Project Controls, Part 3- Procurement, Earned Value, and a Project Control Quiz

Procurement

You might be thinking that your company’s legal and accounting departments are responsible for procurement, but related to your projects, you should take the lead, or at least be heavily involved.  I assume the legal and accounting folks will keep me out of trouble related to audits and company policies and procedures, but it is my job to ensure sufficient and appropriate resources are obtained on time and within budget.  Here is a list of items to perform.

• Enforce purchasing authorities as per the project plan.

Company policies for purchases should have been researched with the accounting department and incorporated into the project plan.

• Provide scopes, terms and conditions, flow-down provisions to contractors, subcontractors, and vendors.

Allow time for new contractors, subs and vendors to obtain credit checks on your company.

• Conduct legal review of subcontracts.
• Use formal purchase orders to authorize vendors.
• Require employees to use expense accounts.
• Travel advances may be required.

Any employee should be able to obtain a travel advance at his/her discretion.  People who carry balances on their credit cards should not have to pay interest for company travel.

• Keep contractors, subs and vendors happy by getting them paid on time.

Earned Value

Earned value analyzes cumulative status of your budget and schedule using one graph.  It is a typical tracking tool generated by project software, or it could be generated using a spreadsheet and drawn manually.  In the figure below, the project baseline (budgeted cost of work scheduled [BCWS]) shows the planned expenditures over time, but the red (dashed) lines tell the real story.  This project is over budget because earned value is lower than what has been spent (actual cost of work performed).  Comparing actual cost to the baseline budget (solid line), you appear to be about 25% over spent.

But earned value (calculated from physical percent complete) reveals you are 100% over budget and the lines are diverging (things are getting worse).  This project is also behind schedule, because the current earned value (physical percent complete) should have occurred one week earlier (move left horizontally from the earned value dashed line to the solid project baseline).

Project Control Quiz – The Situation

For a 1-year long internet and wireless technology procurement and installation project in a 20-floor office building, 4 months is allocated for setting up new equipment and software, testing, de-bugging.   Your company owns the building and is the major tenant, occupying 4 floors.  During the 4-month installation, you have been constrained by upper management to save money by allocating 50% in-house labor, and 50% of labor contracted (as opposed to 100% external contractors).

• What might be the likely issues during this 4 month period?
• Give a brief description of the activities that you would perform as project controls for the 4-month installation period.

One Solution

The most likely issues are related to:

1.  The in-house employees finding sufficient time to perform these additional, short-term duties

2.  Workers and supervisors from 2 different companies having problems communicating, and having disagreements over methods and quality of workmanship

3.  Disruption of ongoing business operations on each of the 20 floors.

(I will assume you conducted detailed manpower planning early in the planning process.  The appropriate supervisors estimated time required for both in-house and contract labor, by individual skill set (there will be several).  Hours per specific weeks per skill type were identified, and compared to in-house availability.  This was the basis for deciding which skills to order by contract, and avoid bottlenecks during installation).  During the project, control in-house labor availability by providing schedule updates to appropriate supervisors mid-week for the next week’s work, and require them to respond in affirmative the same day.  If they wish to respond in the negative, require them to have approval from upper management, including a signed change order to pay for the additional external labor.

Control the issue of possible disputes by one or more of the following activities.  Segregate crews by company if possible.  If crews must be mixed, assign a crew leader from your own company for each crew.  For each skill set, identify a lead quality control supervisor, who will answer questions and resolve technical concerns with materials and workmanship.  Have the crew leaders, quality supervisors, task leaders, and the project manager report 30 minutes early every day (at first, and relax as appropriate) to discuss the previous day’s work and the upcoming work.  Consider hiring qualified 3rd party inspectors to observe and approve critical portions of the work.

Control disruption of ongoing business by surveying supervisors/managers on each floor to determine the best and worst times, days, weeks to be working on their floors.  You might be able to schedule noisy, dusty work for evenings and weekends (if security issues can be addressed).  Use your own 4 floors as the initial work zone, so that fine-tuning the work methods will be complete before working in tenant areas.  Provide schedule updates to the workers on each upcoming floor several weeks before entering their areas.

Next Article in This Series:  The next article discusses changes of scope, controlling external providers, and presents ideas for turning around a troubled project.

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