Construction Companies Benefit From Project Management Professionals (PMP)

Eighty percent of construction companies fail within the first two years, with another 18% joining their ranks in another three years.

There are various reasons that lead to a construction company going in trouble, including general economic conditions, not being competitive, heavy operating expenses, poor accounting system or even high employee turnover, but none impact a construction business as significantly as lack of project managerial expertise.

The Project Management Professional (PMP) certification is for project managers with extensive experience. Qualifications and testing criteria are rigorous, making it a widely respected certification. Generally speaking, construction projects are run by contractors, not by certified Project Management Professionals (PMPs).

The contractors would say that they’re the only ones who truly understand construction, because they’ve been there and done that; but, is that viewpoint valid? Where does the need for hands-on experience end, and the need for rigorous and structured project management ability begin?

Most contractors, whether general contractors or specialists (plumbers, electricians, etc.), worked their way up in the construction business. That means they started out as an apprentice, became a journeyman, possibly were promoted to being a crew chief or jobsite superintendent by the company owner, then eventually stepped out on their own to start their own company and be a contractor.

Here are 5 basic areas in which these contractors and Professional Project Managers think differently. These areas can make or break a project, specially when it comes to maintaining the project on schedule and on budget:

1 – Bidding Strategies and Change Orders

The world of construction is highly competitive, especially in today’s economy. Each job out there has a number of contractors bidding on it, driving prices down and all but eliminating profit margins. A common strategy which many contractors are using today is to bid the job with minimal overhead and negligible profits, depending on “Change Orders” to make their profits.

While this strategy works, it may not be working quite as well as many contractors would like. The very fact of bidding a job in that manner means that there is little room for error. Even a slight error in scope management, cost estimating or scheduling can take a project from profitable to being a loss.

If the project is being provided under a contract, then some advance thinking has to go into how to deal with “Change Orders” when they occur. Project Management Professionals approach Change Orders with a different mindset, since they see this as a change to the original “Plan” and seek to integrate the change into the overall plan instead of “tacking it on top of” work that is already being done.

Approved change orders can require revised cost estimates, new schedule updates, revised activity sequencing, additional risk analysis and even calculation of cumulative impacts. Therefore setting up a “Configuration Management” process with integrated change control provides an effective way to centrally manage and document change orders, while providing opportunities for increased profit margin.

2 – Claim Management

Although this may seem the same as the change orders (mentioned above), it is actually a separate area. “Change Orders” deal with changes for which both the owner and contractor are in agreement. “Claims” deal with areas where there is disagreement. These are extra charges due to unforeseen problems on the project, which the contractor wishes to recoup from the owner at the time of project closing. What makes these claims challenging is the difference in interpretation of the project scope. The owner may feel that these unforeseen situations are part of the scope of the contractor, while the contractor may see them as extra costs he incurred, for things outside of his control.

Effective claim management requires thoroughly documenting the problem, sending on-time notifications to the owner, including estimates of cost and schedule impacts, along with creating a convincing justification for the charges. This is one of the most challenging communication problems on a construction project. Project Management Professionals are trained in dealing with claims, whereas the typical contractor is usually at the mercy of the owner.

3 – Thinking “Tasks” instead of “Processes”

Eighty percent of construction companies fail within the first two years, with another eighteen percent joining their ranks in another three years. It’s not the lack of knowledge in construction, but the lack of knowledge in how to manage their projects. This article describes how construction companies benefit from Certified Project Managers.

A contractor or construction superintendent usually becomes such because they know how to do the job. But, that isn’t the same thing as knowing how to manage the job. They see the project as a series of separate tasks; get all the tasks right and the project will come together.

However, Project Management Professionals (PMPs) are trained to think in terms of “processes.” Thinking this way creates a more global approach to the project, seeing the individual tasks as only part of the processes. This drastically changes their approach to managing a project, seeing how things fit together not so much by a “gut feeling,” but as a continuing path, filled with measurable risks and challenges, towards a specific goal. There are parts of this PMP mindset, such as Communication Management, Risk Management and Time Management which are not directly related to the ability to swing a hammer:

– Not knowing how to set up a “Communication Plan” to clearly define how to communicate the right information to the right stakeholder at the right time can cost a company that just got off the ground heavily.

– Not knowing how to create a “Risk Management Plan” or “Risk Register” for the project, including how to deal with those risks, whether by mitigating them, eliminating them or transferring them, could become fatal.

– Not knowing which tasks on your project are on the “Critical Path” could extend your schedule (hence costs) by enough to make your profits marginal or non-existent.

4 – Managing Technical Changes

Integrating, communicating and managing technical changes, such as changes to a building’s blueprints or equipment drawings requires thorough action, which is properly documented to ensure that everyone is made aware of the change. These technical changes can be as minor as a change in paint color to something major enough to cause a skyscraper to fall down in high winds. Regardless of the size of the change, each one is important to the owner, requiring proper integration and implementation.

As part of their training, Project Management Professionals learn that change requests should be subject to a thorough process that may require analyzing estimated impacts on cost, quality or schedule before the change is approved. Coordinating changes across the entire project, and documenting the complete impact or technical change should be a second nature to any project manager who seeks a successful and profitable project outcome.

5 – Managing Suppliers and Subcontractors

A major part of managing a construction project is ensuring that the work crews and supplies are on the job site when they are needed. A typical contractor deals with their suppliers at the last minute, calling in their orders and expecting delivery the same day. Their way of dealing with subcontractors bears a closer resemblance to browbeating than any accepted management philosophy.

When a construction project is properly managed, a project schedule is created before the first person shows up at the job site. This schedule is maintained and adjusted as needed, be it due to adverse weather, construction delays or other problems on the job. With an accurate project schedule, there is no reason to deal with suppliers and subcontractors on a last minute basis. Everything can be pre-planned and communicated to the proper people well in advance.

Another problem with managing sub-contractors is that when problems occur, the buyer (contractor) has little leverage for claiming the incurred costs due to seller’s (sub-contractor’s) fault. A procurement contract should include terms and conditions that contractor specifies to establish what the sub-contractor is to provide. By including the right terms and conditions into the sub-contracts, many typical problems can be avoided.

As part of the Project Management Professional training, “Procurement Management” is discussed within the perspective of buyer-seller relationship. This relationship exists at many levels, including sub-contractors performance evaluations. These processes indicate if the sub is performing the work according to plans, rate how well the work is being performed, create the basis for early termination of the sub’s contract, and application of penalties, fees or incentives.

Understanding Project Management As Related to PMP Certification

This article will provide an overview of projects, and the relationship between portfolios, programs, and projects, an overview of the processes within project management and discuss it in the content of PMP certification and the PMBOK, the project management book of knowledge.

Many organizations today have a renewed interest in project management and its many benefits. Project management is used on all levels of the organization and is now seen as a valuable profession. Organizations have realized that project success relies on the knowledge, processes, skills, tools, and techniques that skilled project managers can bring to the project.

The Project Management Institute (PMI) is the governing body that issues project internationally recognized management certifications.

There are six different types of certifications that can be obtained after completing the required coursework, field experience, and passing the exam. These include the following:

  1. Certified Associate in Project Management (CAPM)
  2. Project Management Professional (PMP)
  3. Program Management Professional (PgMP)
  4. PMI Agile Certified Practitioner (PMI-ACP)
  5. PMI Risk Management Professional (PMI-RMP)
  6. PMI Scheduling Professional (PMI-SP)

The successful completion of the PMPĀ® examination will show employers that you are an internationally recognized project manager.

A project is a unique undertaking so the approach to managing projects must be different compared to normal operations. Projects are a temporary endeavors and have a clearly defined start and end date.

There are distinct differences between projects and the normal, daily operations of the organization. Characteristics of operations include tasks that are on-going and are usually in a continuous cycle, they have no end date as they are crucial to the daily functions of the organization.

Operations are also repetitive and the inputs and outputs are expected and routine. There is usually nothing unique about operational tasks. Projects, on the other hand are temporary endeavors; they have a definite beginning and end, they are also unique and involve a new undertaking for the organisation and are unfamiliar ground that the organization has not explored before.

Projects can include one or more individuals, one more departments, and even one or more organizations. They can create a variety of tangible or intangible products, deliverable, services, or results.

A few examples include the following:

  • A product can be unique to the organisation and one that has never been produced before or could be an additional add-on to an existing product.
  • It be focused on improving a service or an process for an organisation
  • A project can be an improvement to an organization’s existing products or service lines or it can also be results-based, such as implementation of a computer system or producing an analysis or research document.

Some examples of projects from various industries are:

  • A young couple hires a firm to design and build them a new house.
  • A college campus upgrades its technology infrastructure to provide wireless Internet access.
  • A Banks decides to implement a NEW Customer service computer application
  • A group of musicians starts a company to help children develop their musical talents.
  • A pharmaceutical company launches a new drug.
  • A television network develops a system to allow viewers to vote for contestants and provide other feedback on programs.
  • A government group develops a program to track child immunizations.

These various examples show the diversity of projects and the importance of project management across different industries.

In project management, there is a key relationship among portfolios, programs, and projects. As we have discussed, a project is a unique undertaking so the approach to managing projects must be different compared to operations.

Projects are temporary endeavors and have a clearly defined start and end date.

A program is a group of projects that are similar in scope, activities, and similar subprograms. The purpose of a program is to manage the projects in a coordinated way that would not be possible from managing them individually.

The portfolio includes all programs, projects, and subprograms that meet the strategic objective of the organization Programs and projects do not need to be related in order to be in the portfolio; they only requirement is to be related to the overall strategic objective(s) of the organization.

So what is project management? The simple definition is the management of projects. However, project management is much more than a simple definition. A more useful definition in understanding project management is the application of knowledge, tools, skill, and techniques to project activities in order to meet project requirements.

As defined by the PMBOK Guide, there are five distinct processes that projects go through.

These include the following:

  • Initiating
  • Planning
  • Executing
  • Monitoring and Controlling
  • Closing

During the Initiating Process, the need of the project is clearly defined. This is an important first step as the scope, budget, and timeframe will all be based on the need and expected outcome(s) of the project.

In the Initiating Process, the Return on Investment Analysis is also conducted. The organization will determine if the expected outcome of the project is worth the time, cost, and resources required to complete the project. Based on this information, the organization may determine whether to move forward with the project or stop the process. If the project continues, the final step in the Initiating Process will be to begin the development of the budget.

During the Planning Process, the project scope is defined, the budget is set, the timeframe is determined, and the project team is assembled. As the Planning Process moves forward, the project’s activities will be determined and the responsible project team members will be assigned their various tasks.

During the Executing Process, the actual tasks and activities of the project begin to be worked on and ultimately completed. The Monitoring and Controlling Process actually takes place alongside the Executing Process. During this process the various tasks and activities that are being executed are watched for any variations in terms of scope, time, and budget from the original plans of the project. If there are variations, corrective action may be necessary to keep the project from becoming a failure. During this Process, risk management is conducted to ensure that unforeseen interferences do not derail the project. Changes are likely to occur with any project, so project managers need to assess the various situations and make the necessary changes to keep the project moving forward.

The final process is the Closing Process. During the Closing Process, the project is completed and delivered to the end users.

The customer will review the project to determine if all scope requirements have been met. Once approval is obtained from the end users, the project is officially completed and all project-related documents, accounts, and activities are closed-out. The final task of the project team is to complete the “lessons learned.” This is the process of assessing and communicating what went well with the project and what could be done differently in the future to make similar projects go smoother.

To summarise,in this article we have focused on understanding what a project is and where it fit within programmes and portfolios

Transition to Critical Chain Multi-Project Management

Transition to Critical Chain Multi-Project Management for Long Duration Projects

What to Do Until Buffer Management Kicks In

Abstract

The transition from traditional project management to Critical Chain Project Management (CCPM) in a multi-project environment presents a formidable problem with projects of long duration. A simple method is presented for that transition and provides the metrics necessary to directly encourage and cement the behaviors needed for Critical Chain Multi-Project Management. This paper assumes the reader is familiar with CCPM.

The Multi-Project Implementation

This paper focuses on the period of time from planning the first Critical Chain (CC) project, the cut-over project, to completion of the last traditionally managed project. This can be a long period of time before the company has fully implemented Critical Chain Project Management. Theory of Constraints (TOC) practitioners involved in Critical Chain Mulit-Project Management (CCMPM), often find this transition to be the toughest part of an implementation.

The Implementation Conflict

In order to successfully implement Critical Chain Multi-Project Management, we must obtain support for it. Everyone expects that CCPM will be another flavor-of-the-month implementation that fades away if properly ignored. To obtain that support, we must start with one project to prove that CCPM works. And to be successful, we must change the whole project system to CCMPM. Because Critical Chain requires Buffer Management and traditional projects can’t use it, we must implement CC on all projects at the same time.

Implement One Critical Chain Project First

Even though we know it works, we must prove that it works “here!” A common solution is to use a pilot (trial) project as a way to demonstrate CCPM and get the bugs out of the existing system. One project at a time is much simpler to implement than many. The pilot project should not be thought of as a trial. It’s really the first Critical Chain (CC) project, the cut-over project. Every new project following it will also be a CC project.

Typically, for a transition, the cut-over project is planned while the work-in-process is ignored. But in a multi-project management environment, that means that some or many shared resources will be fought over by the CC and non-CC projects. The resources are usually expected to multitask and have several projects in work at one time. Multitasking is a huge factor in projects being slow. How can scarce resources be assigned where they are most needed, if the statuses of these projects are measured differently?

The common approach to adding a new project to the pipeline of projects is to commit to a date and put it in the system. With little understanding of the amount of work in the system and the system’s capacity, work is pushed in with the expectation that it will get done.

With a system full of work-in-process projects, it will take a long time to complete this first CC project. Continued multitasking between projects will assure it. The reality is that people are asked to not multitask on the CC project while they are multitasking on the others. The non-CC projects will delay the faster, CC project. It will be difficult to determine and measure the Critical Chain project’s success compared to the others. Some people will believe it gets special attention and will demand to share its resources.

The more difficult problem is the lack of Critical Chain buffer management. Lacking CC project buffers, traditional projects can’t use buffer management. Priorities among the projects may be determined by perceived urgency as expressed by the project managers. Implementing the first Critical Chain project has not always been easy.

Big Bang Approach

The whole project system can be changed in one massive replan of all projects. It may make a lot of sense since we know we won’t be done until all the projects are CC projects. All projects are measured the same way and they quickly get up to speed. Or do they? How does the whole system get changed? All of the projects must be re-planned and changed to CCPM by shortening the duration of many, many tasks of many projects.

In a small system, the big bang approach is a real option. In a large system, it is definitely much more challenging and probably not possible. To change all the projects to be Critical Chain projects requires re-planning while they are in progress. The same people that are working the projects are need to do the replan. It’s likely to be chaotic and it won’t happen overnight. Re-planning will delay the implementation, delay current projects and may jeopardize an initial (or any) success. Just the opposite of what was intended.

Delay Until the System is Ready

Do not insert the cut-over project until the resources can focus on it. Prioritize the projects. Since any prioritization is effective in increasing the speed of a system, use the commitment dates as priorities to help determine what to focus attention on. Propose a drum resource and plan the release of the cut-over project to be synchronized with this drum. That sets up the next issue. How do resources (and management) know what to work on next? We need buffer management. We still can’t have it.

Unfortunately, it is not possible to start with a clean slate, no projects. We must deal with the work as it is in the system. It looks like we have to wait to use buffer management until after all projects in the system are CC projects. We still have an implementation conflict.

A New Approach

Create a method of comparing a Critical Chain project’s status with a traditionally managed project’s status, while promoting better behaviors.

(1) Prioritizing the work allows us to recognize that some work may be low enough priority to be delayed or canceled. Use buffer management on the first CC project, and create a kind of virtual buffer for the other projects. Then use virtual buffer management on all of those projects without re-planning them.

(2) Collect status for all projects as “How long until you are done with your task?” If percent complete is provided, accept it and restate it back as, “Does that mean you have 5 days of work remaining and you expect to be finished by next Wednesday?” Also ask, “Is there anything else you are working on?” Be consistent and persistent in asking for work remaining. Don’t argue about it. Accept whatever they give you. Reality will show up eventually.

(3) For each main chain of tasks (the Critical Path) and each feeding chain, compare the planned (base) finish with the current expected finish. The status (days ahead or behind) relative to the plan indicates how it is doing. This same calculation is done for Critical Chain’s buffer management and is called buffer incursion (in days).

(4) This information is used to manage the existing projects with their current due dates, without adding buffers to them, to create an unbuffered management report. The process is to prepare the existing projects by inserting a milestone at the end of the project, and between each feeding chain and the critical path. The milestone, being the last task in the chain, indicates the planned finish of the chain. As status is added, the expected finish of the current task pushes all successors to the future or pulls them earlier. Do NOT recalculate the critical path unless it makes a significant difference to the flow.

(5) Compare the current expected finish date with the base milestone (planned) finish date. This becomes an unbuffered incursion and can be reported and/or plotted for each chain of the project. Unbuffered Management can be used for all the projects, including the Critical Chain project. This provides a way to compare the health of all of the projects and a gives a basis for assigning scarce resources. The Critical Chain project would also have a Critical Chain Fever Chart and Buffer Report.

Unbuffered Management

Create a chart with % Complete on the X-axis and Days Ahead/Behind on the vertical axis. The chart will have characteristics like a fever chart. Place a zero line horizontally (exactly on schedule), and plot days behind above and days ahead below the line. Like the fever chart, it is a visual indicator that the projects are gaining or losing ground. The chart indicates how each the project is doing and its likelihood of completing on time. It has a virtual buffer. The buffer is really not there, but its usefulness is.

Traditionally managed projects typically have significant safety in each task in a futile effort to get every task completed on time. Most project managers either believe they have little or no safety in their projects or they believe that their safety is a minimal requirement to maintaining their schedule. They have substantial experience to prove it. They know that time and Murphy are very fickle. By using unbuffered projects, they keep their original task estimates and project due date. By adjusting behaviors toward Critical Chain requirements, task safety is much less needed and will accumulate at the end of the project. All projects are likely to go faster than they were. Project Managers see real results on their existing projects and look like heroes.

Conclusion

Critical Chain Buffer Management provides focus for management attention to significantly improve project performance. Since it is extremely difficult to transition from a traditional project management system to CCMPM, a transition methodology providing tools similar to Critical Chain Buffer Management is a significant bridge for that gap. With prioritization and unbuffered management, attention is focused where needed. Then good behaviors and a Road Runner ethic are developed, with the focus on completing as soon as possible, rather than on meeting the due dates. All of the work takes advantage of unbuffered management and the whole system flows faster during the transition.

This methodology is only for the transition to Critical Chain Multi-Project Management. It is not to eliminate buffers. It puts all of the projects on a level playing field until the transition is complete.

What to do until Buffer Management kicks in? Be doing Unbuffered Management!

Copyright Skip Reedy, 2002, 2011

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