Change Management for Entry Level Cost Control Professionals Greg - PowerPoint PPT Presentation

Change Management for Entry ‐ Level Cost Control Professionals Greg Whiteside, CCE, EIT

Greg Whiteside Biography University: – Texas A&M University Degree: – Bachelor of Science, Mechanical Engineering Years of Experience: – 4 years of experience Professional Field: – Energy and Chemicals Something you do not know about me: – Play guitar to accompany my dad on blues harp (http://www.youtube.com/watch?v=myuHpwWCHTY) 2

Introduction 3

Presentation Outline Basics: Change Management: • Cost Controller’s Role • Cost Control Plan • Project Lifecycle • Project Changes • WBS Setup • Documenting Changes • Cost Reporting • Change Order Revisions • Progress & Performance • Understanding Changes • Purchase Orders • Factors Driving Change • Client vs Contractor View Point 4

5 Basics: Cost Controller’s Role

Basics: Cost Controller’s Role • Manage project funds • Plan budget breakdown • Establish reporting requirements • Understand how costs are collected • Track costs against budget – “Own” the budget • Role relating to other financial groups – Estimating (future) – Accounting (past) – Cost Control (present) • Change management Estimated – Budgeted – Committed – Expended – Invoiced – Paid 6

7 Basics: Project Life Cycle

Basics: Project Life Cycle FEL 1 FEL 2 FEL 3 Execute Operate Define Concept Optimize Finalize -Factored estimate -Change -Project -Optimize -Prepare for -Select 1 or 2 management closeout concepts execution concepts to -Final -Set scope -Develop full optimize invoices -Set up WBS estimate -Cost control plan -Procure long lead items -Set up contracts • Stage gated approach used by many large oil companies • FEL – Front End Loading, term introduced by DuPont in 1980’s 8

9 Basics: WBS Setup

Basics: WBS Setup • Original Budget – Guidelines • Estimate • Approved funding – Changes – Control Budget (snapshot) • Breakdown – Level of detail – Home office/Construction – Direct/Indirect – Labor/Materials 10

Basics: WBS Setup Project Definition Home Construction Office Mat Manag Engin Lab erial or ement eering s CS SS CS SS valv valv valv valv es es es es 4” 6” 8” 4” 6” 8” 4” 6” 8” 4” 6” 8” valv valv valv valv valv valv valv valv valv valv valv valv es es es es es es es es es es es es Glob Butt Butt Glob Butt Glob Butt Glob Butt Glob Butt Glob Butt Glob Butt Glob Butt Glob Butt Glob Butt Glob Butt Globe Gate Gate Gate Gate Gate Gate Gate Gate Gate Gate Gate Gate erfly e erfly e erfly e erfly e erfly e erfly e erfly e erfly e erfly e erfly e erfly e erfly 11

Basics: WBS Setup Project Definition Home Office Construction 12

Basics: WBS Setup Project Definition Home Office Construction Management Engineering Labor Materials PM CM Civil Mechanical Electrical Civil Mechanical Electrical Pipe Valves Tanks DCS 13

14 Basics: Cost Reporting

Basics: Cost Reporting • Understand how costs are collected – Timesheets – Material goods receipt • Track costs against budget • Financial state of the project 15

16 Basics: Progress & Performance

Basics: Progress & Performance • Progress – Definition – Activities and rules of credit – Partial progress • Performance – Definition – Good/bad 17

18 Basics: Purchase Orders

Basics: Purchase Orders • Contract: Commits funds to a contractor • Further breakdown of work • Example Contractor A Contractor A Contractor B Change! Material Material Labor Labor • Outcome – Lead time on long lead items retained – Work continued unhindered 19

Basics: Summary Basics: • Cost Controller’s Role • Project Lifecycle • WBS Setup • Cost Reporting • Progress & Performance • Purchase Orders 20

Change Management Change Management: • Cost Control Plan • Project Changes • Documenting Changes • Change Order Revisions • Understanding Changes • Factors Driving Change • Client vs Contractor View Point 21

Change Management: Cost Control Plan 22

Cost Control Plan • Outlines how the team will handle changes • Process • Key personnel • Change implementation • Change communication • Forms – Change Form – Change Log • Sets the change management requirements 23

Change Management: Project Changes 24

Project Changes • Added work • Change in execution • Cost savings • Proper documentation • Early identification Actual quote: “We haven’t written the change order yet because we don’t know how much it’s going to cost.” 25

Project Changes If a change is “hidden” until actual costs are determined, the project team has had no chance to avoid the outcome. 26

Project Changes • “For Documentation Only” (FDO) Changes • Example +$ Rearrange Budget to Cover Project Ran Over FDO Changes 27

Change Management: Documenting Changes 28

Documenting Changes • Auditable • Proper forms • Proper authorization • Change Log – Unique identifier – Short description – Originator (go ‐ to person) – Basic dates – Approval status – Cost impact 29

Change Management: Change Order Revisions 30

Change Order Revisions • Changes change • Better information • New portions affected by change • Updated quotes/proposals • Change log will show latest revision • Trade ‐ off between timing, accuracy • “For Documentation Only” (FDO) 31

Change Management: Understanding Changes 32

Understanding Changes • Understand original plan – Scope – Budget – Schedule • Understand the change – Incremental – New Cumulative – What was the value before the change/ after the change? • Communicate the change – Project manager – Project team – Affected contractors / procurement 33

Change Management: Factors Driving Change 34

Factors Driving Change • Scope – Clarity – Disclaimers • Material quantity • Labor rate • Productivity – Poor performance – Root cause 35

Change Management: Client vs. Contractor View Point 36

Client vs. Contractor View Point Client Contractor • Full project • Selected Scope • Oversight • Managing labor and materials • Maximize profits • Revenue generation date – Maximize – Delay/overrun – Breakeven – Rate of return – Payout damages 37

Presentation Outline Basics: Change Management: • Cost Controller’s Role • Cost Control Plan • Project Lifecycle • Project Changes • WBS Setup • Documenting Changes • Cost Reporting • Change Order Revisions • Progress & Performance • Understanding Changes • Purchase Orders • Factors Driving Change • Client vs Contractor View Point 38

Conclusion • Change management is a major part of the cost controller’s role. • Disciplined approach to change management – Good planning – Early, easy identification of changes – Decisive action – Successful execution of changes 39

Conclusion If a change is “hidden” until actual costs are determined, the project team has had no chance to avoid the outcome. 40