Process industry projects are diverse with wide-ranging scopes, budgets and timelines. Good engineering company project management can be the difference between succeeding and failing from one job to the next. However, many end-user companies do not use project management capabilities as a key decision criterion when selecting an engineering services vendor. Asking to speak with the prospective project manager (PM), reviewing procedures, and evaluating PM documentation, reports and tools should be important parts of the vetting process.
The Project Management Institute defines project management as the application of knowledge, skills, tools and techniques to project activities to meet the project requirements. The key phases of project management include initiation, planning, execution, monitoring and controlling, and closing. An individual PM’s knowledge, as well as the tools, workflow and procedures he uses, can heavily influence whether a project is delivered on time, on budget and at an acceptable quality level.
The initiation and planning phases establish the project workflow and tasks, budgets, timelines, staffing requirements, etc. During execution, the monitoring, controlling and reporting become the PM’s focus. The PM continually compares the progress of the completed work scope, schedule and budget against the plan and makes necessary adjustments.
At the most basic level, the three cornerstones of project management are scope, budget and schedule. The relationship between these three elements is fixed, meaning changes to one necessarily affects the others. For example, if a project’s schedule is reduced by three months, then it will require additional money to pay for overtime or extra resources to complete the same scope, or the scope will need to be reduced to accommodate the shorter schedule within the same budget.
These fixed relationships are intuitive, but many end-users are quick to change the scope or schedule requirements without expecting the budget to change. How a PM handles changes can determine project success. Change order management is where PMs struggle the most. When a client asks for an extra drawing, our natural tendency is to agree and do the work. The problem is that, as projects progress and other changes or off-plan events occur, their cumulative impact begins to negatively affect the schedule and/or cost.
The primary foundation of change order management is communication. A proposed change, whether an additional drawing, the decision to buy more expensive equipment, or an extended drawing review and approval cycle, should be documented along with the expected impact. This information should be clearly communicated to the client for approval before proceeding. While it may sound like nitpicking to document every change, even minor ones, this is the best way to avoid any misunderstanding later in the project. It also helps accurately capture actual project costs.
Good PMs understand that changes don’t all have negative impacts and should use the same process if the change has a positive effect. One of the frustrations that many end-user companies have is that they only see additional costs and not the credits for the decisions that lower cost or reduce schedule.
A good way for companies to share in the change management responsibility is to regularly review potential change orders and agree early on to budget a pool of money from the contingency to apply toward prioritized change orders. While neither party likes the idea of heading into a project assuming there will be change orders, the reality is that neither the end-user bid package nor the engineering company bid is likely perfect. Being prepared to address changes before they occur on jobs is a good way to better manage them.
Good project management, including a straightforward approach to change management, increases the probability of project success and is a good investment for both the end-user and engineering companies.
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