Project Cost Management Summary 6th Edition

Project Cost Management Summary 6th Edition

 

  1. Cost estimates  include  the  identification  and  consideration  of  costing  alternatives  to initiate and complete the project.
  1. Cost trade-offs and risks should be considered to achieve optimal costs for the project.
  2. The accuracy of a project estimate will increase as the project progresses through project life cycle.
  1. In project initiation phase have a rough order of magnitude (ROM) estimate in the range of  (-25%  to  +75%).  Later  in  projects  when  more  information  is  known  definitive estimate could narrow the range to (-5% to +10%).
  1. Analogous Estimating, Parametric Estimation, Bottom-UP Estimating &  Three-Point Estimating. In schedule summary.
  1. Reserve Analysis. In schedule summary.
  2. Cost of  Quality:  Assumptions  about  costs  of  quality  may  be  used  to  prepare  the estimates.
  1. Estimate Costs Outputs:

✓  Cost Estimates:

➢  Cost  estimates  include  quantitative  assessments  of  the  probable costs required to complete project work and contingency amounts to account  for  identified  risks,  and  management  reserve  to  cover unplanned work.

➢  Cost estimates can be presented in summary form or in detail.

✓   Basis of Estimates:

➢  Supporting  documentation  should  provide  a  clear  and  complete understanding of how the cost estimate was derived (assumptions, constraints, …).

  1. Determine Budget  is  the  process  of  aggregating  the  estimated  costs  of  individual activities or work packages to establish an authorized cost baseline.
  1. Project budget includes all the funds authorized to execute the project.
  2. Business Documents:

✓  Business  case:  identifies  the  critical  success  factors  for  the  project  like financial success factors.

✓  Benefits management plan: includes the target benefits, such as net present value  calculations,  timeframe  for  realizing  benefits,  and  the  metrics associated with the benefits.

  1. Cost Aggregation: Cost estimates are aggregated by work packages in accordance with the  WBS.  The  work  package  cost  estimates  are  then  aggregated  for  the  higher  component levels of the WBS and ultimately for the entire project.
  1. Historical Information Review:

✓  Reviewing  historical  information  can  assist  in  parametric  or  analogous estimates.

✓  Historical information may include project characteristics (parameters) to develop mathematical models to predict total project costs.

  1. Funding limit Reconciliation:

✓  The expenditure of funds should be reconciled with any funding limits on the commitment of funds for the project.

  1. Financing: Financing entails acquiring funding for projects for long lasting projects. External funding may require certain requirements.
  1. Cost Baseline:

✓  Approved  version  of  the  time-phased  project  budget,  excluding  any management reserves. is used as a basis for comparison to actual results.

✓  The  work  package  cost  estimates,  along  with  any  contingency  reserves estimated for the work packages, are aggregated into control accounts. The summation of the control accounts makes up the cost baseline.

✓  Time-phased view of the cost baseline is typically displayed in the form of an S-curve.

  1. Project Funding Requirements :   Total  funding  requirements  and  periodic  funding requirements are derived from the cost baseline.
  1. Any increase to the authorized budget requires an approved change.
  2. Earned value analysis (EVA):

✓  compares the performance measurement baseline  to the  actual  schedule  and cost performance.

✓  EVM integrates the scope baseline  with  cost  and  schedule baselines  to form the performance measurement baseline (PMB).

  1. Variance Analysis:

✓  Cost and schedule variances are the most frequently analyzed measurements.

✓  Cost performance  measurements  are  used  to  assess  the  magnitude  of variation to the cost baseline and decide whether corrective or preventive action is required.

  1. Trend Analysis:

✓  examines project performance  over time  to determine if performance is improving or deteriorating.

✓  Graphical analysis techniques are valuable for understanding performance  and comparison to future performance goals in the form of BAC vs EAC.

✓  Charts:  In  earned  value  analysis,  three  parameters  of  planned  value, earned value, and actual cost can be monitored and reported.

✓  Forecasting:  Project  team  may  develop  a  forecast  for  the  estimate  at completion (EAC) that may differ from the budget at completion (BAC).

  1. Reserve Analysis:

✓  Reserve  analysis  is  used  to  monitor  the  status  of  contingency  and management reserves for the project to determine if these reserves are still needed or if additional reserves need to be requested.

✓  This reserve may be used as planned to cover cost of risk response.

✓  when opportunities are captured and resulting in cost savings, funds may be  added  to  the  contingency  amount,  or  taken  from  the  project  as margin/profit.

  1. To-Complete Performance Index (TCPI):

✓  Measure of the cost performance that is required to be achieved with the  remaining  resources  in  order  to  meet  a  specified  management  goal  expressed  as  the  ratio  of  the  cost  to  finish  the  outstanding  work  to  the remaining budget.

  1. Work Performance Information:

✓  Includes information on how the project work is performing compared to the cost baseline.

✓  Variances in the work performed and the cost of the work are evaluated at the work package level and control account level.

  1. Equations:

✓  Earned value analysis (EVA): 4 Key terms.

➢  PV  =Planned  Value:   The  value  of  the  work  planned  to  be  completed  to  a  point  in  time,  usually  the  data  date,  or  project  completion.

➢  EV=Earned Value:  The planned value of all the work  completed  (earned) to a point in time, usually the data date, without reference  to actual costs.

➢  AC=Actual Cost :  The actual cost of all the work  completed to a  point in time, usually the data date.

➢  BAC=Budget at Completion: The value of total planned work, the  project cost baseline.

✓  Variance Analysis:

➢  Schedule Variance (SV): The difference between Earned Value and Planned Value.

❖  SV = EV – PV

❖  SV< 0, Behind schedule

❖  SV>0, Ahead of schedule

❖  SV=0, On schedule

➢  Cost  Variance  (CV):  The  difference  between  Earned  Value  and Actual Value.

❖  CV = EV – AC

❖  CV< 0, Over budget (Over planned cost)

❖  CV>0, Under budget (Under planned cost)

❖  CV=0, On budget (On planned cost)

➢  Schedule  Performance   Index   (SPI):   A   measure   of   schedule efficiency expressed as the ratio of earned value to planned value.

❖  SPI = EV / PV

❖  SPI<  1, Behind schedule

❖  SPI> 1, Ahead of schedule

❖  SPI= 1, On schedule

➢  Cost  Performance Index  (CPI): A measure of the cost efficiency  of budgeted resources expressed as the ratio of earned value to actual  cost.

❖  CPI = EV / AC

❖  CPI<  1, Over planned cost

❖  CPI> 1, Under planned cost

❖  CPI= 1, On planned cost

✓  Trend Analysis:

➢  Estimate   at   Completion   (EAC):  The   expected   total   cost   of completing all work expressed as the sum of the actual cost to date and the estimate to complete.

❖  EAC = BAC/CPI     If the CPI is expected to be the same for the remainder of the project.

❖  EAC = AC + BAC – EV   If future work will be accomplished at the planned rate.

❖   EAC = AC + Bottom-up ETC   If the initial plan is no longer valid.

❖  EAC = AC + [(BAC –  EV) /  (CPI x SPI)] If both the CPI and SPI influence the remaining work.

➢  Estimate to Completion (ETC): The expected cost to finish all the  remaining project work.

❖  ETC = EAC – AC   Assuming work is proceeding on plan, the cost of completing the  remaining authorized work.

❖  ETC = Re-estimate   Re-estimate the remaining work from the bottom up.

➢  Variance at  Completion  (VAC): The estimated difference in cost at the completion of the project.

❖  VAC = BAC – EAC

❖  Positive = Under planned cost

❖  Neutral = On planned cost

❖  Negative = Over planned cost

✓  To-Complete Performance Index (TCPI):

➢  A measure of the cost performance that must be achieved with the remaining resources in order to meet a specified management goal,  expressed as the ratio of the cost to  finish the outstanding work to the budget available.

➢  TCPI = (BAC –  EV)  /  (BAC –  AC)  The efficiency that must be maintained in order to complete on plan                                    ❖  Greater than 1.0 = Harder to complete

❖  Exactly 1.0 = Same to complete

❖  Less than 1.0 = Easier to complete

➢  TCPI = (BAC –  EV)  /  (EAC –  AC)  The efficiency that must be maintained in order to complete the current EAC.

❖  Greater than 1.0 = Harder to complete

❖  Exactly 1.0 = Same to complete

❖  Less than 1.0 = Easier to complete

  1. Important Notes:

➢  Three-point estimate is more accurate than parametric estimate.

➢  Assessment   is  proper  action  that  should  be  taken  by  project manager.

➢  Regression analysis >>>> based on one line estimation.

➢  Parametric estimate >>>> depend on expert judgement technique.

➢  Light weight estimation >>>> high level forecast project.

➢  Scope  and schedule are  adjusted to stay with cost constraint >>>> Strick budget.

 

The different types of temporary structures

The different types of temporary structures

 

During construction, temporary structures are required. Let us assume a simple task of painting a building. How could workers go up to the upper levels to paint? Typically, workers stand on a temporary structure known as a scaffold (Fig.1).

Fig.1. The painting of a building. A scaffold is built for painters to stand on while painting the building

 

1. SCAFFOLDS

Scaffolds are work platforms that enable workers to do their job at high elevations. The type of work can be brickwork, painting, steel work, concreting, or window installation. Most scaffolds are made of steel pipes. In some countries bamboo is stillused for scaffolds.

1.1 Pipe Scaffolds

Pipes are used to build scaffolds. Pipes are connected using special connectors. Platforms are provided for workers to stand on. Ladders are provided for workers to go from one platform to another one (Figs.2 and 3). Pipe scaffolds cannot be used for very tall buildings. Other methods such as outrigger scaffolds are used in such situations.

Fig.2. Pipe scaffold with one platform

Fig.3. Pipe scaffold with multiple platforms. Ladders are provided to climb to higher platforms

1.2 Outrigger Scaffolds

Consider this scenario: Brickwork has to be done on the 70th story of a 70-story building. How could the workers get to the 70th story? Should they build a pipe scaffold from the ground all the way to the 70th story? That may not be very feasible. In this type of situation, outrigger scaffolds can be used. Metal beams are attached to the building. These beams are used to build a work platform (Fig.4).

In the case of outrigger scaffolds, metal beams or a metal structure are attached to the newly constructed building. This has to be done with the authorization of design engineers. This metal structure is known as outriggers. The protruding metal structure is used to build a work platform.

Fig.4. Outrigger scaffold

1.3 Modular Scaffolds

Pre-made modules are becoming common in many construction projects (Figs.5 and 6).

Fig.5. Scaffolding modules

Fig.6. Scaffolding modules are fitted together to reach high elevations

Boards: Boards are made of metal or wooden planks attached to the scaffolding for people to stand and work. Uprights also known as standards and poles are used to carry the load to base. False uprights are mainly used near entrances to the work platform. False uprights do not transfer any vertical loads to the ground. Though it may provide lateral support handrails, it does not provide any lateral supports to the scaffold system.

2. SHORING

Scaffolds are built for workers to work. Scaffolds act as work platforms for workers. On the other hand, shoring is done to support wet concrete. Once the concrete is hardened, the shoring is removed. Other than supporting wet concrete, shoring can be used to support weak columns.Let us assume that an existing column in a building is deteriorated and has to be replaced. The procedure to remove an existing column and build a new column is shown in Fig.7.

Fig.7. Provide shoring prior to removal of the column

Once proper shoring is provided and has been approved by the relevant authorities, the contractor can remove the existing load bearing column and construct a new one.

3. BRACING

Bracing is a support element provided to strengthen an existing structural element (Figs.8 and 9).

Fig.8. Deteriorated element in a structure

Fig.9. Bracing is provided for the deteriorated element

3.1 Bracing Masonry Walls

Masonry walls need to be braced during and after construction. All masonry walls have to be supported laterally. In a building, masonry walls are tied to beams, columns, and other walls.

Until the masonry wall is laterally supported, it has to be braced. In practice, bracing of masonry walls has to follow OSHA guidelines. For the exam purposes, NCEES recommends “Standard Practice for Bracing Masonry Walls Under Construction” by Mason Contractors Association of America (MCAA).

Hence, you need to know both OSHA and MCAA guidelines (Fig.10). Masonry walls are made of bricks and mortar. Until a mortar brick joint is fully developed, masonry walls have little lateral stability.

Even after the mortar is hardened, a standing masonry wall has little resistance against over-turning. As per OSHA, any wall 8 ft or taller needs to be braced.

Fig.10. Schematic diagram of a masonry wall bracing. Bracing is required tomaintain the lateral stability of a masonry wall

4. COFFERDAMS

There are instances where construction has to take place near a river, lake, or ocean. Bridge piers, harbor structures, and flood control structures are some examples. In such situations water has to be kept away from the construction area.

How can you concrete when water is pouring in? A structure has to be built to keep the water away. In such situations a temporary structure needs to be constructed to keep the water away. These temporary structures are known as cofferdams.

Cofferdams are temporary structures constructed to keep water out ofthe construction area. The majority of cofferdams are constructed in riversmainly to build bridge piers. Thanks to improvement in caisson technology, in most cases cofferdams may not be necessary anymore.

 

 

Plant Structure Corrosion Monitoring

Plant Structure Corrosion Monitoring

 

Once a plant is in operation it is important to monitor the progress of any corrosion which might be taking place. The four approaches described below vary in sophistication and cost.

The most appropriate for any plant is determined by a number of factors, including the mechanisms of corrosion which are anticipated and the implications of catastrophic or unexpected failure. Key areas of the plant require closer monitoring than readily replaceable items.

The measures described below do not replace the mandatory inspections of pressure vessels, etc. for insurance purposes. The overall philosophy of corrosion monitoring is to improve the economics of the plant’s operation by allowing the use of cheaper materials and generally reducing the over-design that goes into plant to combat corrosion.

1. Physical examination

Full records of all constructional materials that are used in the plant should be maintained and updated when repairs are undertaken.

The exteriors of all parts of the plant should be subjected to frequent visual examination and the results reported and stored for future reference. This maximizes the warning time before corrosion failures occur, since the majority of failure mechanisms cause leaks before bursting.

Key items of plant, those in which some degree of corrosion is anticipated and those which might suffer catastrophic failure should be examined in greater detail. Internal visual inspection during shutdowns is sufficient to identify most corrosion effects.

Cracking can usually be seen with the naked eye but where cracking is considered to be a possible mechanism an appropriate non-destructive test method should be employed. In items of plant which are shut down only infrequently (relative to the timescale of possible corrosion or cracking failure) external non-destructive testing is often possible.

Candidate non-destructive test methods include:

a. Ultrasonic techniques:

Wall thickness can be mea- sured to monitor the progress of general corrosion, cracks can be detected and hydrogen blisters identified. Certain construction materials such as cast iron cannot be examined by ultrasound. Skilled operators and spe- cialist equipment is required. Plant can be examined in situ except when it is above 80°C.

b. Magnetic particle inspection:

Surface emergent and some sub-surface cracking can be detected in ferro- magnetic materials. The technique must be used on the side of the material in contact with the corrodent.

c. Dye penetration inspection:

This is a simple technique, requiring a minimum of operator training. In the hands of a skilled operator it is capable of detecting fine cracks such as chloride stress corrosion cracks in austenitic stainless steels and fatigue cracks.

2. Exposure coupons and electrical resistance probes

 

If changes have been made to the process (e.g. if incoming water quality cannot be maintained or other uncertainties arise) concerning the corrosion behaviour of the construction materials,  it is possible to incorporate coupons or probes of the material into the plant and monitor their corrosion behaviour.

This approach may be used to assist in the materials selection process for a replacement plant. Small coupons (typically, 25 × 50mm) of any material may be suspended in the process stream and removed at intervals for weight loss determination and visual inspection for localized corrosion.

Electrical resistance probes comprise short strands of the appropriate material electrically isolated from the item of plant. An electrical connection from each end of the probe is fed out of the plant to a control box. Instrumentation in the box senses the electrical resistance of the probe.

The probe’s resistance rises as its cross-sectional area is lost through corrosion. The materials should be in the appropriate form, i.e. cast/wrought/welded, heat treatment and surface condi- tion.

Metal coupons should be electrically isolated from any other metallic material in the system. They should be securely attached to prevent their being dislodged and causing damage downstream.

Simple coupons and probes cannot replicate the corrosion effects due to heat transfer but otherwise provide very useful information. It should be noted that any corrosion they have suffered represents the integrated corrosion rate over the exposure time.

Corrosion rates often diminish with time as scaling or filming takes place, thus short-term exposures can give values higher than the true corrosion rate.

3. Electrochemical corrosion monitoring

A number of corrosion-monitoring techniques, based on electrochemical principles, are available. These give an indication of the instantaneous corrosion rate, which is of use when changing process conditions create a variety of corrosion effects at different times in a plant. Some techniques monitor continuously, others take a finite time to make a measurement.

  1. Polarization resistance: The current-potential behaviour of a metal, externally polarized around its corrosion potential, provides a good indication of its corrosion

The technique has the advantage of being well established and hence reliable when used within certain limitations.

This technique can only be used for certain metals, to give general corrosion rate date in electrolytes. It cannot be employed to monitor localized corrosion such as pitting, crevice corrosion or stress corrosion cracking, nor used in low-conductivity environments such as concrete, timber, soil and poor electrolytes (e.g. clean water and non-ionic solvents). Equipment is available commercially but professional advice should be sought for system design and location of probes.

  1. Impedance spectroscopy: This technique is essentially the extension of polarization resistance measurements into low-conductivity environments, including those listed

The technique can also be used to monitor atmospheric corrosion, corrosion under thin films of condensed liquid and the breakdown of protective paint coatings. Additionally, the method provides mechanistic data concerning the corrosion processes which are taking place

  1. Electrochemical noise: A variety of related techniques are now available to monitor localized No external polarization of the corroding metal is required, but the electrical noise on the corrosion potential of the metal is monitored and analysed. Signatures characteristic of pit initiation, crevice corrosion and some forms of stress corrosion cracking are obtained.

4. Thin-layer activation

This technique is based upon the detection of corrosion products, in the form of dissolved metal ions, in the process stream.

A thin layer of radioactive material is created on the process side of an item of plant. As corrosion occurs, radioactive isotopes of the elements in the construction material of the plant pass into the process stream and are detected.

The rate of metal loss is quantified and local rates of corrosion are inferred. This monitoring technique is not yet in widespread use but it has been proven in several industries.

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