financial Analysis Report Form (Figure 8). This report form traces the basic contract cost and fee during the life cycle of the project. The form is used by the project manager for discussing project financial performance with management and for controlling contract targets, scope changes and appropriate fee adjustments, reimbursable and non-reimbursable costs, and manhours.
THE FUTURE OF PROJECT MANAGEMENT
Project management is an active, dynamic concept that is assuming an increasingly more vital role in modern power projects. Two important developments now taking place in the San Francisco Power Division of Bechtel are (1) the trend to more sophisticated project controls and (2) greater centralization of management activities.
Work Breakdown Structure
We are currently developing a work breakdown structure for use as a framework for improving the various control tools of project management. This structure depicts the project in a hierarchy which displays the work effort as it actually occurs in increasing levels of detail. The goal is to develop the project control system so that planning, monitoring, and reporting are measured from a common point and at a level of detail necessary to facilitate effective management.
Centralized Project Administration
The whole complex of administrative tasks for a power project will soon be assigned to a project administrator reporting directly to the project manager. The increasingly large number of administrative personnel and tasks as well as the vast amount of paperwork generated by a typical project make centralization necessary and inevitable.
It is a tribute to the project-management system that, with all of the components and interfaces in this highly dynamic era, we end up with a quality product — namely, a safe, reliable, environmentally acceptable power plant completed on time and within budget.
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