Many hangar projects are erroneously started in what should be the fourth step – project execution. Bypassing the first three planning steps usually leads to frustration and project failure. There is no way to shorten the process by skipping any particular step. Planning the development of any construction site ultimately saves time, effort, and money. All of the project pre-planning and preparation to this point begins to pay off. During the project execution phase project manager completes the project design and funding, solicit bids, award the construction contract, build the hangars, and move in tenants. There will be changes that must be incorporated into the project plan (change in funding sources, regulations, stakeholders, size of project scope), and using the principles of project management can ensure the best possible outcome. This case is about the construction bid for an Aircraft maintenance hanger.
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ABC Construction Company is in the business of the Aircraft hanger construction. The company has bid for the construction of Aircraft hanger at one of the client site. The Project Manager of the ABC Construction Company has been entrusted with the responsibility of coming up with the project management plan for the entire construction. The following sections provide the baseline plan, progress of the activities against the plan on a given date (15/12/2010) and the efforts by the project manager to bring the plan to the original schedule.
The second part of the task is to develop a project cost plan for the main contractor’s preliminaries associated with the construction of the aircraft hanger. When calculating the preliminary costs, following information is referred:
- NRM Group element 10 guidance
- Drawings of the Aircraft hanger
- Contractor’s master program
The cost plan also discusses the implications of earned value techniques on the project as part of the project control process. The discussion also includes examples to illustrate the application of the earned value techniques in the management of the preliminaries costs.
Finally, the value engineering process is conducted to the project, and a better deal is offered the client, which has a better value but at a lower price.
The value engineering report prepared as part of this process demonstrates each step of the value engineering process.
Time and resource planning and control
Assuming the project starting date is of 06/09/2010, and 5 working days a week with Saturday and Sunday as holidays. Based on the tasks lists provided to you,
- Input activity information into Microsoft Project and schedule the hanger.
- Based on the schedule that you have generated using Microsoft Project, provide the following outputs:
- project schedule information (activity ID, activity description, activity duration, predecessors, skilled labor, unskilled labor, early start, early finish, late start, late finish, and total float);
- CPM network diagram;
- Bar charts; and
- Project resource profiles (skilled labor and unskilled labor).
By now, you should have developed your baseline schedule for the office building. As an exercise in monitoring and control, you will be required to monitor and control your project based on certain deviations from your initial project plan.
- Save your initial schedule plan as a baseline schedule and identify all the critical activities;
- Assume the current date to be 15/12/10 and induce delays into your project based on the following considerations:
- Due to the problem for the selection of the color of bricks, the hanger starts on 15/10/10 instead of 06/09/10;
- all activities in progress on 22/10/2010 are delayed by 3 days each;
- all activities in progress on 01/11/2010 are delayed by 5 days each;
- all activities in progress on 20/11/2010 are delayed by 2 days each;
Update the project and save this as actual project information.
- After updating, please provide the following information
- Project schedule information (activity ID, activity description, activity duration, predecessors, skilled labour, unskilled labour, early start, early finish, late start, late finish and total float);
- Project resources profiles (skilled labour, unskilled labour); and
- Critical activity list.
- Do a comparison between both baseline and actual schedules. For comparison, you may compare activity start and finish dates under both situations.
- Since your project should have been delayed, it is your duty as a project manager to bring the project back on schedule with the least cost. Using 15/12/10 as a current date, try compressing some activities (these activities should not have started yet) and bring the project back on schedule. Compression should be logical and at a minimum cost. This may require several trials. Assume that the extra cost incurred as a result of activity compression is £50/worker/day.
- After bringing back your project on schedule, please provide the following information:
- Project schedule information (activity ID, activity description, activity duration, predecessors, skilled labor, unskilled labor, early start, early finish, late start, late finish and total float);
- Bar charts;
- Project resource profiles (skilled labor, unskilled labor); and
- Critical activity list.
- Do a comparison between baseline, actual and updated schedules. For comparison purposes, you may compare activity start and finish dates under all situations.
All the above details related to above questions have been entered into MS-Project and the three mpp’s are enclosed with the assignment.
Develop a project cost plan for the main contractor’s preliminaries associated with the construction of the aircraft hanger.
The Project cost plan includes the schedule of costs to be incurred during the project and the associated estimates. These are the costs which are expected to be incurred as a result of the completion of project activities. The schedule of activities and the resource plan feeds into the Cost plan and hence it is prepared subsequent to them. As a result of the project planning activities, the project manager is aware of the details regarding the project and hence the refinement of project budget can take place. This activity is particularly important when the project in full or part is expected to be executed under a contract. This is not to undermine the importance of accurate cost planning for the in-house projects as accurate and realistic cost plan helps in effective monitoring and of costs during the execution of the project. The monitoring of the cost helps the project manager to execute the project within the budget.
Following three activities are important to develop the cost plan –
- The expected cost identification and estimation
- Estimation of schedule when these costs would be incurred
- Cost per activity/task estimation
The development of the cost plan for simple projects may only involve the consideration of the overall cost vis-à-vis the project activities on the schedule of activities. Nevertheless, the situation is different for the complex projects, where, a detailed cost plan needs to be drawn in order to effectively monitor the overall expenditure.
The NRM is also known as New Rules of Measurement. It provides a structured basis for preparing ‘order of cost estimates’ and ‘elemental cost plans’ including all the costs and allowances forming part of the cost of the building to the client but which are not reflected in the measurable building work. NRM covers the non-physical aspects of a project that the client may require as part of his overall budget for the project.
NRM rules for order of cost estimating –
- Information required
- Measurement rules
- Floor area
- Functional units
- Elements – floor area, Element unit quantities
- Updating historic costs
- Contractors overheads and profit
Discuss how earned value techniques could be employed on the project as part of the project control process including examples to illustrate their application to the management of the preliminaries costs.
Earned Value Analysis (EVA) was developed by the US Department of Defence to determine the performance of large military procurement contracts. Its techniques can still be applied to the smaller projects currently in use today. Indeed, as Microsoft Project allows drilling down through and across a project, specific variances and general trends can be easily found. EVA looks at three basic parameters:
- What value of work SHOULD have been accomplished to date?
- How much value has been realized to date?
- How much has actually been spent to date?
By comparing these parameters, an objective assessment of cost AND schedule performance can be gained. Instead of simply concentrating on how much time has been taken to achieve progress, earned value looks at how much value has been achieved so far. For example, take the following project summary task:
- This project started on time, but it is currently expected to finish 5 days late.
- This project is expected to overspend by $1,280 – approximately 13% greater than its baseline cost.
So far (as of the project’s status date), the project is behind schedule to the value of $1,600 worth of work. In addition the current best estimates indicate that it will (if things continue as planned) overspend by $2,004, which is $725 more than forecast in the topmost example. Whilst these figures may not indicate large overspend or overrun, these figures are from a sample project containing ONLY seven tasks. If there were 70 tasks (or even several hundred tasks), the potential for error becomes much larger.
Value Engineering Efforts to reduce the Cost
Value Engineering is defined as “an organized effort directed at analyzing the functions of systems, equipment, facilities, services and supplies for the purpose of achieving the essential functions at the lowest life cycle cost consistent with the required performance, reliability, quality and safety”. Numerous other terms (value management, value analysis, etc.) are also used when referring to VE. While there are subtle differences among these terms they all refer to-generally the same process.
There types of benefits associated with the VE exercise in the current case are –
- First Cost Reduction: These reductions are attributed to the VE program only when required project functions or features can be delivered at the reduced cost. Simple cost cutting – e.g. reducing cost at the expense of required features or functions – is not VE. VE first cost reductions are counted as VE savings to the extent that dollars are withdrawn from approved budgets based on the results of VE studies.
- Life Cycle Cost Reduction: LCC reductions are based on the aggregate of first cost and anticipated future cost in maintenance and operations. When additional first cost is required to implement a specific VE suggestion, this can be offset by other VE suggestions which reduce initial cost. If the project budget must be increased to accommodate the additional investment, first cost savings derived from other projects may be used for this purpose after appropriate approvals. As long as they do not entail first-cost project budget increases, VE suggestions based on apparent life-cycle cost reductions may be adopted without formal LCC analysis. However, LCC reductions will be counted as VE LCC savings only when supported by sufficient economic analysis.
- Value Improvement: Value improvement is a subjective expression referring to a projected or apparent favorable shift in cost/worth ratio. The objective of all VE suggestions is value improvement, whether or not cost reductions are involved. VE suggestions maybe to reduce life cycle cost with no reduction or a lesser reduction in worth, to increase worth with no increase or a lesser increase in life-cycle cost, or (ideally) to increase worth and reduce cost. All VE suggestions which involve adjustments in worth should be related to specific forms of such adjustment (e.g., productivity, flexibility, expandability, aesthetics, etc.), whether or not they also involve cost adjustments.
Following two studies were conducted as part of the VE exercise:
- The completion of Concept Design
- The completion of Tentative Design
As it is a new construction projects, the first study at Concept Design is intended to review basic design decisions that pertain to areas such as:
- Siting and building orientation
- Building form, shape and massing
- Occupiable to gross area relationships
- Design criteria
- Building systems selection options
- Space program options
- Building space/volume parameters
- Vertical and horizontal circulation
- Major Mechanical-Electrical-Plumbing (MEP) considerations
- Overall energy considerations
- Site access/egress
- Overall phasing/scheduling plans (as appropriate)
- Sub-soil conditions and geological data
- Utility availability
The second study at Tentative Design will focus on more detailed design decisions including (as applicable):
- Specific building system design
- Specification and performance requirements
- Proposed design details
- Layout options within overall building geometry
- Specific MEP system selections
- Site paving, grading and utilities
- Phasing and scheduling plans
- Major constructability issues
The basic approach is intended to consider macro level issues at Concept Design and more micro level issues at Tentative Design. In general, decisions made as a result of the first study will not be reconsidered in the second study unless significant new information is available. Furthermore, design changes implemented as a result of the studies will generally be considered to be within the bounds of the normal design process.
VE Job Plan
The recommended VE methodology (Job Plan) used by the VE team during the Workshop had five distinct phases. Briefly, these phases are:
- Information Phase: During this phase, the VE team gains as much information as possible about the project design, background, constraints, and projected costs. The team performs a function analysis and relative cost ranking of systems and sub-systems to identify potential high cost areas.
- Speculative/Creative Phase: The VE team uses a creative group interaction process to identify alternative ideas for accomplishing the function of a system or sub-system.
- Evaluation/Analytical Phase: The ideas generated during the Speculative/Creative Phase are screened and evaluated by the team. The ideas showing the greatest potential for cost savings and project improvement are selected for further study.
- Development/Recommendation Phase: The VE team researches the selected ideas and prepares descriptions, sketches and life cycle cost estimates to support the recommendations as formal VE proposals.
- Report Phase: The VE consultant will work in concert with the A-E and the PBS representative to produce a preliminary written VE Report which is intended to represent the results of the VE workshop activities, and meet the VE Program objectives.
Finally, post workshop, all the suggestions were collated and classified into three categories of high, medium and low complexity. The suggestions associated with the current projects were as follows –
- Modification of architectural designs: The hangar roof was designed to be an opaque structure. This roof can be made transparent through the ample use of the transparent glass which would allow more volume of sunlight. The high amount of sunlight during the day would result in the low usage of electricity and hence reduction in the variable cost of the running the hangar.
- Substitution of building wall material: Building wall material is designed to be made up of steel which can be replaced with high grade brick. The brick would also keep the temperature under control within the hangar.
- Reuse of existing materials such as fencing: The material used in fencing can be reused in the construction activity as the fence would not be required eventually.
- Use of Solar power: The Solar power can be effectively used to heat the water as well as to provide the night time lighting. This would reduce the variable cost of running the hanger.
- Cooks, Sarah (2002), A Guide to the Project Management Body of Knowledge, PMI, 3rd Edition (PMBOK Guides)
- Public Procurement Directorate (2007), [Internet], Public Procurement best practices guide, Available at :< http://www.publicprocurementguides.treasury.gov.cy/OHS-EN/HTML/index.html?7_4_3_cost_of_project_development.htm>, accessed on: 25 May 2010
- Homepage (2007), [Internet], Aircraft Hanger development guide, Available at :< http://www.aopa.org/asn/hangar-execution.pdf>, accessed on: 25 May 2010
- Jack J. Champlain, Auditing Information Systems, Second Edition (2003), Pages 277, 278, 279 & 280, John Wiley & Sons Publication.
- Mulcahy, Rita (2003), Risk Management, Tricks of the Trade® for Project Managers, 4th edition, RMC Publications.
- Mulcahy, Rita (2003), PMP Exams Prep, RMC Publications.
- Rich, Jason R, Design and Launch an Online E-Commerce Business in a Week, Entrepreneur Press, 2008, ISBN: 1599181835, 9781599181837.
- Schwalbe, Kathy (2009), PMBOK (Project Management Body of Knowledge) reference and Information Technology Project Management, 6edition.
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