Project Risk Management

Everyone Likes to Pick a Winner

Risk is everywhere in business. Whether you’re a large or small company; or whether you run large or small projects – you are always running the very real risk that you’re project won’t succeed according to plan. How your business performs on a project however, goes well beyond just your own internal issues of cash flow and resourcing. The interdependencies that are inherent in construction projects means that what you do has a direct effect on your peer organizations and the owner. In other words: what you do is not just your own problem. If you blow it, you may end up blowing it for everyone around you. That doesn’t go over well – people talk. It’s in everyone’s best interest to know who delivers and who doesn’t. There are others out there watching you. Evaluating you. Building a database of metrics on you. Your company’s performance, your productivity, and your ability to deliver at a high degree of quality. You are being continuously monitored by those that are affected by you. One of the most popular features of procurement management software like 4castplus is its ability to gather historical performance metrics on vendors. Every shipment, every completed job, every item of communication from documents to emails, every milestone, every request for extension, every price change; and a ton more things are all captured and available to be reported on. Vendors get ranked. Vendors get compared and evaluated for future jobs. The owners and Engineering-Procurement organizations that are leveraging technology to collect performance information are the ones who are in a far better position to pick the winners in the crowd. It’s in their best interest to pick winners - they

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

People Hate Change – 6 Tips for Making it Easier

  People Hate Change? People generally like the idea of change, but they really hate the effort that goes along with it. The idea of change brings with it feelings of hope, opportunity and the promise that things can get better. But sometimes it can be hard work and require a lot of perseverance. The challenge to any organization is to get good at change – because as your company grows, change is going to have to happen, whether you like it or not.  You might as well get used to it, and get good at it.     I’m probably like most people in that sometimes I can be good with change and sometimes I’m pretty crap at it. I recently, for example, had to get a new laptop. I was avoiding making the change for a long time because: I was dreading having to reload applications and transfer all the data from my old laptop I hate shopping So, I suffered with my ancient laptop (4-yrs old) as it gradually fell apart.  I could visualize that day in the future when I had that shiny new machine that was fast and clean, but I just couldn’t bring myself to go through the hassle of making the transition. The defining moment came when the cooling system broke down and it overheated. Disaster.  After that, I could only run it for ½ hour at a time before having to shut it off for 20 minutes while it cooled down. You could say I left it a bit too long. It started seriously affecting my work and life.   Most organizations behave pretty similarly. They know they need to upgrade their technology, systems and processes, but

Reduce Errors by Forecasting Regularly

  Running forecasts on your project is an extremely powerful way to get critical insight into your project’s current status and projected final results.  Forecasts, however, do a lot more than that; especially if you run forecasts on regular intervals. Regularly forecasting is a key strategy for the project manager in any construction project. There are several reasons for this. First of all, entering percent complete on the tasks in your project is prone to some subjectivity and error. Regardless of how you go about determining percent complete – whether it’s pre-defined earning rules,  best-guess approach or team-based assessment – it’s practically impossible to know exactly how far along any task is. There are a number of techniques for mitigating the errors in applying percent complete – and we’ll talk about more of these in other articles – but one of these techniques lies is the power of executing forecasts on a regular basis. In 4castplus, forecasts are easy to do and provide a quick, high-value snapshot of where things are at right now in your project. What you may not have realized is that 4castplus also keeps a copy of all the information in your project as it was in that forecast period. So taking that snapshot means that all that information is preserved for historical reporting. If you run forecasts on, for example, a weekly basis, 4castplus will enable you run reports on the history of how your project progressed over time, on a week-by-week basis. Have a look at the screenshot below (click on it for a full view). It shows a summary-detail report that’s interactive for the user to click-through the forecast periods in a project. The detail report below shows

Using Contingency to Manage Risk

  Contingency Management in Construction Projects 4castplus provides built-in contingency management so you can allocate a reserve of funds intended to help manage the risky (known and unknown risk) elements of construction projects. In this brief article I’m going to discuss how to use this contingency feature.   Management Reserve Also known as “Management Reserve”, allocating contingency is a commonly used strategy to cover off any project costs that were unanticipated or unknown at the time of project planning. This reserve of funds will appear as a separate item from the project estimate; and added together with the project estimate will result in the Total Project Budget. So,   Total Project Budget = Project Estimate + Contingency   The contingency reserve is automatically calculated along with the project estimate; and then displayed in various reports and dashboards. The management of that contingency is also cared for automatically by 4castplus as project tasks are completed. I’ll talk more about how all this works in the rest of this article.   Project Default and Task Override You can set the overall default contingency factor – as a percent – at the project level and then override that factor at the task level – also as a percent. So, in other words, if you want to set a default contingency as 15% for the whole project, and then go on to identify certain tasks that require a different contingency; you can override that 15% to be higher or lower for those tasks. Any tasks that you don’t override, will take their contingency from the default set at the project.  Click on the two screenshots below. Screenshot 1: Set default contingency at the project   Screenshot 2: Override default