Project Change Management

What’s the Difference Between a Change Order, Change Forecast and Budget Transfer?

Changes are inevitable on projects. No project manager in their right mind moves forward with a project not expecting changes to happen - fluctuations in scope, cost, schedule and activity can happen almost daily.  In this article, I want to tackle a segment of change management that I often come across in conversations. Which is: the different types & states of Change Events that can be registered on a project; and some of the nuances of each. The three main project change events are: Change Order.  Used to register a change in project scope Change Forecast. Used to identify any project trends Budget Transfer. Use to move funds & resources within the project without modifying the budget It’s important to understand the difference so as to know in which cases you’d use each type of change event. Change Order There can be many reasons to initiate a Change Order, but they typically represent an underlying change in scope or unanticipated cost that has occurred on the project. As a result, change orders will always result in a modification to the project budget. They can be initiated by an outside request – such as an RFI from a customer or other stakeholder - or they can originate from an internal source, supplemental information, design change, or just be a result of a mistake.  In any case, something’s happened that’s going to require a change in budget (usually additional funds are requested), and potentially a change in schedule. If it’s an increase in budget, the initiator of the change needs to specify a funding source. The funding source could be a supplemental AFE, Purchase Order, etc.; or it could come from the Contingency Reserve (if there is

Are we nearing the end of Cost Reimbursable?

Get Ready for Convertible Price Projects   When we see quotes like this from the Globe and Mail, “Investors are increasingly applying pressure on oil companies to trim their investments in oil sands projects,” it becomes clear that a change in how we do business in Alberta is on the horizon.  If the investment community is losing faith in our ability to extract oil at a reasonable and predictable cost, our industry is in serious jeopardy. There is a shift underway. Cost overruns on construction projects aren’t uncommon of course, and the oil and gas industry in Alberta has not been an exception. It has in fact shown to have one of the worst records for budget overruns of any energy geography in the world. There are a number of underlying challenges that have contributed to this unfortunate track record; but one of the primary culprits has to do with the predominantly cost-reimbursable contract culture that exists in Alberta. This culture creates a challenging environment for projects to stay on budget. The nature of these contracts suggests that there is compensation for all costs incurred plus a rate uplift, with little to no risk absorbed by the contractor for when projects are extended or when they aren’t executed at maximum efficiency.   When the cost-risk is so lopsided like that, the owners face having to bear all the added cost of any inefficiencies, productivity issues and errors that occur with any contractor or engineering firm on the project. There can be dozens of contractors and engineering firms (EPCM) on a project, and with the way contracts are currently structured, everyone just passes their problems up the food chain (even the best, most efficient contractors).  Nobody’s

Top Challenges with Running Complex Projects

  Construction projects are saddled with a whole host of complexities that require careful planning and management in order to result in a successful, profitable outcome.  Most construction businesses themselves struggle with an equally broad set of challenges when comes to successfully running a project-based business. Here are some of those challenges.   Project Visibility. Getting reliable information that’s up-to-date, accurate and detailed enough to understand what’s going on at all levels in a project. As I’m sure you’re aware, knowledge and good information are the ultimate control weapons for keeping projects on track. I often hear C-level managers express frustration about not knowing where they’re at with projects or even parts of projects.   Getting Organized. One of the biggest sore points we hear about from construction management professionals, is a feeling that it just takes too much time, and they need to simplify & streamline how they go about their day-to-day controlling of projects. They often experience a sinking feeling of chaos and a need to pull together all the project-related information, processes and tools into one place where they can plan, execute and report without having to spend endless hours trying to cobble together a simple progress report.   Managing Project Changes. Change can be notorious for causing cost overruns, delays, misunderstandings and even disputes.  Changes are easily underestimated and overlooked when you’re busily trying to complete project work. There’s a tendency to be optimistic, agreeable and eager to just get things done and ignore the control aspect of change management.  Everyone has to face project changes, but no-one really wants to deal with it.   Access to Information. Many construction organizations struggle with having all their project information well organized and

Got projects going over budget?

You're Not Alone. Project cost overruns are common. Statistics will tell you that over 85% of projects go over budget. But Why? What are the mechanics behind project cost overruns and project schedule delays? Plenty of talented and experienced professionals engage in dialog about this very topic every day, and try to arrive at conclusions about how to stop projects from going over budget. In this article I’d like to shed some light on the underlying workings as to the root causes of cost overruns and schedule delays. In order to tackle the problem of how to eliminate overruns, it’s important to understand the main reasons why they happen. Obviously, there’s no one-sentence answer to these questions since every project is unique and the influences that trigger overruns can vary tremendously. Luckily, however, there’s been quite a bit of research and experimentation around this exact problem - since it is a pervasive issue that so many businesses, large and small, struggle with. As a result, there have emerged some key factors we can point to that are the major contributors to projects going over budget and suffering schedule delays. A lot of project managers and business owners have their own theories; and after a good deal of listening and reading, many will have you believe that it all comes down to one thing: Project Changes. Technically speaking project changes are arguably the biggest contributor to projects going over budget and blowing schedule deadlines, but for the purposes of this discussion, let’s leave Change and Change Management out of it. I’m saying that because I don’t believe changes are truly the root cause of cost overruns. I believe that if you approach a project anticipating that

How to Solve Project Management Client Problems

  Even the best project managers occasionally encounter clients who make completing a project difficult.  From being indecisive to delaying the project schedule, clients can impede what would otherwise be an effective and timely outcome.  By utilizing PMP training and being proactive, you will be successful in achieving project goals.   Communication Breakdown Communication can be the key to success for any project, but what do you do when you can’t get in contact with a decision-maker?  Keep in mind that it’s easier for a busy client to say yes or no than to provide a detailed explanation as to what they want or need. Do some groundwork in advance to explore possible options.  When a decision needs to be made, clearly indicate which course you think is best, and then confirm that this is direction your client wants to go.  It also helps to present a well-defined project schedule to the client prior to beginning work.  This can help manage expectations and provides a tangible framework for the client to either consent to or object.  Having these primary steps in place will allow a potentially “slow” client to make a yes or no decision and allow you to move forward.   Indecisive client Clients are busy, and not always ready to provide you with direction if you need it.  In fact, some clients may not be able to envision what they want until a certain portion of the project is complete.  Develop a foundation for your work by having the client explain the exact requirements of the project before you generate a plan. Use these guidelines to develop as specific a plan as possible.  The client may waver on making decisions, but referring back

Project Change: Strategies for Making the Best of it

A must-read article on the effects of change in projects by Arthur O’Leary called Coping with Changes during Construction takes a very savvy look at both the reasons changes happen, along with strategies around managing the risk. While O'Leary's focus is on construction projects, this advice and rules are equally valid for projects in any industry that have complexities such as: many moving parts, suppliers, subcontractors, customers, complex WBS, multiple resource types, etc. O’Leary states: “It is seldom that any construction contract can be pursued from start to finish without some changes having to be made. This is in spite of the best of intentions of all parties. Despite stories about fat contractor profits in changes during construction, in reality they are an onerous economic burden on all concerned. Contractors often have difficulty in breaking even on changes.”   So why is it that change has such a big effect on projects?  O’Leary goes on to discuss exactly that point: “Projects plagued by numerous changes can become mired in confusion if they are not administered in an orderly manner. Serious problems arise when multitudes of changes are in various stages of progress. Some in the stages of deciding what to do, redesign or engineering, pricing, reconsidering, negotiation of price, contention about responsibility, approval in part, final approval, or cancelation. Some changes will have a profound effect on scheduling while others will have unexpected effects on interfacing trades. Some parts of the work may have to be deferred while awaiting final decisions and ultimate approvals of proposed changes. In some cases the proposed changes, after careful consideration, are canceled, and the deferred work then becomes critical to the time schedule." "Often, controversy develops among owner, architect,