Project Controls

A. Definition
B. Project Schedule Control
C. Project Cost Control
D. Cost Estimate (Estimation)
E. EVM (Earned Value Management)
F. Project Economic Review
G. Bond and Insurance
H. Additional Definitions

A. Definition

Control is a method or mechanism used as a standard rule or procedure that is to guide, check, verify or audit the operation of actions or behaviour. Controlling is the analysing of any gaps from original plans, and developing the corrective action plans for the achievement of the original targets and goals.

Project Controls are a work process of the developing plans, measuring the actual performances, and creating reports for the project schedule, cost, and resources by data the gathering, status analysing, comparing actual performance with planned, and communicating with project teams to support a right and effective decision making. The Project Controls are needed a forecasting ability, developing corrective action plan, and proceeding change management process.

Project Controlling is to foresee or identify and analyse any gaps from original plans, and to develop the corrective action plans to meet the project targets and goals, or to evaluate project new goals and targets that is needed the forecasting ability, developing corrective action plan and change management. Corrective action plans can be included increase resources and/or upgrade work processes.

Planning is the methodology development how to achieve the goals and objectives that is able to make a successful completion of the task or project through the identification of the needs and requirements. (Refer to the Project Planning)

Project Planning is a methodology development process for the achievement of the project success that is required an agreement and consensus with internal and external functional organisation through the project kick-off (K/O) meeting and alignment meetings. The Project Planning activities are the establishment and development of the project organisation with roles and responsibilities; the project baselines (e.g., project execution plan (PEP); detailed project schedules; budget and cash flow; risk management plan, etc.); project procedures including reporting and progress measurementation system, and manuals with the work processes for the project progress monitoring, controlling, performance appraisal, and required tools and systems (software). Effective planning requires the resource allocation planning for all team members, developed within approximately 2 to 3 months from the project beginning, and all Planning documentation should be updated and maintained for the entire project life cycle.

Plan-Do-Check-Act or Adjust (PDCA) is the methodology of the four steps process for quality improvement (Plan/ Do/ Check/ Act) that carries out systematically to achieve continuous improvement work processes to decrease failures, increase efficiency, and avoid potential risks.

Aggregate Planning is a marketing operational activity to the organisation to balance long term business strategic planning with short term production success so that the total cost of operations of an organisation is kept to the minimum over that period. The Aggregate Planning typically covers 3 to 18 months period that determines overall output levels, and appropriates resource inputs: a quantification of resources for outsourcing, subcontracting, overtime of labour, etc., in each period and the amount of inventory to be held in stock.

Contingency is for the unknown or unpredictable know-unknown events that may possibly happen in the future, usually potential risks or causing problems. The Contingency is to cover the currently unforeseen cost element of time and material within the specified scope of works and services such as cost overruns, currency fluctuations, unexpected re-do works, and contractual warranties and guarantees, but the Contingency will not cover any additional scope of works and any unknow-unknow events. The Contingency is in addition to any allowances included in the estimate. The Contingency is estimated based on the previous experiences by the expert or risk simulation analysis results, and company procedures and rules.

Control Base is the established baseline (e.g., Scope, Cost, Schedule, and Performance) against which project performance is measured and controlled that serves as a reference point for comparing actual progress, costs, and schedule against the planned targets. The Control Base is developed as a taken-off from construction drawings that is a quantified basis represented a true picture of service or materials to be installed. Once the Control Base is established, project controls are used to monitor and measure actual project performance against the baseline.

Forecast (Forecasting) is an estimate or a prediction of the future conditions and events of production or distribution demand and other factors affecting profit margins and business activities. The Forecast is the work involved in anticipating future events, while establishing objectives are the work necessary to commit to accomplish predetermined results. The accuracy of a projected forecast can be negatively impacted by unexpected events in the financial markets, fluctuation in commodities, or environmental disasters, etc.

Monitor is a review and analysis of the actual result of a project activity or component with the budget or original plans. Monitoring is the observation of the actual performances comparing with plans. The Project Monitoring is the assessment or observation of the actual performances and progresses comparing with baselines and plans, and evaluation of the actual status and performance to ensure the project goals and targets can be met that is to review the project reports, interview project members, examine quality and completeness of output.

Project Assumption is any event and circumstance that is expected to occur during the project execution, and needed to control and manage by a creation and fulfillment of the Project Assumptions List including a responsible person per each assumption item, and the Project Risk Management. (Refer to the Risk Assumption)

Project Health Check (PHC) is a tool for the project management and control whether a project is well-managed, and the inherent risks are being identified and controlled in accordance with its objectives, and how well it adheres to organisational processes or standards. A PHC is an independent assessment of the project controls routine activities by which project members including a project manager, sponsor and other project key staffs are fully involved in the day-to-day project operations. A PHC is intended to focus on cross functional project execution issues such as cost, schedule, safety, and other KPIs including current performance and forecasting.

Resource Management is the method for the effective planning of all resources (e.g., finance, material, labour, skill and knowledge, and procedures, etc.) that is the distribution or scheduling of resources based on resource availability parameters. The Resource Management includes planning, allocating and scheduling of resources to tasks, which has an impact on schedules and costs as well as performance include work safety and quality. (Refer to the Resource Allocation Planning)

Trend Analysis is the technical analysis of time series data comparing the same item over a significantly long period that is the practice of collecting information, analysing, and defining to spot a pattern. The Trend Analysis is used to predict future events or to estimate uncertain events in the past that is based on the ideas: what has happened in the past gives traders an idea of what will happen in the future.

Workload Management is the process of balancing the workload and resources which is a future workload (Backlog) to complete works or tasks without any sacrificing schedule, safety, and quality. The Workload Management develops the workload analysis including a timeline with details on allocated resources, planned activities and preset milestones based on resource availability parameters, and the adjustments or controls the sequence or method of works or tasks based on the schedule and cost impacts as well as the performance include work safety and quality. (Refer to the Load Management; Resource Management)

B. Project Schedule Control

Schedule is a time management tool that identifies tasks, events, or actions for an entire time frame with a scale and sequences of activities. The Schedule is a list of planned activities to be done showing the times or dates that is estimated by other information included resources, budgets, activities duration, and linkages of dependencies, etc.

Project Schedule is a time, cost and resource control and management tool that identifies activities for entire project with time scales, required budget and resources, and relations with dependencies. The Project Schedule is a plan for completion of a project, list of planned activities to be done within allowed time frame, usually with intended start and finish dates that serves as a tool to assist project management in achieving project goals through efficient use of available resources.

Schedule Control and Management is a work process to control and manage the timely completion of the project including develop various schedules; measure the progresses, analyse and generate reports; support trouble shooting; forecast completion dates; etc., that ensures the efficient operation of the project resources to meet the project target date.

Type of Schedule in development techniques is a Milestone Schedule; Bar Chart or Gantt Chart; PERT (Program Evaluation Review Technique: to determine the time required to complete each element in terms of pessimistic, optimistic, and best guess estimates); Network or CPM (Critical Path Method), and Detailed Report Schedule (e.g., document issue schedule (deliverables), material delivery schedule, construction heavy equipment mobilisation schedule. etc.).

Level of Schedules are a Project Master Schedule (Level 1), Project Summary Schedule (Level 2), Control Level Schedule (Level 3), Detailed Network Schedule (Level 4), and Reports Schedule (Level 5). The Master or Project Summary Schedule is one of the contract documents, and the Control Level Schedule is a project baseline document.

Progress Measurementation is a regular measurement of the performance or achievement which generates reliable data on the effectiveness and efficiency of programmes. The Progress Measurementation system is using the weight value (or weight factor) for the project phases and disciplines. The Progress can be calculated differently depending on the aspects of project cost, schedule, resource, or integration of cost, schedule, and resource such as work volume quantities, activity durations, budgeted cost, resource effort hours including labour hours and so on. There are many factors to account for accurate progress measurementation such as a type of measurement, accuracy of the input data, frequency of the collect and record, and change management, etc.   

Critical Activity is an activity relating to providing services in which disruption may have significant impact or influence on schedule, cost, safety, quality, environment, and operating performance. The Critical Activity in the schedule control and management is a work element which must be properly managed to ensure the success of an activity, project, programme, and organisation that is in the critical path and influences the ending date of the project.

Fast Track is the quickest way to complete a job or project by performing activities in parallel, but overlapping tasks in this way often increases risk that is a project execution strategy, start the procurement and/or construction work before the engineering work is finished. To develop the Fast Track Schedule by changing sequential activities to parallel activities (e.g., finish to start and start to start relationship with negative legs). (Refer to the Crashing)

Milestone is a zero-duration schedule event marking the due date for accomplishment of a specified work scope or objective that is a major event or a critical activity of the project execution. The Milestone may mark the start of interim step, or the end of one or more activities for major key issues, and a necessary of external review or approval for the following activity. In general, the milestones do not impact project duration, but major progress achievement that must be met to achieve success, and the achievement is basis of the progress measurement and linked to the payment schedule.

Progress Payment is one of the payment methods that is based on the percentage of the contract prices rather than providing a single lump sum. The detailed Progress Payment method is defined in the contract, and can be made at different stages. (e.g., based on planned progress, actual progress, or milestone achievement payment, etc.) Typically, payments are made periodically, a monthly basis with agreed the certain percentage of contract prices or agreed fixed amounts.

S Curve is a progress control tool and method of the schedule control and management that shows the growth of a variable (progress) in terms of another variable (time). The S Curve displays the cumulative progress, costs, labour hours, other quantities plotted against time. The name derives from the S-like shape of the curve, flatter at the beginning of the project and the end of the project, and steeper in the middle, which is typical of most projects. The beginning represents a slow and low progress performance, but accelerated after the project operation system is ready, while the end represents a deceleration as the low efficiency of work.

Schedule Variance (SV) is the schedule performance analysis on the programme that is the mathematical difference between the scheduled completion of an activity and the actual completion of that activity. SV (Schedule Variance) = EV (Earned Value) - PV (Planned Value). A positive value means a favourable condition, while a negative value is unfavourable.

C. Project Cost Control

Cost is an amount of money needed to pay or compensate to buy or take a service or good. Costs is the value or total amount of money to do the work or needed for a business that is the sum of fixed and variable costs.

Project Cost is the total funds needed to complete the project or work that consists of a Direct Cost and Indirect Cost. The Project Costs are any expenditures made or estimated to be made, or monetary obligations incurred or estimated to be incurred to complete the project which are listed in a project baseline. Project Cost Management (PCM) is a technology method that controls and manages the cost and productivity through the full lifecycle of the project.

Cost Control and Management is a process involved in budget cost estimate (planning, estimating, financing and funding assistance, etc.), execution (controlling cost: budget allocation, expenditure, cash flow, payment, forecasting, etc.), and managing project cost (in order to minimise cost and increase profitability) that ensures the efficient operation of the project cost to complete the project within the approved budget.

Cash Flow Forecasting or Cash Flow Management is a key aspect of the financial management of a business. The Cash Flow Forecasting is a cash balance planning for the future cash requirements to avoid a crisis of liquidity. The best way of the cash flow forecasting will be realistic; definition of incomes and cost for expenditures; factor in fixed and variable costs (indirect costs); develop multiple scenarios, etc.

As Sold Profitability is calculated in order to provide a measurable financial benchmark for evaluating project performance as the project is being executed. The As Sold Profitability is established at the time of contract award based upon agreement between the project business team and execution management that is the baseline of profit performance expected from the project management.

Authority for Expenditure (AFE) is a formal approval or authorisation of expenditure for a project by the authorised organisation representative. An AFE is a budgetary document, usually prepared by the business development department that is listed the projected expenses for a particular project or a phase of a project and authorises an individual or group to spend a certain amount of money for that project. Failure to approve an AFE may result in delay or cancellation of the proposed project or subsequent operation.

Contract Price is the mutually agreed upon total amount of the contract in a written that specifies both the price amount, payment method, and other terms and conditions.

Project Cost Accounting is the accurate tracking of expenditure costs for the services, equipment, materials, and labour costs as well as the construction cost and expenses that differs from general accounting in which records expenses and revenues. Project Cost Accounting tracks costs to the project in addition to expenses, billings, payments, and financial benefits associated with a project including the analysis of expenditures with committed budgets, and forecast EAC (Estimate at Completion) and ETC (Estimate to Completion) costs for the entire project duration. The Project Cost Accounting can be a valuable tool for effective project management by providing a detailed view of project financials and progress.

Provisional Sum is an amount of allowance money at the present time but likely to be changed that is tentatively agreed for the work to be performed. The Provisional Sum may be included in the contract as a specific contingency for the execution of work or the supply of materials or services which may be used in whole or in part or not at all based on the contract terms and conditions. The Provisional Sum is changed when the additional information is available or work definition is more clearly defined.

D. Cost Estimate (Estimation)

Estimate (Estimation) is a process of finding the estimate or approximation values that is the numerical value of unknown from incomplete data in a given set of circumstances or samples. The Estimate is to guess or calculate the cost, size, value, etc., by an estimator based on the knowledge and experiences.

Cost Estimate is an approximation or anticipated cost for the specified a scope of work, project, or operation that is the process of predicting a cost of the facilities and services through quantitative analysis of the work required by the design documents to evaluate a single total value and may have identifiable component values. A main purpose of the Cost Estimate is for a feasibility decision, funding arrangement and making a bid or contract. A reliable cost or an accuracy of estimates are necessary for responsible management at every stage of the project that is depended on the details of input information. A project underestimation of resources and costs is one of the most common contributors to project failure. 

Cost Estimate Classification applies the degree of project definition that is to define the budget, funding requirement, determine cash flow, and cost controls. The Cost Estimate Classification is improved by communications among all the stakeholders’ involvement with preparing, evaluating, and using cost estimates: the quality and value of information available to prepare cost estimates; the various methods employed during the estimating process; the accuracy level expected from estimates, and the level of risk associated with estimates.

The Cost Estimate Classification as the primary characteristic for determining an estimate’s classification: Factored Estimate (Capacity or Equipment); Budgetary Cost Estimate; Control Budget Estimate: Detailed Estimate, etc.

Estimate Accuracy is a degree of meeting between the prediction and actual data depending on the available to execute the estimate.

CAPEX (Capital Expenditure or CapEx) is an amount of money invested to acquire the new business or upgrade fixed assets that is invested in to maintain existing levels of operation within a company or in something new to foster future growth. A CAPEX is used repeatedly in production processes at full cost price that can be tangible (such as buildings, machinery, equipment, and facility), or can be intangible (such as patent). (Refer to the OPEX (Operational Expenditure))

E. EVM (Earned Value Management)

Earned Value (EV) is one of the project management techniques for measuring project performance in terms of the estimated deliverable, budget, and schedule of the project. An EV is a periodic, consistent, and objective measurement of work performed that is compared to the total estimated of plan (schedule progress or cost) to actual work performance (schedule progress or cost performance), and obtains an estimate for the resources that will be used at completion.

Earned Value Management (EVM) is a performance management process based on a structured approach to planning, data gathering and performance measurement that links resource planning to cost and schedule requirements. All project works or activities are budgeted and scheduled in time increments incorporating the baselines. An EVM is a single integrated system of combining measurements of the project scope of work, schedule and cost, and also able to provide accurate forecasts of project performance.

Earned Value Management System (EVMS) is a program of the performance management system that integrates the work scope, schedule, and cost parameters. EVMS provides the objective performance measurement data that measures progresses objectively with earned value metrics; accumulates direct costs; allows for analysis of deviations from plans; facilitates forecasting the achievement of milestones and contract events; provides supporting data for forecasting of estimated costs; and encourages discipline in incorporating changes to the baseline in a timely manner.

F. Project Economic Review

Investment Appraisal (or Capital Budgeting) is the decision-making process for investing in long-term assets, major capital investments or expenditures that is to determine and evaluate potential significant in amount of expenses or investments. The Investment Appraisal is usually involving the calculation of each project or asset future profit by period, present value (PV) of the cash flows, pay back the initial cash investment, assessment of risk, and other factors. The formal method of Investment Appraisal techniques: Net Present Value (NPV); Internal Rate of Return (IRR); Profitability Index (PI); Payback Period, etc.

Capital Investment Decision (CID) is a long term corporate finance decision based on key criteria to manage the company’s assets and capital structure. A CID includes allotting the capital investment funds of the firm in the most effective manner to make sure the best possible returns. Assessing projects as well as the allocation of the capital depends on the project requirements are some of the most crucial capital investment decisions aspects. (Refer to the FID (Final Investment Decision))

Final Investment Decision (FID) is the final decision of the Capital Investment Decision (CID) as a part of the long-term corporate finance decisions based on key criteria to manage company’s assets and capital structures. In general, FID can be made after completion of permits and financial arrangements, and ready for commencement of the construction works at the site (EPC Contract). They are the points at which contracts for all major equipment can be placed, allowing procurement and construction to proceed and engineering to be completed.

EBIT (Earnings Before Interest and Taxes) is an indicator of a company's profitability, operating earnings, profit, or operating income, of which EBIT is calculated as all profits before taking interest payments and income taxes. EBIT focuses on an organisation's ability to generate earnings from operations, ignoring variables such as the tax burden and capital structure that is a way to determine the profitability of a business by excluding interest and income tax expenses.

Economic Model is a simplified description of economic reality showing the interrelationships between selected economic variables. There are two broad classes of economic models: theoretical model - to derive verifiable implications about economic behaviour under the assumption, and empirical model - to verify the qualitative predictions of theoretical models and convert these predictions to precise, numerical outcomes. The standard model of supply and demand taught in introductory economics is a good example of a useful economic model.

G. Bond and Insurance

Bond is an agreement or promise to pay a certain amount of money to the bond holder (client) through the bonding company such as a bank or insurance company when the bond issuer (contractor) fails his contractual obligation or specified condition is happened.

Insurance is an agreement in which an organisation or a personal (Insured) pays an insurance company (Insurer) money (insurance premium) and the insurer pays the insured costs as financial compensation of loss, damage, or injury by an accident or incident risks. The Insurance can be one of the risk transfer methods.

H. Additional Definitions

Change in Scope is a change to the originally defined project scope that is the alteration and deviations from the agreed with the client in the contract scope of work or baseline scope of work. The Scope Change can be caused by insufficient definition of project requirements; insufficient scope statement; market changes; government regulation changes; project site conditions, or client opinion changes. Any Change in Scope must be proceeded with the Project Change Management Procedure and compensated for time and expense based on the approved through a written supplemental agreement. (Refer to the Change Order (CO); Change Control)

Commercial means 1) related to or used in the buying and selling of goods and services; 2) relating to or based on the amount of profit that something earns; 3) related to the cost, prices, or contractual terms and conditions.

Construction Progress is the status of a construction project at a particular point in time that involves assessing and tracking the completion of various tasks, milestones, or phases within the project to determine how much work has been accomplished compared to the overall project timeline or schedule. A Construction Progress Report informs management of the overall field construction progress (physical percent complete), costs, performance, and manpower to a specific reporting cut-off date as well as major accomplishments, areas of concern, and other pertinent information necessary for proper management and control.

Current Forecast is the current prediction of final costs at project completion that is the prediction or estimate of future conditions, trends, or events made at the present moment based on available data, analysis, and assumptions about the factors influencing the subject being forecasted. (e.g., changing market conditions, unexpected events, or errors in data or assumptions) (Refer to the Forecast (Forecasting); Cash Flow Forecasting)

Economics is the academic study of the production, distribution, and consumption of goods and services that is the analysis of how people use the resources available to them. The two largest branches of economics are microeconomics and macroeconomics.

Economy is 1) a system of trade and industry by the production and consumption of goods and services, and the supply of money; 2) acquiring the necessary resources (finance, staff, buildings, equipment, etc.) to carry out an activity at the least cost.

Effort Hour (previously called as the Man-hour) is an amount of work performed by the average worker in one hour or an amount of required hours for the particular work or task performed or to be performed.

Field Project Controls

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