Ministry of Transport

URRAP-Training of Trainers for

Contractors and Coordinators

Project Management and Planning

DAY 1- Friday August 02, 2013
1
Outline
Introduction

Overview of the Construction

Industry

Project
Management
Framework
2
Outline

TheRole of Effective Project

Manager

Leadershipand Human
Resource Management

3
Outline
Contemporary themes of
Construction planning
◦ Scheduling

◦ Resourcing

◦ Monitoring and Control

◦ Cash flow forecast and Control

4
Introduction
The prevailing facts of the road
sector

◦ Cost overrun

◦ Time overrun

◦ Quality reduction

5
Introduction

6
Introduction

Considerable shortcomings are

related with failure of the
contractor’s performance in all over
project management
(Abd. Majid and McCaffer, 1998, Frimpong et al. 2003, Assaf and Al-Hejji.,
2006).

7
Introduction
 Inefficiencies
and ineffectiveness are part
in day today activity in the construction
sites
◦ weak site organization;
◦ Improper construction method;
◦ Work discontinuity;
◦ Rework: 10-15% contract value;
◦ Improper resource allocation( Human, material,
equipment) and under-utilization;

◦ Poor cash flow: not to utilize advances properly, not to

raise sufficient payment;

◦ Attitude: not being self-contained…in identifying material

sources, inaccurate setting outs, incomplete approval 8
Overview of the Construction
Industry

9
Overview of the Construction
Industry
 High work demand in the market… 100s of
thousands Kms

 Lessfragmented ( Specialized firms are growing so

slowly)

 Loosecoupling between the industry and the

supply chain

 developing financial market

 Relay on importation
10
Overview of the Construction
Industry

The Public sector is the major Client

Traditional procurement approach is

predominant

Limitedadministration capability in most

of the organizations, both private and
public

Less focus on Research & Development

11
Overview of the Construction
Industry

 Local Contractors and Consultants are

taking the major share of the construction
market

 Limited financial and technical capability

 Less focus on quality delivery

 Less focus on organizational learning

12
What is a project ?

A project is a
temporary endeavour
undertaken to create a
unique product,
service, or result.
(Source: Source: Project Management Institute ,PMIBoK)

13
What is Project Management ?

Project management is the application

of knowledge, skills, tools and
techniques to project activities to
meet project requirements.
(Source: Source: Project Management Institute ,PMIBoK)

14
The Three Main Pillars of Project Management

15
.... and emphasise on people !

“Projects do not succeed just by assiduous

adherence to a mechanistic process”
(BS 6079 Part 1: Guide to project management)

16
 Triple Constraints of Projects
Project
Management

Time
Start End

Project
Management

!
Cost Scope What happens if the plan
was based on the wrong
assumptions

17
Another View of the Triple Constraints

Cost

Project
Budget
Contingency

Scope

Contingency Time

18
Why do we have projects ?
•Profitability
•Market share
•Competitive advantage

Business Goals

Projects Outcomes

Outputs Benefits

19
Projects Take up
Investment
The Firm: An organization that bring
together different factors of production such
as labor, land and capital to produce a
product or services which it hoped can be sold
for a profit

Firm
Entrepreneurs: Profits are a rewards of the
Entrepreneurs to take risks

Managers : hire ,fire , organize the business

Workers
20
Projects Take up
Investment
 Normal profit : minimum level of reward to
keep/attract the entrepreneur in the particular economic
activity

Profit = total revenues- total cost

 Economic profit : considers alternative use of all

resources

Economic profit= total revenues – total

opportunity cost of all inputs used

Economic cost= explicit cost and implicit cost

21
Projects take up
investment
Opportunity cost of Capital : concerns the
rate of return on the capital as all other business of
similar risk are willing to pay

Degree of risk and difficulty involved

Opportunity cost of Labor: concerns rate of

return on the opportunity cost of time of doing similar
job

Opportunity cost of land: concerns the rate of

return on the capital as all other business of similar
risk are willing to pay
22
Projects Take up Investment

Return on
Investme Investment
nt

Project duration

Start End
Goal = Finish As Soon As
Possible
Goal of the firm: Profit maximization is a
target
23
Project Management Framework
Project Project
Procureme Integratio
nt n
Managem Managem
ent ent

Project Project
Risk Time
Managem Managem
ent ent

Project Scope
Management
Project Project
Communicati Cost
on Managem
Management ent

Project
Project
Human
Quality
Resource
Manageme
Managem
nt
ent

24
Project Management Framework– Construction Extension

Slide 25
Project Scope Management

Processes required to ensure that

the project included all the work
required and only the work
required to complete the project

26
Project Manager

Is the single integrative point of

responsibility for the project

27
The Role of Project
Manager
The planning and coordination of a
project from inception to completion
on behalf of a client, to deliver the
client's objectives in terms of
Function, Time and Cost

28
Project Manager’s Responsibilities
Liaison with the client/sponsor
Develop and maintain project plans
Team leadership/Teambuilding ability
Cost effective work progress control
Cost control
Planning and technical decision
making
Quality and safety management
Business and administrative aspects

29
Higher Order Objectives
Complete all projects efficiently &
profitably

Balance long & short term

priorities

Supply & allocate resources

Integrate multiple projects with

other activities
30
Balance in Projects

31
Managing Clients
Agree project objectives –
deliverables
Initial start up meeting
Interim reporting & reviews
Problem resolution
Manage the relationship
Under promise & over deliver
Always negotiate

32
Establish Client's objectives +
priorities
Business aims
Project aims + scope
Priorities - quality, time, cost
Timescales
Understand uncertainty + risks

33
Design an Organisation
Structure
participants
relationships
decision points, key +
operational reporting
integrating + coordinating

34
Common forms of
structure
Functional
Product based
Geographical
Divisionalised
Matrix
1 Functional
2 Divisional
3 Matrix
4 Teams
Selection + appointment of
project team

Scope + terms of reference

Selection criteria
PM's own appointment
Appointment agreements
Procurement route

40
Develop brief for project
team
translate client's objectives
state in terms of needs +
outcomes
alternatives + evaluation
clarity + communication

41
Uncomfortable Facts
Leftalone people will tend
toward;
◦ First come – first served
◦ Enjoyable / familiar tasks first
◦ Easy rather than difficult tasks
◦ Simple vs complex tasks
◦ Gain easy wins –short term rewards
◦ Not favour releasing key resources /
people
◦ Provide the answer you want to hear
42
Establish Information and
Communication Structure
Measurement of data +
presentation
Communication channels
Meetings
Reporting mechanism

43
Facilitate the Decision
Making
What?
By whom?
When?
At what Cost?

44
Question – in groups

Reference the distirbuted ‘direction

finder’, how would you apportion
your time (%) on a project?

45
Projects – Direction Finder

46
 P. O. L .C. MODEL
Setting standards and Establishing objectives &
assessing success in planning work
achieving objectives

PLANNING

CONTROLLING ORGANISING

LEADING
Influencing and motivating Organising people,
team members in doing the materials and scheduling
work
Leadership involves:

Challenging the status quo

Inspiring a shared vision
Empowering others to act
Modelling the way
Motivating others
 MOTIVATION FACTORS

ENVIRONMENT MOTIVATORS
 Working conditions  Recognition
 Interpersonal relations  Responsibility
 Job Security
 Achievement
 Salary
 Advancement
 Status
 Work itself
 Policy
 Growth
Empowered Individuals:

Take risks
Gain knowledge, and
Develop new skills
Leadership – The 4 Basic Building
Blocks

Accountability

Trust

Communication

Goal setting
Communication

Involves the transfer of information

and understanding
o Are you really communicating
when you talk?
o How can you be sure?
 Communication

Communication breaks down due to:

• Biases and assumptions
o Biases predetermine reality of how
things or people are
o Assumptions are about why people
do things
• The language used
• Status
• Not really listening
Overcoming Communication Barriers

Takes time
Involves conscious effort
Requires a structure
Team Communications

Could include:
memos

minutes

circulars

notices

meetings
Why do we have meetings?

 Exchange Information
 Discussion on important issues
 Make Decision
 Team Building
 … Management
Planning Meetings:

Conducting a meeting without a plan

is much like trying to build a house
without a plan. It can be done but is
likely to take much longer and have
many more problems
Planning Meetings:

1 Determine the objective:

- Why do I want to hold this

meeting?
- What do I want to achieve?
- Is it necessary?
Planning Meetings:

2 Determine who should participate:

3 Prepare the Agenda:

. Venue

. Date

. Start and Finish Times

. Agenda Items - What, Who, Timing

 Delegation

Advantages:
• Builds trust
• More people can do more things
• Staff are more involved and committed
• Staff grow and develop
• Skills and knowledge of staff are used more
fully
• Individual performance can be measured
• Opportunity for recognition
• The manager has time for managing
Delegation
Barriers:
• I don’t have time
• I don’t know how
• I don’t know to whom I should delegate
• It’s easier to do it myself
• I don’t want to lose control
• My staff lack experience and competence
• My team members resist responsibility
• My staff are not smart enough
• My staff cannot be trusted to work on their own
 Delegation
Principles
1. Delegate the whole task to one person
2. Select the right person
3. Specify the required result
4. Delegate the responsibility and authority
5. Check for understanding
6. Set a date to review progress
7. Maintain open lines of communication
8. Don’t take the project back
9. Evaluate and recognise good performance
Benefits of Effective Work Assignment

For the Individual:

• Has a clear understanding of what is required
in doing the work

• Is motivated and has ownership of the work

• Is able to measure and adjust achievement

towards the goal
 Benefits of Effective Work Assignment

For the Manager:

• Management is more effective due to a disciplined
process of assignment

• Fewer performance problems

• A better base of coaching/help staff

• A better base of monitoring staff performance

 Work Assignment

The process:

Step 1 Explain the purpose and relevance… (Why)

Step 2 Explore the current situation

Step 3 Define the work [Description, Scope, Means]

Step 4 Specify authority and responsibility

Step 5 Ensure system and personal capability

Step 6 Agree performance management of the work

Don’t forget to check for understanding and agreement!

 Performance Management

Includes:

• Performance Measures

What is being measured – outputs, outcomes or a mix

• Performance Standards

Apply to a role or a process eg ‘response within 1 week’

• Performance Monitoring

How and how often will information on performance be collected

and reviewed

What reporting is required

Work Assessment - Feedback

 The process of providing staff with information

with respect to their actual performance

 Should be used to not only get staff member

back on track but to confirm that they are on
the right track.
 7 Reasons for giving feedback

1. Correction and consolidation

2. System improvements

3. Coaching

4. Learning and Development

5. Recognition and reward

6. Discipline

7. Evaluation
Elements of effective feedback

• Be specific

• Be honest

• Stick to the facts

• Maintain self-esteem

• Listen and respond with empathy

• Separate the problem from the person

• Involve the employee

 Feedback
Critical, Complex and Difficult:

Because it provides staff with information with which

they can evaluate and modify their performance

You have to be the task expert managing the

technical aspects and, at the same time, manage a
difficult person-to-person interaction
Main stages of a construction
project
Inception
Feasibility
Design
Preconstruction
Construction
Commissioning and occupation

71
 The project ‘moodograph’

Scale of
enthusiasm

Handover

New Project

Project Timescale
72
Contemporary Themes of
Planning
Construction is Complex system
◦ Uncertainty
◦ Interdependency of operations
 Sequencing of activities
 Resource
Construction a Chaotic system:
◦ dynamic
◦ non uniform environment

73
 Contemporary Themes of
Planning

It demands frame work

◦ To structuring and
managing the complexity
of a project
◦ To coordinates activities
◦ To control the interfaces
and delivery
◦ To control effective use of
resources 74
Contemporary Themes of
Planning

‘If you fail to plan, then plan to

fail’

75
Contemporary Themes of
Planning
Planning in management concept

◦ Assists Objective setting and

monitoring progresses

◦ Avoidance of Sub-optimization

◦ Facilitating communication and

collaboration

76
Contemporary Themes of
Planning
Planning in Construction

Assists PM setting guide line for

project
Execution, coordination
Forecast uncertainties
Identify constraints
Monitoring progress

77
Effective Planning
Contributes...
 a disciplined approach
 a crucial communication aid
 identification of project risks
 preparation of risk mitigation
measures
 formulation of contingency plans
 fundamental project progress
monitoring
 anticipation of project delivery issues
 evaluation of remedial options
 confirmation of achievements
78
Planning in Construction

A multi-staged process
performed by different people at
different stages for various
purpose

79
Planning in Construction

80
 Planning View
schedule

project planning
view view

quality/scope costs resources

81
Preconditions and
stability
Materials Information

External Conditions

Preceding Activity
Activities

Space
Safe environment

Crew Equipment

82
Preconditions and Stability
Condition Reliability
Reliability Reliability
? 83.3% 95%
Preceding task 83.3% 98%
ROW cleared site 83.3% 96%
Equipment 83.3% 96%
Crew 83.3% 95%
Information 83.3% 100%
Materials 83.3% 95%
External conditions
<30% 70-80%
Overall
Reliability

83
Planning Process

84
Planning Encompasses...
schedule management
◦ recording planned activities and
dependencies
◦ testing plan logic
◦ highlighting critical activities
◦ recording activity progress
achievement projections
resource management
costs management
exploring what-if scenarios

85
S.M.A.R.T. goals
 develop a series of goals to define a logical
sequence of achievements that,
cumulatively, build towards successfully
delivering the required project outcomes

 goals should be SMART…

 Specific
 Measurable
 Agreed
 Realistic
 Time-based

 include these goals in the project plan as

milestones

86
Preparation of Plan
 Major Steps required to develop a schedule
◦ Establish work breakdown structure (WBS)
◦ Sequencing of activities by analysing their
interrelations / interdependencies
◦ Allocation of resources to activities
◦ deciding time required for each activity
◦ developing the overall time schedule of
the project
NB: The above are not a onetime done
activity, need iterative process till optimal
solution is obtained.

87
Preparation of Plan
Resources planning:
◦ Determining the labour requirement
◦ Determining the material requirement
◦ Determining the number of equipment
required
◦ Determining the cash requirement
◦ Schedule the ordering of material,
equipment, recruitment of labour and
cash requirement together with the
provision of lead-time for all.

88
Preparation of Plans ….Major
components

A) Work method selection

B) Scheduling
 Critical Path Method
 Critical Chain Method
 Location based/Repetitive
Scheduling
 The Last planner concept

C) Cash flow forecast

89
Preparation of Plans
Work Method Selection
◦ Analyzing the project scope: including quality
assurance requirements against the time and
cost implication

◦ Understanding the whole process: mapping

the process and pin point the required
information

◦ Reviewing the construction technique that

goes with the company ability and the work
demand

◦ Defining the natural work flow within the sub-

sequent work units 90
Preparation of Plans
The Method Selection needs to provide
Efficiency and Effectiveness, i.e.:-
◦ Economical: too much focus on least
expensive activity may adversely affect
productivity and quality of works

◦ Site specific
◦ Safe
◦ Reasonably considered social and
environment issues

91
Preparation of Plans

The Selected Method : address

issues like:
◦ The What? …. The activities
◦ The Where?..... The location
◦ The When? …. The duration
◦ The How?...... The Construction
Technique

Typically done either simultaneously or in

a series of iterations.
92
Preparation of Plan
Scheduling Techniques:
◦ Tools for construction planning and
control
◦ Used to estimate of overall duration
◦ Basis for resources allocation & cost
estimation
◦ Control timing of activities thereby
ensuring the timely completion of
project
Principal scheduling techniques
◦ Bar chart
◦ Network Methods
◦ Time-space diagram 93
Preparation of Plan

Bar chart
◦Easiest to understand
◦Most commonly used
◦List of activities shown as
“bar” plotted against time
scale (start, duration, Finish)

94
Preparation of Plan

Duration
Activity (days)
A 4

B 8

C 4

D 4

E 2

F 2

G 2
0 4 8 12 16 20 24
Duration (days)
EXAMPLE OF SIMPLE BAR CHART

95
Preparation of Plan
Advantages of bar charts
◦ Very simple presentation, easily
understood
◦ Good form of communication to non-
technical personnel
◦ Requires little training to use
◦ Suitable to be used for planning
time-phased resources (labor,
material, equipment, budget)

96
Preparation of Plan
Disadvantage of bar charts
◦ Can not show interdependencies among the
various activities
◦ Critical activities that need attention and
floats for non‑critical activities are not shown
(complex projects).
◦ Change in schedule requires redrawing of
the chart.
Despite its disadvantages the bar chart
is the most commonly used tool for
planning and control
97
Preparation of Plan
Network method
◦ Suitable for large complex projects having
many interdependent activities
Two commonly used network methods are
◦ Arrow‑diagram
◦ Precedence‑diagram
Main difference
◦ Arrow diagram represents activities on arrows
and the node represents the event at a time
◦ Precedence diagram shows activities on nodes
and the logical sequence of activities with
arrows
98
Construction Planning(Cont.)
1
ACT.1 ACT. 2 ACT.3
2 3 4

EXAMPLE OF ARROW DIAGRAM (ACTIVITY ON ARROW)

Act. 1
Act. 2 Act. 4 Act. 5
2week
5weeks 3weeks 6weeks
s

SS 2 weeks Act. 3

5weeks

EXAMPLE OF PRECEDENCE DIAGRAM (ACTIVITY ON NODE)

99
Preparation of Plan
Steps in developing a network
diagram
◦ Listing all project activities using WBS
◦ Prepare an arrow‑diagram following
the logical sequence of activities
◦ Estimate activity duration
◦ Calculate the time for events and
determine floats and critical‑path
(time analysis using forward and
backward pass)

100
Critical Path Method: Scheduling
concept

Predecessor
• controls the start or finish of another
activity

Successor
• depends on the start or finish of
another activity

10
1
Activity relationships
Finish to Start (FS)
when A finishes then B can start
(this is the default relationship type)

A B
Predecessor Successor

10
2
Activity Relationships

Start to Start (SS)

A
Predecessor
when A starts then
B can start
B
Successsor

10
3
Activity Relationships

Finish to Finish A
(FF) Predecessor

when A finishes B
then B can
Successor
finish

10
4
Activity Relationships

Start to Finish (SF) A

Predecessor
B cannot complete
until A starts
B
Successor

10
5
Activity Relationships
Finish to Start with Lag/lead

A B
....days

Predecesso Successor
r

Should be carefuly reveiewed inorder to avoid miss use /

It may bes better to deffine the activity itself inorder to a
And better control…specially for people who are not fam
The hidden structure Concerete cure time 10
6
Activity Relationships
Start to Start with
Lag/lead
A
predecessor

B
Excavation and pipe laying
...days
successor

10
7
Scheduling concept
Forward Pass
calculates the early dates for each
activity
early dates are the earliest times an
activity can start and finish once its
predecessors have been completed
the calculation begins with the
activities without predecessors

(Early Start + Duration) - 1 = Early Finish

10
8
1 5

11 25

1 10

10
9
Scheduling concept
Backward Pass
• calculates the late dates for each
activity

• late dates are the latest times an

activity can start and finish without
delaying the end date of the project

• the calculation begins with the

activities without successors

(Late Finish – Duration) + 1 = Late Start

11
0
6 10

11 25

1 10

11
1
Float- definitions
Float generally is the amount of time an
activity can slip from its early start without
delaying the project

Total float: Time available before being

critical
◦ Late Dates - Early Dates = Total Float
Free float: Time delay without delaying
subsequent activities
Independent float: Time delay without
impact on preceding or succeeding activities
Activities with zero total float are
critical 11
2
 a th
5 l P
i c a
t
Cri

11
3
Preparation of Plan

Duration
Activity (days)
A 4

B 8

C 4

D 4 FLOAT

E 2

F 2

G 2
0 4 8 12 16 20 24
Duration (days)
ACTIVITIES A, B, C, E, F and G are critical
ACTIVITY D is non critical and has a float of 8 days

114
Preparation of Plan

Advantages of network methods

◦ shows the logical interdependencies among
activities and the effects of their changes on
one another
◦ shows critical activities and floats for
non‑critical activities
◦ estimates project duration more accurately
by splitting the project into smaller activities
(work contents)
◦ doesn't require redrawing for changes
◦ Resources levelling can be done by shifting
around non‑critical activities
115
Preparation of Plan
Disadvantages of network
methods

◦ Requires proper skill & training

◦ Difficult for supervisors on site to easily

understand and get necessary information. This
normally leads to the use of network based bar
charts on construction sites.

116
Preparation of Plan
 Time space diagram
◦ Suitable for linear construction projects like highways,
cannels, tunnels, sewer lines
km Cut & Fill Protection Works
100 Legend: Drainage
Sub-base
80 Base course
AC Bridge B
60
Culvert 2
40
Culvert 1
20
Bridge A

0 5 10 15 20 25 30
Time (Months)
TIME CHAINAGE DIAGRAM

117
Preparation of Plan

 Advantages of the method

◦ Easily understood by all levels
◦ Good means of communicating information to
non-technically trained personnel
◦ Varying performances can be clearly seen from
the diagram i.e. change in slope
◦ Location of the work along the project length
can easily be seen at any given time

118
Preparation of Plan

 Disadvantages of the method

◦ Interdependencies among activities are not
shown
◦ Critical and non-critical activities are not shown
◦ Its use is limited to linear construction projects

119
Plan Information Diffusion
Plans have to be communicated
clearly and ‘no doubt should be left as
to what is to be done and when’.

A well informed employee is

committed to the plan which
facilitates the monitoring and
controlling process.

Clear information also increases

commitment of subcontractors.
12
0
Cost Flow Forecasting

Cash is a life-blood of any

business

Cash inflow is not an

income: money entering -
money leaving the firm

.

12
1
Cost Flow Forecasting ….
Cont
Helps to :
To provide timely warnings…to take
corrective actions
They also allow you to analyze whether
a project will be sufficiently profitable
to justify the effort put into it.
Be useful for analyzing owners’
personal finances. This is useful when
making difficult financial decisions.
12
2
Cost Flow Forecasting …. Cont
The Process of Cash flow forecast is
similar to the process of
production(Single Project)
Working
capital
Operatio
Cash ns Revenu
( break into
operation manageable
e
size)
expense

Operation
Income 12
3
Cost Flow Forecasting …. Cont
The basic steps in cash flow forecasting
are:

Set the period of forecast

Prepare manageable activity break down

Prepare a spreadsheet identifying revenues,

costs and total cash flow

Estimate/forecast the corresponding values

and calculate
12
4
Factors affecting project
cash flow
 Revenue factors
◦ Advance payment: proper utilization to support the
cash flow
◦ Progress payment: timely delivery of the work and
timely collect the payments
◦ Interest on Payment: Sub clause 60.8
◦ Retention release
◦ Acceptable cost claims
Cost factors
◦ Direct cost of factors of production: ( labour,
material, equipment, finance...)
◦ Indirect cost
 Overhead and Profit, (Performance and other payment
guaranties)
◦ Subcontractors
◦ Escalation...etc 12
5
Factors Affecting Project
Cash flow
Time
◦ Project schedule: delays/ accelerations, change of
work
◦ Holidays and non-working days
Terms of the contract
◦ Minimum amount of payment for IPC
◦ Retention deduction
◦ Advance recovery
◦ Payment on remaining % for General
Provisions
◦ Unbalanced bids and the BoQ quantity
changes
12
6
Factors affecting project cash
flow
Material related variables
◦ Storage, lead time of procurement,
credit terms, discount rate

Depreciation
◦ Helps to recover fixed capital early

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Implementation of Plan and
Control

◦ Planning facilitate project

implementation control

◦ Firms has to Methodically

and Continuously
measure and evaluate
the performance

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8
Implementation of Plans and
Control
• Project performance measurement
should evaluate

◦ Productivity(efficiency)

◦ Effectiveness of how the activities were

done, i.e. no rework

◦ Improved relations and communication

◦ Overall satisfaction
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Implementation of Plan and
Control
◦ The performance monitoring
system:
 Timeliness
 Standard,
 Honest and
 Clearly showing divergence

◦ managers must evaluate the

performance, and take corrective
action when the project runs away
from the plan. 13
0
Dynamics of Planning
The employed performance measurement
must lead to plan revision when there is
divergence:

Project plans are subjected to re-planning

either
due to project goal change by the client or
plan change by site management due to
influence of project micro and macro
environment.
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Dynamics of
Planning…….Cont.
Planning needs timely and frequent
updating during construction due to
following reasons:
◦ Resources not available as planned
◦ Productivity may be less than assumed
◦ Unanticipated extra quantities
◦ Design changes etc.
◦ Unusual weather conditions
◦ Differing site or soil conditions
◦ Untimely payment for completed works

 In
such ever changing and dynamic
environment plans age early:
132
Implementation of Plans and
Control
Earn Value Management has become an
industry standard way to Performance
management and forecast
measure the progress of a projects if
accomplished is as planned in terms
of Cost & Schedule of the work
performed

identify schedule and budget

variances throughout the life of a
project

forecast its completion date and final

cost
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 Earn Value Management
• ACWP – Actual Cost
Now EAC of Work Performed
Cost (spent cost)
EAC • BCWP – Budgeted
Cost Cost of Work
BAC overrun Performed (Earned
BCWS Value/Achieved
BCWP Time Cost)
overrun • BCWS – Budgeted
ACWP Cost of Work
CV Scheduled (Elapsed
SV
Cost/Baseline Cost
to Date)
• BAC – Budget at
Completion
Time • EAC – Estimate cost
at Completion
134
•
 Earn Value Management
• SPI: Schedule Performance Index (“Did a
month’s of schedule produce a month of progress?”)
– SPI=BCWP/BCWS
– SPI<1 means project is running behind schedule

• CPI: Cost Performance Index (“Did the progress we

made cost what it should?”)
– CPI= BCWP/ACWP
– CPI<1 means project is going over budget

• CSI: Cost Schedule Index (CSI=CPI x SPI)

– The further CSI is from 1.0, the less likely project
recovery becomes.

135
 Earn Value Management
• Predicting future cash flow
Simple extrapolation

Final cost = cost of work done + (work left/past

performance)

Assumes future performance is same as past

(generally true)

EAC=ACWP + (BAC-BCWP)/CPI How far is

the
Completion
EAC=ACWP + (BAC-BCWP)/CSI
136 predictable
 Securing Smooth Cash Flow
At Tender stage:Having as accurate estimate as
possible Load money into early items such as
excavation and substructures
Construction stage: from project activities
 Submit interim application on time
 Deal with defective work quickly to avoid
delayed payment
 Delay some activities
 Value materials on site
 Frequent inventory to spare parts and idle
resources
 Manage maintenance and other expenses
 Agree in the value of variations as soon as
possible
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 Securing Smooth Cash Flow

◦ Timely avail finance from other sources

 Long term borrowing: has to be invested in capital assets
 Short term borrowing: should be invested as working
capital
 Bank loans,
 Bank overdrafts
 Trade creditors: make maximum use of credit facilities..etc

◦ Post-construction stage : to assure profit is

maximized: agree on final account and collect
outstanding retentions
on time

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Thank you

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