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ForumForumProject Control...Project Control...Shared knowledg...Shared knowledg...Reasons for possible delays & cost overruns on projectsReasons for possible delays & cost overruns on projects
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 4/22/2010 10:33 AM
 

Although the factors which everyone suggests certainly contribute to cost-over-runs, the main culprit is the management entity who disregards the reasonal cost assessment provided by the professional and competent cost estimator (not some engineer with tunnel vision who can add a row of numbers together). The competent estimator calculates this cost based on defined scope provided. That estimator's supervisor then typically reduces the value of the capital cost estimate provided in order to sell the idea.

To answer your question regarding "pro-active action to prevent or mitigate," short of hanging said cost-cutting management entity by the toes and beating him with a slide rule, the alternative is to live in a perfect world. Unfortunately, the poor estimator is usually the one beaten, drawn, quartered and then fired.

Given that we will never totally mitigate these behaviors or live in that perfect world, our recourse as a project control professional for a project in development is to forewarn, using systematic forecasting methods which include not only change orders/changes in scope, but trending based on productivity and common sense. As long as we are diligent about keeping this information on the table, our job has been done. The management entity who chooses to ignore this routine tool of forewarning is ultimately held accountable, but as we all know in our imperfect world, it's the messenger who is shot!

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 4/22/2010 10:35 AM
 

The much common aspect that I have usually seen is lack of information concerns with the real cause of deviation so that management decisions are focused in errors mitigations actions which do no attack the real cause of problem. Other typical aspect and quite related with the first mentioned, it is a budget bad structured and planned with an unreal database. When I mention that the database is unreal is because again it does not reflect the resource performance of the company whom is going to develop the project. As a resulted, the figures are based on cost and productivity false indexes. As a consequence, the budget will never guarantee all main aspects concern with time, productivity and cost of the resources to allow that the project funds will cover all expenditures and provide profits.
Poor quality of budget structure is also critical, in order to get the cost driver to understand well the process and focus the control and decision management process in risky activities to be overrun generating a reduction of the profits.
Mitigation concerns with budget structure is to define the correct work breakdown structure and cost breakdown structure to permit determining the critical activities and cost element where control system should be focused, to implement efficient corrective actions. Once the cost drivers are defined, it is easy to detect the real cause of deviation to evaluate its impact using EVA and give to management tools and useful information to implement corrective actions that would solve the problems by reducing o eliminating the cost impact of been overrun.
The real cost and productivity indexes will give to company a database of own performance to address if it is competitive doing the benchmarking and take the actions for enhancing the profits.

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 4/22/2010 10:36 AM
 

Everything is manageable but the one thing almost everyone is guilty of doing is not communicating with all parties dealing with the budget. How many times have you been notified of plan or specification change(s) through an informal conversation? Oh and by the way the change took effect 2 weeks ago.

It has been my experience that communication, or the lack thereof, leads to one of the largest reasons a budget will have a cost overrun. As an Estimator it is our prerogative and our duty to be the gate keepers of the budget. Estimators are the brain and heart of any company because we feed information to both project management and (in my case) construction management. If the Estimator is not told of potential changes then how can your company work properly? Project management needs us to provide an accurate budget they can plan to and construction management needs our estimates to perform all the tasks required in the project.

Communication even extends to the people performing the work. If a field change is made on a project due to field conditions or incorrectly drawn plans then the Estimator needs to know about these changes, so the budget can be tracked accordingly. Any deviations from the plans and the estimate will lead to a cost increase. Far too often the Estimator is overwhelmed with office work and they can not make it to the field to watch the progression of a construction project. However, this doesn’t mean the Estimator shouldn’t make time. In fact, any good management team would encourage the Estimator to go to the field and see how the project is progressing. This has a multitude of benefits for the Estimator. It allows the estimator to compare their estimate to the way it was executed which helps the Estimator understand how their estimate is an integral part of the construction phase. This also allows the Estimator to make changes the next time this same type of estimate is performed. If the estimator assumed one thing and another was performed then it’s a learning experience. The installation of a structural slab can be performed differently throughout a region or other countries. If the Estimator doesn’t take this into account when performing the estimate then there will cost issues. However, this could be alleviated by communication with the construction management department because they are the subject matter experts.

Once again, it all comes down to communication. If key personnel are not communicating then a project will have cost overruns because each department wants to think they are more important than the other(s). In all reality, every department relies on each other and too often department managers seem to forget this when a project is under way.

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 12/7/2010 6:26 PM
 
Reasons for Project Delays
1. Lack of Clarity in Scope of Works
2. Major discrepancies on project documents - Drawings, Specs, Contract Documents
3. Changes made midway on the Project by Client needing revised design during construction stage
4. Selection of the right consultant and selecting the key design staff on the project is a key requirement.
5. Selection of Contractor's on basis of L-1 criteria rather than thru detailed rating systems considering other key parameters - past performance, quality of service, time completion, no. claim oriented, relationships with other contractor/subcontractor on works are attitude towards interface issues.
6. Manufacturer tight Delivery Schedules and previous commitments  to other contracts, especially when you have specialized works - Polycrete pipes and manholes in middle east.
7. Project Financing Issues
8. Adverse Climatic Conditions- Cyclone Gonu and Phet affecting Oman's projects.
9. Delays in authority approvals, getting permits during project commencement
10. Delays associated with Infrastructure works in heavy Congested Traffic Areas
11. During project operations delays in authority reviews, supply of  substation transformers, and final inspections on Building projects.
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Work that gets planned gets done on time
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