How Can We Give the Engineering and Construction Industry the Transparency It Deserves?
No one can deny that the Engineering and Construction industry and in particular in the Middle East region lacks the transparency and accountability best practices adopted by other businesses. This lack of transparency and accountability results in wasted funds that cannot be recovered. Although most institutional and public sectors bodies have enforced stringent audit practices on their projects, but most of those practices are based on trying to identify what went wrong after the fact. Project management professional practices and technology can provide those institutions with proactive project audit control that can identify possible wrong doings while project execution where recovery of misused funds can still be recovered and remedial actions can be still done.
By reverse engineering the results that usually trigger an organization to audit a project, we can come with the actions and processes that could reduce the likelihood occurrence of wrong actions and doings. In other words, instead of treating the symptoms of the questioned project, we need to focus on preventing the causes that have resulted with those symptoms.
Usually a project gets subjected to audit when certain triggers occur. Those usually include going over budget, being late, large number of Request of Information (RFI), quality of completed products among others. For each one of those outcomes, the institution needs to have in place the processes to enforce capturing the actions the have could have caused this outcome.
Automating Project Management Processes
Project Management Information System like PMWeb will automate the different project management processes that are needed by the project audit team to ensure that the right data is captured by the right project team member at the right time. The PMWeb forms will ensure the quality and validity of reported data for each project management process. PMWeb comes ready with most forms needed for managing a project as well as it has a custom form builder to create any additional form for capturing data for forms that are not readily available in PMWeb.
Each project management form in PMWeb allows those involved in submitting, reviewing and approving the project management process to attach all supportive documents for the form. Usually, those documents will be uploaded in PMWeb document management repository. The document management repository allows creating folders and sub-folders to exactly map the project’s documents filing system.
The PMWeb workflow will ensure the formal involvement of all those project team members that are part of each process submit, review and approve steps in accordance with the predefined sequence and authorities assigned to each. Each project team member involved in the workflow can add his/her notes and remarks during the form review process. Workflows can include conditions and branches to map the authorities and approval levels assigned to each project team member.
This will provide the project team as well as the audit team with trust-worthy real-time logs and registers of all data captured in each project management process. Those logs and registers will become the basis for creating triggers that will be used to identify performance trends that will call for immediate project’s audit attention.
Over Budget
Projects can exceed the approved budget for many reasons starting with having the wrong cost estimate. Therefore, it is critical that the institution maintain a log of all cost estimates submitted during the project’s design development stages. The cost estimate needs to be detailed to the desired level and needs to provide all documents such as drawings and specifications used to quantify the project’s scope of work. The different cost estimates need to be formally reviewed and approved by the qualified and authorized project team members before it can be approved to create the project budget.
Understanding that projects are unique and assumptions need to be made to address the likelihood and impact of those unknowns, a risk register need to be created and maintained at all times. The risk register should also detail the response actions taken to mitigate the high exposure of those risks. The risk register will also provide the backup data needed to determine the project’s contingency and management reserve.
The approved cost estimate will become the basis for setting the project’s performance budget which needs to be maintained during the project’s execution. Any changes to the approved budget including transferring funds from one cost center to another or one project to another needs to get the needed approvals as per the predefined workflow.
The approved cost estimates will also become the basis for comparing the bids received for the different bid packages. Comparing the received bids with the approved cost estimate will help the institution to immediately identify unbalanced bids, front loaded bids or bids that had wrong prices due to lack of understanding of the project scope of work. In addition, those cost estimates will help the institution in verifying the correctness of their cost estimates.
Of course, institutions should avoid inviting unqualified contractors to bid on projects just for the sake for increasing competition. Unqualified contractors might simply bid on projects to get the advance payment to fund other projects or business requirements. Therefore, a formal prequalification process needs to be adopted by the institution to ensure that only qualified contractors are bidding on projects.
Another reason for projects to exceed their approved performance budget are change orders for either in scope or out of scope of work. Changes could happen for many reasons including but not limited to intent of documents not "reasonably inferable" and corrections required, unknown conditions necessitate changes, owner's requirements change, changes in code or changes in interpretation of code, specified product no longer available, consider new product because of cost savings or other benefits, specified product inappropriate, estimated quantity of work for unit prices changes and revision of unattainable requirement.
In addition, the actual cost for approved work in place and materials stored at construction site needs to monitored and controlled to avoid payments for rejected work or work that is not yet approved. This will also include payment for all material supplies, professional services and other miscellaneous expenses.
The data captured by PMWeb will provide the project audit team with real-time dashboards that can trigger alerts for the team to review, analyze and drilldown to the data source that have resulted in this alert. The audit team can also design that helps in better visualizing and analyzing the captured data in any desired format. Those dashboards can be specific to a single project, portfolio of projects or all projects.
Schedule Delays
In engineering and construction projects, the project’s execution schedule will usually get developed by the general contractor. Before using those schedules to monitor, evaluate and report the project’s schedule performance, the project owner and his authorized representative needs to have a formal process for reviewing the project’s baseline schedule and all subsequent updates to ensure the validity, achievability and comprehensiveness of the schedule. The formal schedule review and analysis checklist needs to be address items that relate to contract compliance, general schedule submission, submittal and procurement, activity duration, float, calendar, activity codes, logic, critical path, good schedule practices and resources requirement.
The institution needs to have the approved baseline schedule and all subsequent schedule updates captured in an electronic format to enable creating variance reports to identify schedule slippage and to report the reasons that caused this slippage. The schedule data can also provide great value in running delay analysis using the time impact technique. In addition, this data can become part of other reports used to monitor, evaluate and report the project’s performance.
All project delays, critical or non-critical, excusable or not, with compensation or without compensation as well concurrent delays needs to be formally captured. For each delay event, the institution needs to ensure that complete delay analysis have been performed. All support documents including daily reports, correspondence, meeting minutes, schedule updates among others need to be attached to the delay event form.
Some of the project delays that could be claimed by contractors could be related to the delayed approvals of material samples and workshop drawings. It is therefore very critical that each project should have detailed submittal log that is integrated with the construction schedule to ensure that all submittals are reviewed and approved before affecting critical activities. The submittal log will also detail the reasons for delayed submittal approvals which could many attributed to the contractors when failing the submit the contract specified materials and equipment.
For delay events that could involve having idle resources or impacting the resources productivity rates, it is important to use the daily reports submitted by the contractors to identify the actual manhours spent by labor and non-labor resources on those periods. The daily report will also include details of work accomplished during the same period as well as the weather conditions which could have impacted to work on site.
The data captured by PMWeb for the different project schedules, delay events, delayed approvals, actual manhours among others can provide the project audit team with great insight in determining the reasons for project’s delays and the project party responsible for those delays. In addition, the manhours captured in daily reports will become the basis for determining labor productivity rates and determining the extent of inefficiencies that the project have encountered.
Excessive Request for Information (RFI)
RFI are usually the result of incomplete contract documents, inconsistency or conflict between more parts of contract documents, insufficient amount of detail to determine design intent, inability for contractor to provide specified product or system, unforeseen site conditions encountered among others. RFI could be used by contractors as the reason for initiating change orders. In addition, failing to respond to RFIs in a timely manner could give the contractor the excuse to request for time extensions.
Some of the RFIs could result in having the need to issue revised drawings to rectify the design mistakes or provide the needed clarifications. Therefore, it is important to maintain a log of all contract documents including drawings for which the log will detail all revisions issued to supersede the earlier versions. Of course, the drawing or any other contract document that has been revised needs to be uploaded into the document management repository and attached to the appropriate version reference.
The data captured in the RFI module will provide the project audit team with great wealth of information that can be used to analyze those RFIs including the reason for issuing the RFIs, the time it took to respond to those RFIs and whether those RFIs have resulted in additional cost or delay to the project’s milestone dates.
The same approach can be implemented to other project management processes that are essential for providing the data needed for the project audit. Those could include for example inspection forms, non-conformance reports, snag lists, project handover documents, safety incidents among others.