Project Control – GleeYM https://www.gleeym.com GleeYM offers complete risk management , PMO, Mind Mapping, Training and Digital Transformation Servces! Tue, 14 Jan 2025 04:07:11 +0000 en-CA hourly 1 https://wordpress.org/?v=6.9.4 https://www.gleeym.com/wp-content/uploads/2022/01/cropped-gleelogo-1-1-32x32.png Project Control – GleeYM https://www.gleeym.com 32 32 166212591 Are Caring about the Penalty Clause in a Mega Construction Project? 3 Questions Need to be Addressed! https://www.gleeym.com/2021/02/21/penalty/ https://www.gleeym.com/2021/02/21/penalty/#respond Mon, 22 Feb 2021 00:00:10 +0000 https://www.gleeym.com/?p=2844

Construction Project - Better way to Envisage Your Project's Future. How? 4 Graphs are Enough to Illustrate!

Key Words

Construction, penalty, Delay, Contractor, Client, Owner, Construction Project, Project Delivery, Project Controls, Brown Field, Green Field, Cost Estimates, Schedule, Integrated Cost Risk Analysis, Risk Register, Execution, Planning, Remote Area, Skilled Labor, Material Handling, Bulk Material, Construction Equipment

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QUANTITATIVE RISK ANALYSIS

Summary

Delays in construction projects can lead to hefty penalties. These cost implications shouldn’t be overlooked and should be planned for in a variety of ways by both contractors and subcontractors. The importance of understanding and planning for these delays shouldn’t be underestimated, considering that contractors and subcontractors are often the ones responsible for paying the penalties. By understanding the consequences of delays, you can work to prevent those delays and avoid paying the penalties!

Read article on Project Cost and Risk analysis: 

https://www.gleeym.com/2021/02/16/accessroad/

Case Study

Access Road Construction Project that is required to be done well before commencing process plant construction. The project schedule, schedule and cost risk analysis have already been discussed in the previous article.

As per the penalty clause in the contract, $5,000/day penalty will be imposed to the contractor in case of delay for each day after the target date. Interestingly, there is no cap on penalties.

Top Risks

The top identified risks are:

  1. Flash Flood
  2. Delay in Delivery of Material
  3. Unavailability of Skilled Labor

 

Is it important to focus on Access Road Construction for mega Complex remote project? 4 Figures Depict a Complete Story!

Important Consideration

The construction industry is a high-risk, high-reward industry. It’s important for builders, contractors, and subcontractors to have a thorough understanding of the full cost implications of delays in construction projects. Understanding the potential penalties for delays can help your business plan better and potentially reduce your overall cost.

Construction delays can be a result of many different factors, but they are rarely the fault of the contractor doing work. The best way to avoid being placed in that situation is to make sure your project is documented with proper project controls. One of the factors to consider when maintaining project controls is the role that cost plays. It’s hard to estimate cost without knowing the impact of the delay you’re facing, which is why it’s so important to analyze the cost risks before projects begin. It’s also vital to integrate the risk analysis into your schedules and plans so that you can have well-executed plans that are also cost conscious. By making sure you understand cost implications before you plan, you can be sure that you have a plan that works well for your business!

Risk assessment for a mega complex construction project-www.gleeym.com/qra
Pic. 1 - Risk Assessment for Mega Complex Projects

Delays can happen to anyone who’s involved in construction projects. Contractors, subcontractors, and builders are required to understand the cost implications of delays. Knowing the penalties associated with uncompleted projects can provide valuable insight into how much money is available to complete a project. If you’re involved in a construction project, you should be aware of the different types of penalties that may be implemented. The most notable of these penalties are completion delays, mobilization delay, and liquidated damages.

Construction risk assessment-www.gleeym.com/qra
Pic. 2 - Construction Risk Assessment Services by GleeYM

Project Scenario

Project complete target date is 26-8-2021 with the cost estimates of $9 M.

The project owner put a penalty clause that if the project delays after the contractual deadline i.e., 26-9-2021, then there will be a penalty of five thousand ($5,000) dollars per day.

This analysis provides an equal opportunity to the client and the contractors including subcontractors to revise the schedule accordingly and negotiate the timelines and the budget.

Why to develop a model and run a Monte Carlo simulation? The simple answer is to forecast your project execution while planning in present.

QUANTITATIVE RISK ANALYSIS

There are three important questions that can be addressed for a client and a subcontractor:

  1. What are the chances that the project schedule will be delayed, and cost overrun?
  2. What will be the 50th percentile for a penalty in case of project delay?
  3. What will be the probabilities of occurrence of different possible outcomes for a penalty?

Quantitative Risk Analysis

GleeyM Offer services to identify risks and perform Quantitative Schedule Risk Analysis (QSRA) and Quantitative Cost Risk Analysis (QCRA) for mega complex projects!
Click Here
Probability distribution graph by www.gleeym.com/qra
Pic. 3 - Probability Distribution for a Project Schedule

There is 50% (mean) chance that project will be delayed by 62 days. Furthermore, there is 80% chance that project will be delayed by 85 days.

Project cost overrun distribution graph by www.gleeym.com/qra
Pic. 4 - Probability Distribution Graph for a project Cost

There is 50% chance that the project cost overrun will be $4.474 M. Whereas cost overrun will be $3.194M between P50 – P80.

Penalty

Penalty S-Curve by www.gleeym.com/qra
Pic. 5 - Penalty S-Curve

It’s crystal clear that based on the current schedule and mapped uncertainties and risks; the penalty will be substantial.

As per the contract, the penalty will be $5,000 per day. Therefore, there is a 50% chance that the penalty will be $160 K in case of project delay beyond the contractual deadline of 26-9-2021.

What if a project delays further? Then from a distribution graph, there is an 80% chance that the penalty will be $325 K.

The question is what will be the monetary benefit to the contractor? How to address it while negotiating the contract and mitigate plans during the project planning? In case of delay, will there be an impact on CAPEX? Will there be an impact on OPEX?

Kindly give your comments and like our articles for more updates!

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Conclusion

Integrated risk analysis is an equally important for both Client and Contractor. Risk Based Decision Making is required to demonstrate ALARP/ALARA. By incorporating what if analysis in ITB, contracts and planning will definitely help to forecast project health and EVM.

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]]> https://www.gleeym.com/2021/02/21/penalty/feed/ 0 2844 1 big reason, why to choose Long Lead Item as a “Focused Activity”? https://www.gleeym.com/2021/01/31/llirisk/ https://www.gleeym.com/2021/01/31/llirisk/#respond Sun, 31 Jan 2021 23:55:47 +0000 https://www.gleeym.com/?p=2154

1 Big Reason, Why To Choose Long Lead Item As A “Focused Activity”?

Keywords

Construction Procurement, Procurement Strategy, Long Lead Item, Gas Process Facility Construction, Sensitivity Analysis, Monte Carlo Analysis, Procurement Risk,  Distribution Graph, Cumulative distribution graph, Quantitative Schedule Risk Analysis, Quantitative Cost Risk Analysis

Summary

In mega complex project, managing risk is a necessity to ensure that your project is not derailed by unexpected events.

The world of construction procurement is a complex one. New processes, regulation, complex supply chain and complicated standards are popping up rapidly, making it difficult for construction companies and even for clients to stay on top for smooth execution.

Procurement (including contracts) is a key focus activity, especially the long lead items. Project schedule provides only a deterministic value. What if there is a delay in delivery of Long Lead Items to a site?

The distribution graph is showing, there is only a thirty three percent chance to meet the target date. If the anticipated risks occur, then What will happen? Of course, the construction, pre-commissioning, commissioning, and operations will be delayed. It will not only hamper CAPEX, but OPEX will also be impacted.

Quantitative Schedule Risk Analysis (QSRA)

Quantitative risk analysis is a computer-based method of analyzing the probability of a risk occurring and quantifying its effect on the project. It can be used to estimate expected costs and rate schedules for various projects i.e. Quantitative Schedule Risk Analysis (QSRA) & Quantitative Cost Risk Analysis  (QCRA)

Quantitative risk analysis (QRA) is a set of techniques that helps to prioritize and manage risk within a quantitative project. QRA tools assist decision makers in identifying the most critical risks and cost drivers for their projects, enabling them to make informed decisions about the future course of action.

Quantitative risk analysis (QRA) is the process of determining how likely it is that a particular investment decision will be successful. To do this, you need to quantify the potential risk in your project and assign a probability to each risk.

Procurement of Material and Long Lead Item (LLI) - A Focused Activity

It is important to understand that the quantitative risk assessment process will allow you to determine the level of risk that your project faces. What is the probability of events occurring? How likely are things to go wrong? In order to make sound decisions about strategic direction, you must have accurate information about the risks facing your project. 

A Gas process facility is a mega complex Greenfield construction project. According to the level-I schedule; a deterministic project completion duration is 966 days. After validating schedule, validate the schedule followed by Monte Carlo Simulation (MCS). Procurement of Material and long lead item was considered as “Focused Activity.” It’s second main driver after the construction for schedule delay and cost over run.

It’s a common phrase that “Knowing Long lead Items (LLI) early will speed up the construction execution.” It’s nota reality in areal world of executing mega complex projects. There are many factors internal and external that influence timely delivery Long Lead Item (LLI) to site. Few factors are:

  • Design data
  • Purchase Requisition (PR)
  • Purchase Order (PO)
  • Shipment
  • Load and Unloading
  • Damage during shipment
  • Damage during road transportation
  • Insurance
  • Manufacturing location
  • Single source/sole source
  • Long lead Item dates are missing in schedule
  • Various versions of schedule within the project – very common in mega complex projects.
  • Date for delivery at a site
  • Shop drawing submittal
  • Date plus design data
  • Shop drawing approval data
  • Fabrication/manufacturing schedule
  • Fabrication start
  • Quality control, inspection and third party inspections
  • Manufacturing Site visit
  • FAT
  • Fabrication completion
  • Shipping Date
  • SAT
Above all the procurement process time line set by the procurement department should also be known. Normally for a mega project to issue a PO might take six (6) months.
Gleeym offers Quantitative schedule & cost risk analysis using Monte Carlo Simulation.
Fig 1 - A Cumulative Distribution Graph for a Finish Date

A Table -1 is showing percentile, cost and contingency reserved required for making risk-based decision regarding schedule. It’s the management choice to choose P50 or P80 for a cost contingency reserves. 

Table 1 for Schedule contingency reserve
Table 1- Schedule Contingency Reserve
Fig 2- A Cumulative Distribution Graph for a Cost

A Table -2 is showing percentile, cost and contingency reserved required for making risk-based decision regarding cost. It’s the management choice to choose P50 or P80 for a cost contingency reserves.

Cost Contingency Reserve
Table 2 - Cost Contingency Reserve

Conclusion

It’s the management choice to choose P50 or P80 for a contingency reserve. The Organization usually prefers P80. Determine the contingency reverse is the one (1) biggest reason!

During a project start the level of information is low and risk is high. Therefore, it is recommended to run the Monte Carlo Simulation (MCS) at the beginning of project phase or before gate approval of a previous phase. It will support management to make a decision under uncertainty. A monte Carlo simulation is a requirement for making risk-based decision. It’s not optional!

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]]> https://www.gleeym.com/2021/01/31/llirisk/feed/ 0 2154 Digital Product Development and Decision Making Under Uncertainty https://www.gleeym.com/2020/10/20/digitalproduct/ https://www.gleeym.com/2020/10/20/digitalproduct/#respond Wed, 21 Oct 2020 03:05:26 +0000 https://www.gleeym.com/?p=1961

Digital Product Development and Decision Making Under Uncertainty

Digitization is dominating in this era of 2nd machine age. A webinar. Worth watching it. Isn't?

The failure rate is high in case of product Development. Technology, competitors, and market dynamics are the key factors, but one can’t ignore cost and schedule.
Cost and schedule model development is the starting point to plan the development of a digital product.
Whether it’s agile, scrum, or waterfall, planning is utmost to avoid financial loss.

@RISK helps to model uncertainty to cost and schedule. @RISK has the capability to analyze the schedule without using any scheduling software and apply uncertainty.

Whether it’s agile or scrum or waterfall methodology, developing schedule and cost estimate are essential.  

 

<div id=”wi105″><div class=”sq_wiki_content” style=”position: relative;clear: both;background: white;font-size: 14px;color: #333;max-width: 500px;margin: 5px auto 5px auto;padding: 13px;border: 1px solid #DDD;-webkit-box-shadow: 0 1px 0 #DDD;-moz-box-shadow: 0 1px 0 #ddd;box-shadow: 0 1px 0 #DDD;”><a id=”w_0″ class=”sq_wiki” href=”//en.wikipedia.org/wiki/Decision_theory” title=”Decision theory” style=”display: block;font-weight: 700;color: #0074B7;line-height: 1.4em;margin-bottom: 5px;text-decoration: none;”>Decision theory</a><div class=”sq_wiki_text” style=”font-style:italic;color: #333;”>re-evaluation of what useful <span class=”searchmatch”>decision</span>-<span class=”searchmatch”>making</span> requires. The area of choice <span class=”searchmatch”>under</span> <span class=”searchmatch”>uncertainty</span> represents the heart of <span class=”searchmatch”>decision</span> theory. Known from the 17th</div></div></div><div><br style=”clear:both” /></div>

<a href=”https://www.gleeym.com/2021/02/11/5waysrisk/” title=”5 Ways Risk Management Software Can Help Your Business. Are You Still Not Considering Risk Software?” style=”font-style:italic;color: #333;”>https://www.gleeym.com/2021/02/11/5waysrisk/</a>

Also visit following link to watch recorded webinar

Capital Project Petrochemical Process Plant, IRR, and NPV Analysis – Webinar

Digital product development and decision making under uncertainty - www.gleeym.com/qra
Pic-1 Digital Product Development
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GleeyM Offer services to identify risks and perform Quantitative Schedule Risk Analysis (QSRA) and Quantitative Cost Risk Analysis (QCRA) for mega complex projects!
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]]> https://www.gleeym.com/2020/10/20/digitalproduct/feed/ 0 1961 Capital Project Petrochemical Process Plant, IRR, and NPV Analysis – Webinar https://www.gleeym.com/2020/08/25/capitalproject/ https://www.gleeym.com/2020/08/25/capitalproject/#respond Tue, 25 Aug 2020 22:10:20 +0000 https://www.gleeym.com/?p=1607

Capital project for the petrochemical process plant (downstream) is slightly different from other capital projects. It requires estimating Total Installed Cost (TIC) plus Owner cost in order to find the complete project cost. Cost estimation for petrochemical process plant is comprised of equipment specification and definite plant facility information.

In this case study, there are 2 products that will be sold in two regions. The price strategy is different so the IRR and NPV will be calculated for base case and under uncertainties and risks. Then we’ll compare the IRR and NPV under different scenarios.

Also visit following link to watch recorded webinar

Digital Product Development and Decision Making Under Uncertainty

Petrochemical plant project management - www.gleeym.com/qra
Pic-1 Project Management
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Quantitative Risk Analysis

GleeyM Offer services to identify risks and perform Quantitative Schedule Risk Analysis (QSRA) and Quantitative Cost Risk Analysis (QCRA) for mega complex projects!
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]]> https://www.gleeym.com/2020/08/25/capitalproject/feed/ 0 1607 Decisive Decision Making for Digital Risk Management (DRM) – A Headway to Digital Transformation https://www.gleeym.com/2020/03/25/decisionmaking/ https://www.gleeym.com/2020/03/25/decisionmaking/#respond Thu, 26 Mar 2020 02:02:44 +0000 https://www.gleeym.com/?p=1475

Digital Transformation

Aligning resources to remain competitive and meeting strategic goals are cumbersome in this era of “Digital Transformation”. Digital transformation is reshaping the corporate world. Pursuing the digitizing requires a sense of urgency, change management agents, and the ability to choose the optimal decision based on the data. Decision making requires Data as input and presenting data in the form of alternatives/options to select the best one i.e. Risk-Based Decision Making.

In the concept phase, the project initial phase, presenting alternatives and choosing the best one is the key to success. Collecting data, reshaping the data, defining correlation and keeping eye on key risk drivers certainly helps to come to a conclusion and get buy-in from the key stakeholders. Presenting numbers/analytics to board members or partners are always a “Game Changer” to win.

Decision Tree Analysis helps to portray various decisions with data. Decision Tree infused with Date helps to determine optimal path and display combination of inputs for the corresponding output. It helps to better understand the uncertainties associated with the data and perform further analysis as per requirement for decision making.   

Case Study: Digital Risk Management

SVP Technical decided to align projects with strategic goals and section of projects as per scorecard or set criteria. He chose SharePoint for an Enterprise solution. SharePoint is a masterpiece for collaboration and share information among the various Stakeholder. SharePoint is a content repository. His idea was based on an Enterprise solution. He presented this idea to the board members for final approval.

During the formal discussion, one prominent and dominant board member and the main investor asked him questions:

1- What if Enterprise deployment fails?

2- What if consider deployment first for Megaprojects only?

This could be the “Show Stopper” to get the final approval and budget allocation. Meeting adjourned with remarks/decision to present the idea again with best possible alternatives and answers these two questions to make the most of it.

After several meetings and brainstorming sessions, developed “Decision Tree” with associated cost and monetary benefits. A data table is given below:

Visit following links for more details:

QUANTITATIVE RISK ANALYSIS

RISK MANAGEMENT SYSTEM

Decision Tree for Decision Making

Decision Tree Data Table by Gleeym
Table 1 - Decision Tree Data Table

Cost of Complete Deployment for Enterprise Project Management was $ 700K. A 65 % probability to save (benefit) $2 M in case of successful deployment and meeting objectives. 35% probability of losses. The losses that would be $200k in case of delays, resistance from the stakeholder for change and interruptions because of low productivity.

More risk-averse approach to deploying and implement the software for megaproject only i.e. Partial Deployment. Cost of Partial Deployment was $350K. Probability of success was 70% with cost-saving of $ 1 M while the probability of failure was 30% with a loss of $ 100k.

Decision Tree with Chance Nodes
Pic 1 - Decision Tree with Chance Nodes

2 -way sensitivity 3-D graph shows a combination of two (2) inputs and the corresponding output. Choose two inputs to display corresponding output values i.e. Expected Values.

Two Way Sensitivity Graph - www.gleeym.com
Graph 1 - Two Way Sensitivity Graph

Strategy Region Graph is used to portray the best decision for the combination of the two inputs. Diamond Shaped icon is used to display the corresponding combination. It provides headway to choose option precisely based on data.

Graph 2 - Strategy Region Graph

Big Picture:

Big Picture portrays Decision Tree in a dynamic way. Eye-catching graphics help to visually illustrate the various components of the complex Decision Tree. It helps to present an idea to the management in an interactive way. Below given Big Pictures are showing the complete Decision Tree in fragments. It provides a framework to analyze various options critically for digital risk management.

Big Picture- Decision Tree 1 by www.gleeym.com
Big Picture- Decision Tree 2 by www.gleeym.com
Big Picture- Decision Tree 3 by www.gleeym.com
Big Picture- Decision Tree 4 by www.gleeym.com
Big Picture- Decision Tree 5 by www.gleeym.com

Conclusion - Decisive Decision Making

After presenting data in a structured and graphical way, the Board approved the project with one condition. The condition was to implement the project in phases:

1- In the first phase deploy software partially for mega-projects only.

2- In the second phase deploy the complete project and align overall project scope.

Decision Making requires Critical Thinking and aligning data to Project scope statement. It helps to collect, reshape and align data to address actual problem and make the right decision in digital risk management!

Thank you

@RISK

]]> https://www.gleeym.com/2020/03/25/decisionmaking/feed/ 0 1475 Earned Value Management (EVM) Concept https://www.gleeym.com/2020/03/06/evm/ https://www.gleeym.com/2020/03/06/evm/#respond Fri, 06 Mar 2020 16:30:36 +0000 https://www.gleeym.com/?p=1287

Earned Value Managment - EVM. Why is it so important?

Earned Value Management (EVM) has always been challenging to understand. EVM covers 4 to 5 questions in the exam. I am going to narrate an example to explain this concept:

Q – A company ABC is hired to install underground pipes for water supply to metropolitan city. Total length is 9 km. The cost is $ 30/Ft. Project duration is 6 months. Today 2nd month is completed. The Company has installed pipes over 1.8 km. The Cost incurred is $ 185,000.

Calculate CV, CPI, SV, and SPI?

A – First need to calculate EV. EV is Budgeted cost multiplied by % complete i.e.

EV = Budgeted Cost x % Complete

The Cost to install one running foot of pipe is $ 30. The Total distance is 9 km. The Cost is expressed per running feet and distance is taken in Kilometer. So unit conversion is required. Convert cost and distance into the same unit. Therefore Budgeted Cost is

Budgeted Cost = Total Cost (Some of PV)

= $ 30/ft *9 km

= $ 98.425/m * 9000 m

= $ 885,825

Budgeted Cost (BC) = $ 885,825

1.8 km is complete so far. It means

% complete = 1.8/9

= 0.2

= 20 %

% complete = 20 %

EV = 885,825 x .20

Ev = 177,165

Now Calculate

1 – Cost variance (CV):

CV = EV-AC

= 177,165 – 185,000

= – 7,835

CV = – 7,835

2 – Cost Performance Index (CPI):

CPI = EV/AC

= 0.95

CPI = 0.95

3 – Schedule Variance:

SV = EV – PV (Planned Value)

= 177,165 – 295,275

= – 118, 120

SV = 118,120

4 – Schedule Performance Index (SPI):

SPI = EV/PV

= 177,165/295,275 = 0.6

Project is cost overrun and behind schedule

* One ft is 304.8 mm, one m to1000 mm.

**PV is calculated as:

Project Cost Control - EVM
Pic- Project Cost Control - EVM
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Quantitative Risk Analysis

GleeyM Offer services to identify risks and perform Quantitative Schedule Risk Analysis (QSRA) and Quantitative Cost Risk Analysis (QCRA) for mega complex projects!
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