PROJECT MANAGEMENT: A Handbook for Small Projects

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PROJECT MANAGEMENT A Handbook for Small Projects

Process Information Disclaimer

Information contained in this publication or as otherwise supplied to Users is believed to be accurate and correct at time of going to press, and is given in good faith, but it is for the User to satisfy itself of the suitability of the Product for its own particular purpose. GBHE gives no warranty as to the fitness of the Product for any particular purpose and any implied warranty or condition (statutory or otherwise) is excluded except to the extent that exclusion is prevented by law. GBHE accepts no liability for loss, damage or personnel injury caused or resulting from reliance on this information. Freedom under Patent, Copyright and Designs cannot be assumed.



Contents SECTION 1 PRINCIPLE AND PRACTICES 1 INTRODUCTION 2 GBHE PROJECT PROCESS 2.1 Introduction 2.2 Project Opportunity 2.3 Project Definition 2.4 Project Implementation 2.5 Project Benefit 2.6 Project Review 2.7 Business Ownership 2.8 Measurement and Auditing 3 KEY CAPABILITIES 3.1 General Skills 3.2 Personal Competencies 4 PROJECT MANAGEMENT PRACTICES - PROJECT DEFINITION 4.1 Business Opportunity Testing & Objectives Setting 4.2 Developing the Project Scope 4.3 Project Strategies 4.4 The Project Organization 4.5 Project Estimating and Planning/Work Breakdown 5 PROJECT MANAGEMENT PRACTICES – PROJECT

IMPLEMENTATION 5.1 Team Building and Team Management 5.2 Risk Management 5.3 Design Management 5.4 Contract Management 5.5 Construction Management 5.6 Commissioning Management 5.7 Change Control 5.8 Cost Management 5.9 Progress Monitoring, Control and Reporting 5.10 Information and Document Management



6 PROJECT MANAGEMENT PRACTICES - PROJECT REVIEW 6.1 Project Close Out and Reports/Reviews 6.2 Measurement and Learning 7 VALUE IMPROVING PRACTICES 7.1 Introduction 7.2 Types of Value Improving Practice FIGURES 1 PROJECT PROCESS 2 COMMERCIAL STRATEGY & RISK RELATIONSHIP 3 GBHE RISK MANAGEMENT PROCESS SECTION 2 CHECKLISTS AND REFERENCES 8 INTRODUCTION TO THIS SECTION 9 PROJECT DEFINITION CHECKLISTS 9.1 Business Opportunity Testing & Objectives Setting 9.2 Developing the Project Scope 9.3 Project Strategies 9.4 Developing the Project Organization 9.5 Cost Estimating 9.6 Contractor Selection 9.7 Work Breakdown Structure (WBS) 9.8 Planning and Control 10 PROJECT IMPLEMENTATION 10.1 Cost Management 10.2 Change Control 10.3 Document Management 10.4 Construction Management 11 PROJECT REVIEW CHECKLISTS 11.1 Project Review, Reporting and Close-Out 11.2 Measurement (Learning Log) 12 REFERENCES DOCUMENTS REFERRED TO IN THIS INFORMATION FOR ENGINEERS DOCUMENT



SECTION ONE PRINCIPLES AND PRACTICES 0 INTRODUCTION This Information for Engineers document comprises two sections. Section 1 contains the components of the GBHE Project Process, the capabilities and competencies required by a Project Manager and, finally, specific project management good practices including value improving practices. Section 2 contains information that supports the practices contained within Section 1. This includes helpful checklists, references and information about deliverables and other examples, all of which will provide practical help to Project Managers and their project teams. The document assists client sites in meeting the necessary engineering requirements related to safety, health and environmental matters on their sites, and supports the GBHE Safety, Security, Health and Environmental Policy. WHAT PROJECTS CAN IT BE APPLIED TO? Although the information contained is applicable to most projects, the document is aimed primarily at GBHE’s Consultancy and Associated Projects in the range of $40k to $5m and is adaptable across a wide range of technologies and geographic locations within this range. How you apply it depends mainly upon your Business and project strategies, the complexity of your project and the Business you belong to. Projects that are of higher cost or have some particular complexity may require the application of additional and more rigorous procedures. Such procedures can be found within each Business or organization and these will deal with the requirements of projects that are not covered by this document. WHY HAS IT BEEN WRITTEN? All GBHE's major competitors apply and work to a companywide consistent project process, one of the important features of which is a common language for all those involved. Evidence also shows that as a result, most achieve high levels of performance in delivering their projects. GBHE’s guidelines for capital investment projects now require GBHE Businesses to apply a consistent, GBHE Project Process.



This document has been written, therefore, to describe the content of the GBHE Project Process and also to provide a framework for good practice. This, supported by checklists and examples, will thereby help Project Managers and their teams to further raise GBHE's all round investment performance. Finally, although GBHE's Guidelines require the GBHE Project Process to be used company wide, this document has been produced to provide guidance not establish hard prescription. Following the GBHE Project Process or the content of this document does not imply working within a straight jacket of bureaucracy, nor does it guarantee success; but will go a long way towards making success more likely. WHO HAS IT BEEN WRITTEN FOR? It is hoped that both seasoned Project Managers and those learning the role will find the contents useful and helpful. Seasoned Project Managers as a useful reminder and new Project Managers as statement of the standards they need to achieve. It has not been produced to replace the need for project management experience and training but as a supplement to these. 2 GBHE PROJECT PROCESS 2.1 Introduction The GBHE Project Process is part of a total business investment process whose prime aim is helping to ensure that capital and revenue resources within the company are spent effectively and that key safety, health and environmental standards are met. The Project Process is set out in Figure 1 and defines the key stages and decision points that are required for all projects. It does not prescribe the way in which those stages are undertaken, this will normally be done by local project procedures appropriate to the nature and size of the project as well as the local business and regional context. For larger or more complex projects, additional decision gates may well be required. Business and project strategy usually determines how the Project Process is applied.



FIGURE 1 PROJECT PROCESS

2.2 Project Opportunity The Business identifies the opportunities and their nature, reviews alternatives and identifies the potential risks and benefits before defining the business objectives for the project and appointing a Business owner. The decision to proceed with the project and to provide appropriate resources is recorded. 2.3 Project Definition The project definition stage tests that the business objectives are clear and establishes critical success criteria for the project. The scope of the project is defined in sufficient detail to satisfy the sanctioning criteria; and planning of the execution of the project is completed in order to define roles and responsibilities and resourcing requirements; schedules are produced which are based on an appropriate work breakdown structure and estimation of costs. A defined project strategy, definition package, project schedule and sanction cost estimate are produced at this stage. 2.4 Project Implementation Following the sanction decision, project implementation proceeds in accordance with the defined project strategy and scope. The stages of implementation vary with the nature of the project but typically include detailed design, procurement, construction and start-up.



Appropriate monitoring, validation and control measures are employed to track progress, control costs, ensure safety and limit change to ensure the project objectives are achieved. The deliverable at the end of this stage is a productive asset, which meets the business objectives. 2.5 Project Benefit The Business ensures that the project benefits defined at the outset of the project continue to be realized throughout the operating life of the asset. 2.6 Project Review All projects complete an appropriate review process, which ensures that learning from the project, both positive and negative, is captured and recorded. This includes both project learning and business learning in terms of whether business objectives have been achieved by the investment. Appropriate mechanisms are put in place to ensure such learning is disseminated throughout the Business and project communities to maintain effective feedback for future improvement. 2.7 Business Ownership Each GBHE project has an identified Business owner responsible for delivery of the project benefit and accountable for managing the integration of activities from identification of project opportunity through to delivery of project benefit and completion of project review. The Business owner has responsibility for ensuring that the capability is in place for the effective delivery of all stages of the project process. This usually requires the appointment of a suitably qualified Project Manager. The Business owner also has responsibility for ensuring that essential safety, health and environmental requirements are met throughout the project process. 2.8 Measurement and Auditing Each stage of the GBHE Project Process includes the definition of key deliverables. These deliverables form the basis on which decisions will be made to proceed, or otherwise, to the next stage of the project process. It is important that these deliverables are measurable and that suitable audits or project assessments are carried out from time to time to ensure that the process is being effectively and consistently applied.



These can take the form of self-assessments or may be peer assessments or independent audits. It is particularly important that regular assurance of SHE compliance on projects is undertaken. 3 KEY CAPABILITIES In order to successfully complete projects there are a number of key competencies and skills that are required within the project team. If the team is lacking in any of these capability areas, the project may still be successful but the risk of failure is greatly increased. Project management is both an art and a science, combining a structured logical approach, which requires discipline with a range of skills which require experience and judgment. The need for these key skills and competencies is not reduced merely because the project is small. 3.1 General Skills The key skill areas are as follows:

• Adoption of a project process and appropriate procedures to ensure that objectives are understood, scope defined and strategy planned before implementation takes place. The GBHE Project Process is defined in Section 2. It is part of the responsibility of the Project Manager to ensure that the discipline of the process is applied throughout the project.

• The project team needs clearly defined roles and responsibilities, which

cover all the project requirements. The internal interfaces between project team members need to be clear as well as the interfaces outside the project team (e.g. with the Business, works, other projects, etc.). The interfaces with contractors and suppliers are especially important and need to be properly managed.

• The Project Manager must ensure that all the appropriate skills are

available and harnessed at the right time. Unlike many line management jobs, the Project Manager will often need to draw upon the skills of people who have other accountabilities in the organization. Access to resources is a key requirement of project management.

• Since projects usually involve the integration of related activities in a

defined time frame, good team building and communications skills are required by the Project Manager. Similarly, good projects depend heavily upon planning and preparation and it is essential that those skills are available within the project team.



• It is a key requirement in all projects that knowledge in the technology is available to the project team. For the core skills of project management, process and engineering design, knowledge of hazards and statutory requirements, operational knowledge, construction management, purchasing and contract management etc., these will often exist within the project team. There are, however, other knowledge and skills which may be required to ensure a successful project, such as risk management, scientific know-how, legal and financial knowledge, and the project team needs to have access to these where appropriate.

• Some knowledge and skills can be developed through training and education; others are only developed by practice and experience. It is important that all members of the team have been trained to a level that enables them to discharge their responsibilities and have the appropriate level of experience where skill and judgment is required. It is the responsibility of the Project Manager to ensure that the skill balance in the team is sufficient to enable the project to be successfully completed.

3.2 Personal Competencies The following make up the basic personal competencies required by the Project Manager and they also need to exist to some extent or another within the rest of the project team. 3.2.1 Defining This is about helping customers, suppliers and the project team makes up their minds and is aware of the consequences of their decisions. 3.2.2 Scanning This is surveying the totality of the project including such things as business politics, the market, goals, technology and progress against plans and budgets, whilst maintaining a clear appreciation of the whole project. 3.2.3 Strategic Thinking This is being able to identify key methods of approach that, if successfully accomplished, will greatly facilitate the completion of the many tasks to be done. Once decided, these become the key elements of the strategy.



3.2.4 Selecting This is differentiating between those issues having a potentially great impact on the project and those not so important. 3.2.5 Resourcing This is finding the necessary resources to take advantage of an opportunity or to resolve an issue or problem. 3.2.6 Influencing This is using personal skills to get things done. 3.2.7 Interfacing This is making sure that intergroup relationships promote the project rather than draining its energy. 4 PROJECT MANAGEMENT PRACTICES - PROJECT DEFINITION 4.1 Business Opportunity Testing & Objectives Setting A successful project not only meets its own targets but delivers a benefit and acceptable rate of return for the Business. It thus follows that both the project objectives and the underlying Business drivers must be fully aligned, developed and understood. If the latter have not been thoroughly developed, then the expenditure incurred by the project team is likely to be abortive or wasted. Further, it is difficult for a Project Manager to set the project objectives if there is limited clarity around the reason for proceeding with the project and the issues that affect it. Hence it follows that the Project Manager needs to establish the background to the project when they first become involved and certainly before committing significant expenditure or other key resource. There are a number of key questions (see Section 2 checklists) which can aid this process.



Having answered these questions, the Project Manager can then develop the project strategy and objectives. This is sometimes best achieved by working backwards from the end of the project and questioning what each stage of the project requires from the preceding stage (i.e. what do commissioning require from construction)? What does construction need from design and procurement to achieve this, and in turn, what does procurement require from design? The Project Manager then can set objectives for each area and stage of the project which are consistent with the overall direction of the work. They can then use these objectives to determine and select the relevant resources and services for the project. 4.2 Developing the Project Scope 4.2.1 Introduction Successful projects are categorized by good early definition, enabling only viable business options to be evaluated, approved and implemented. The Project Definition stage is concerned with developing definition, identifying and assessing options, evaluating and recycling them through a series of decision stages. Only viable proposals are then taken forward and considered for approval by the sanctioning authority concerned. There are 3 key phases during definition (i.e. Assessment, Optimization and Development). Normally, 2 key documents are produced:

• Project Proposal;

• Project Specification and Strategy. These are used to describe for example project boundaries, scope, cost and timing. They are key documents and are used to drive out issues and ensure alignment between the client, engineering and operational stakeholders. The Project Manager takes the project team through the 3 important and distinct phases, assessment, optimization and development, which systematically and progressively improves definition and limits costly re-cycle and re-work. Poor definition leads to a poor project outcome. Throughout, the project proposal and project specification are re-visited, improved and re-issued.



Perhaps only the more complex of small projects will involve these 3 discrete definition and re-cycle phases. However, following such systematic discipline is good practice and can only help in improving the completeness of the scope and the viability of the overall investment (not just the project). 4.2.2 Importance of Scope Development A good scope is a prerequisite for a successful project. Scope development is a key activity that involves taking the client’s Project Proposal and building it into a working project scope. The Project Manager in conjunction with the Project Owner makes certain this work is carried out thoroughly and that the scope fulfils the original intent and is supported by all stakeholders. A Project Scope document is produced which, amongst other reasons for its production, helps the scope to be tested to ensure adequacy and value. The scope documents are important because:

• By reviewing the project proposal and specification documents with the client it confirms correct interpretation of Design Brief by the Project Manager. Also:

o Becomes the official record of agreement between client and Project Manager;

o Serves as a base case from which to control change;

o Ensures a consistent understanding of the brief across the project team;

o Is the basis for the estimate;

o Is the basis for the program;

o As new people are brought into the Project Team this is where they

start;

o They are key documents in the Project Review, which is an important part of the Project Process.



4.2.3 Getting the Right Project The scope development phase is the stage at which the client and project team have the maximum influence on the project outcome. More projects have failed to deliver business benefit through doing the wrong project than through poor execution. The client discusses the business case with the Project Manager, stresses what’s important and what is less important. Alternative solutions and ideas are also investigated. It is rare that first ideas cannot be improved upon. Where appropriate, input from the following is also key:

• Business. • Marketing.

• Engineering, Design and Construction.

• Purchasing, Tax positions for overseas projects.

• Commissioning.

• Operations.

• Maintenance.

• Environmental.

• Safety.

• Occupational Health.



4.2.4 Value Improving Practices (VIP’s) Studies of past projects have shown that applying VIP’s at the right stage will enhance the quality of the project scope. Value improving practice is covered in Section 7 of this document. However, the following are examples of those deployed during Project Definition:

• Value Analysis: Breaks the scope down into its functional elements and allocates the estimated costs allowing judgments to be made on value for money.

• Conceptual Analysis:

Similar to above but carried out earlier in the project process using a conceptual or very preliminary estimate.

• BETA Studies - (Business, Engineering and Technical Assessment):

Compares business aspirations and needs with proposed engineering solutions.

• Risk Management:

Identifies project risks and develops a risk management process to manage through the project.

4.2.5 Definition Phases

• Assessment: This is concerned with establishing understanding of the key project drivers and influences, the development of an outline scope and the evaluation of the project economics to assess viability. The project scope is developed to a point where an order of cost estimate can be produced (likely ±30%) and the timescale can be confirmed with reasonable confidence. With this information a first-pass economic assessment can be made by the Business to support decision making.



• Optimization: This involves further developing understanding and optimizing the project economics. It is the phase, for example, where such things as the site would normally be confirmed and process design and layouts optimized. Alternative technologies are evaluated and VIP practices are applied such as VA. If this phase is carried out properly, costs can be reduced considerably and/or operability improved. Optimization and risk mitigation are the key drivers. The likely outcome at the end of this phase is that an optimal solution is developed; confidence in the outcome increased considerably, scope fixed and key project strategies in place which will exist through to completion. Only fully optimized and viable investments are taken forward to the development phase. Costs will be evaluated to ±20% confidence. If this is completed then the client will have reworked economics and be in the position to consider commitments to increased pre-sanction funds.

• Development: This is concerned with developing definition, improving implementation strategies and commercial arrangements to a point where the implementation phase can be initiated. It helps reduce risk by increasing knowledge/definition and starts the preparation for implementation. At the end of development the project will have been defined to a point where delivery, in accordance with the investment case, can be formally assured. Costs are evaluated to ±10% confidence and a firm project schedule is available. Contractual/commercial strategies and arrangements will also be fully developed. 4.3 Project Strategies 4.3.1 Introduction To meet the business objectives and to provide a firm basis for management and control requires a project strategy to be established as an early and key part of project definition. The project strategy considers, for example, such things as purchasing and contracting options, project organization roles and responsibilities, timing and budgeting, information management, how the project is to be designed, constructed and commissioned, role of the client, communications and much more.



Formulating the project strategy involves considering all issues likely to affect the project and the way in which they can be satisfied; the outcome provides a framework for carrying out all subsequent project activities. As such, the project strategy provides alignment of business objectives with those of the project and this is therefore central to the successful outcome of the project. 4.3.2 Contract and Procurement Strategy 4.3.2.1 Contract Strategy The Project Manager must make available all the required skills and resources to the project to effectively achieve its aims. It is only on very small projects, however, that all of the skills required are available in-house. For the majority of projects, some skills within the project team must be supplemented by the use of outside resources. Procuring these skills will be done through a contract. The efficiency of the project will be determined by the Project Manager's selection and subsequent management of the contract. The successful management of any Contractor depends on a mutually respectful relationship, with the objectives of both parties aligned to the objectives of the Project. The relationship is crucial to success, and recognizing that the Contractor has been engaged to supplement a skills shortfall within the project team is the best way of avoiding the temptation for scarce specialist client resources to get involved in detail which is the scope of the Contractor. Many an escalation in scope and project cost has occurred because of 'preferential engineering' - a difference of professional opinion, when either solution would achieve the contract objective. It is worth bearing in mind that: "A Contractor selected with the appropriate skills for the scope of works required, and with appropriate reward for the complexity of the work and the market conditions prevailing at the time, will perform to the standard required by the terms of engagement" A comprehensive contracting strategy is therefore essential for all projects and it needs to cover all "procurement" activities. This is the foundation for effective contract management and formulation commences during Project Definition. The key to a successful outcome is a strategy that is aligned with the overall investment objectives of the project and the aspirations of the contractor or supplier. The contracting strategy defines the number of different contracts, the scope of work of the contracts, the structure of the contracts, the timing of contractors and so forth.



Choosing the contract type should be based on sound objectives with respect to such things as performance, time schedule, quality, and scope, flexibility of design, the client’s involvement and risk allocation. The way in which you engage and manage the contractor is therefore extremely important. A "win - win" approach which embodies appropriate incentives balanced with associated risk is the most likely route to success. The type of contract that emerges will then help to deliver the required outcomes for GBHE in terms of efficiency, scope, cost and time and will also be aligned to the aspirations of the contractor or supplier.

• Careful planning is essential, and preparing a contract plan which embodies the key elements to be contracted out, the preferred strategy and a related schedule is good practice. Having enough time to complete contract negotiations is key to getting the strategy you need, and making sure that you have enough time for all the steps is essential.

• It is essential to reflect the kind of constraints (some of which are identified

below) the project is facing in the strategy. Identifying these as soon as possible during project definition, as part of the overall process for formulating overall project strategy, will help you.

• Consider and promote strategy that includes innovative approaches to

incentives as far as you can. For instance, these could be based upon schedule, total project cost, quality, man-hours, client satisfaction and so on.

• If the project is part of a joint venture or other type of co-operative alliance,

this will have significant impact on the contract strategy. The joint venture partners, or similar, will have specific objectives of their own in addition to the overall product strategy, this also needs to be incorporated and you will need to plan for a long lead time to complete the strategy stage.

• A key output of the strategy is the decision on the type of contract. There

are a number of contract options. All arrangements bring with them different risks, advantages and, importantly, dictate the need for different levels of contribution and hence responsibility from the client.

• A project is different from a manufacturing operation. In addition to direct

labor and direct materials a project organization may involve multiple layers of management for example, as subcontractors work under larger contractors and vendors. The result being mark ups for overhead and profit and contingencies have a great effect on the final cost. The Project Manager is however expected to achieve efficiencies through the selection of an appropriate contract strategy and, specifically, thereby:



• Eliminating mark ups by eliminating layers of subcontracting;

• Eliminating mark ups through selection of competitive bidders who are

matched to the size of the project;

• Eliminating mark ups for contingency during the bidding and procurement cycles through good scope definition;

• Reducing construction costs through proper evaluation and selection of alternatives;

• Reducing engineering design costs through leadership and complimentary services.

• The Project Manager, specialists within the project team and the Project

Owner are jointly involved and responsible for the development of the contract strategy. Examples of the constraints that the projects face that need to be taken into account are as follows:

• Flexibility in execution;

• Time schedule;

• Client involvement;

• Project budget;

• Availability of client personnel;

• Risks connected with the project;

• Technical complexity of the project.

• Capabilities of available contractors;

• Location of the project;

• Uncertainties;

• Quality of the work;



• Point in life cycle of product. 4.3.2.2 Types of Contract There are a number of contract types frequently used and referred to industry-wide. However, the use of this terminology is often variable; therefore the important consideration is that a contract needs to be selected which will be aimed at delivering the project objectives, and the scope must be clearly and unambiguously defined in the contract document. The following are some frequently used contract types: Management by Client: Each complete work package is contracted separately. The commercial basis for the different contracts is variable. The client supervises the contracts and manages the contractors. This type involves a high management overhead for the client in terms of the management effort needed to control the individual contract interfaces. Engineering, Procurement, Construction Management (EPCM): Detailed engineering, procurement and construction contract. The commercial basis can vary from anything between lump sum and full reimbursable. If a single contract is placed on a lump sum approach, the client usually places a contract with a single contractor who carries the total responsibility for the project. The contractor may in turn subcontract part of the work, but remains totally responsible. If established properly and managed effectively these arrangements, based on a well-defined scope, involve the least amount of contract interface management effort for the client. Turn Key: The scope of works normally comprises detailed engineering, procurement and construction up to and including commissioning. The commercial basis for the total project is always a lump sum price. A Main contractor handles the contract and may sub-contract specialist works to appropriate subcontractors. Complete turnkey contracting involving little or no client involvement up to take-over has not been widely used by GBHE.



Construction Installation Contracts: Construction/installation contracts can be grouped into four approaches based on the risk allocation and commercial arrangement:

• Lump Sum Construction Contract:

A single contract approach on a lump sum basis. The client places a contract with the construction contractor who carries the total responsibility for the construction. The contractor may in turn subcontract part of the work, but remains totally responsible. The contractor bears the economic risk of the execution. A lump sum contract based on full design generally leads to the best defined program and lowest costs, but not necessarily the shortest project execution time.

• Management Contractor:

Single contract approach. The client places a contract covering the entire construction with the management contractor, for a fee related to a target total cost for the installation subcontracts. The contractor will manage the construction/installation subcontracts, which may be on a fixed price or reimbursable basis. The client agrees to pay the management contractor for the actual cost of the subcontracts, which may be a higher or lower figure than the target set. The contractor carries responsibility for the entire construction activity.

• Main Contractor (sometimes called Coordinating Contractor):

Multiple contract approach. The client places several contracts with various contractors to execute the construction. One of the contractors also manages the other contractors and co-ordinates the execution. Each contractor is responsible for and carries the financial risk for its own scope of work. The commercial basis for the contracts is variable. This approach usually also requires a higher level of client management activity.

• Construction Management:

Similar to coordinating contractor, with the difference being that the construction management contractor performs construction management only and no actual construction.



Contracts are placed in the name and on behalf of the client with installation contractors by the construction management contractor. The construction management contractor carries financial risk for its own scope of services. The commercial basis for the contracts is variable.

4.3.2.3 Commercial Considerations The key to commercial success must be in acquiring commercial awareness. This is a subject in itself and too large to be covered in detail here. Help is available through both internal and external courses that are designed to reinforce practical experience. Contracts are classified by the price type, examples being, firm and fixed price, cost plus, reimbursable and incentive. You can’t rely too heavily on this terminology, for example some of these are sometimes transposed in trade practices and combined as fixed firm price or firm fixed price etc. leading to confusion. The degree to which cost, time, performance and profit is linked is reflected by the type of contract selected and needs to be resolved as part of the contract strategy. In addition, payment and the mechanisms involved is an exceedingly important part of the commercial considerations. Performance driven contracts will often, for example, benefit by payment being linked to completion of specific deliverables or other specific milestone achievements. This greatly improves the likelihood for control and helps to mitigate against risk. 4.3.2.4 Commercial Arrangements The two extremes of the wide variety of commercial arrangement available are: (1) Lump Sum (or fixed price). (2) Reimbursable (or cost plus). The variations between Lump Sum and Reimbursable are almost limitless. For each project the optimum commercial basis has to be developed based on the project objectives, client requirements and specific circumstances. The commercial strategy should be developed by a team including the Project Owner, where appropriate the Commercial Manager and the Project Manager. Figure 2 illustrates the decision process. The commercial strategy reflects on the commercial basis of the contract and is independent of its scope of work.



FIGURE 2 COMMERCIAL STRATEGY & RISK RELATIONSHIP

Some frequently used arrangements include:

• Guaranteed maximum price:

This variation is essentially reimbursable but puts a ceiling on the total project cost and provides more certainty in critical budget and financing situations. A reasonable scope definition is required. It is usually combined with an incentive plan related to cost savings.

• Unit Rates:

This variation is preferred where the specifications are well defined but the scope of work and therefore material and labor quantities are subject to variation. The contract quotes unit rates (including labor) per defined quantity and quality of material or item of work.

This type of contract requires a labor intensive supervision (quantity surveying) of the contractor.

• Fixed Fee:

The contractor is reimbursed for his material costs but the profit and some general overheads are included in a fixed fee based on an agreed scope of work.



• Fixed Price with Escalation (variation of fixed fee):

The contractor’s risk is reduced by means of an indexed adjustment to the initially quoted contract price. This variation may be appropriate in unstable economic conditions.

• Omnibus Fee:

This approach is a combination of the lump sum and fixed fee type contracts. A portion of the contractor’s cost is fixed, with a percentage fee applied to other reimbursable costs. Strict control procedures should be established to keep the fixed and reimbursable parts of the work separate before using this type of contract.

4.3.2.5 Incentive Plans Irrespective of contract types, the contractor can be stimulated to better performance by means of incentives built into the contract. These incentives are generally based on achieving mutual benefit for client and contractor by means of increased productivity, efficiency or cost effective execution. Incentives are often directly self-funding. Incentive plans are becoming increasingly sophisticated. They can be based on schedule, total project cost, productivity, safety, quality, man-hours, client satisfaction and so forth. Incentives can be unilateral or of the bonus/penalty type. In the first case the contractor is only rewarded for better than target performance, in the latter the contractor will also be penalized if the target performance is not achieved. Penalty clauses, however, may cause the contractor to re-assess his risk and add an allowance to the contract price for the possible imposition of a penalty, or to ’relax’ the targets set for its performance. 4.3.2.6 Contractor Pre-Qualification Contractors often need to be pre-qualified to assess their suitability to carry out the work. Where this is the case, a formal and objective process is used and the results and decisions are recorded. The Project Manager ensures that this is carried out objectively against consistent criteria. There are at least 2 routes depending upon the size and scale of the contract. One is to carry out "bench" surveys based upon existing local intelligence and completion of the questionnaire and the second is a more detailed and rigorous approach based on visits and interviews.



The first route can also be used in conjunction with the second to refine a longer list of possible suppliers or contractors down to a short list when the second approach can be used to focus on the likely bidder list. 4.3.2.7 Enquiry Parcel Preliminary engineering or definition is insufficient for instructions to third parties. A bid package or enquiry parcel is required. This must provide sufficient information for the contractor or supplier, based upon the instructions to tender, to bid for the work including the completion of any pre-contract work that may require to support the tender price. The checklists contain help with putting together the contents of an enquiry parcel. 4.3.2.8 Tender Evaluation and Contract Award Tender Evaluation: Following receipt of the bids, strict confidential and consistent procedures need to be followed. The instructions to tender will contain information for the supplier on how the bid is required to be structured and when it must be returned. It is essential that this is maintained so that such things as co-operate governance and commercial professionalism can be maintained at all times. It may well be necessary to clarify detail with the contractors or suppliers concerned following receipt, however it is important that confidentiality and discretion is maintained when providing answers to any questions they might ask. The bids are compared and analyzed consistently against criteria developed prior to enquiry. Perhaps where complex projects or contractual arrangements are concerned, it is sometimes useful to have the bids validated or compared by an independent organization to provide greater objectivity from an industry wide perspective. It is good practice to include a (GBHE) purchasing professional in this process. The outcome of the evaluation process is recorded including reasons for the conclusions and final choice made.



• Contract Award:

Contract award is the final step in the process leading to execution of the works and management of the ongoing contract. Care is required to ensure that the award of the contract is a formal step including the issue of all necessary paperwork, and contract related activities are not inadvertently entered into which might prejudice or jeopardize the eventual ongoing contract.

Negotiation is a key activity at this stage and merits a complete manual in its own right. The negotiation might be related to:

• A contract issue; • The process of agreeing the contract; • or, following award, other post contract negotiations.

Negotiating is a critical and specialist task and requires professional assistance and training. Preparation and formulation of strategy and a plan is key to a successful outcome.

4.3.3 Design Strategy This concerns not only how the design will be handled in terms of the organizations best equipped to do it, proportions of the work they will handle, consideration of the skill balance needed, the resource levels required but also consideration of the tools and techniques to be used to support the design process. Resources like IT are often key to the successful outcome of design and particularly for projects where people are dispersed over a wide area. Communication is a key element of the design strategy; poor communication processes add considerable inefficiencies to the design process and overall success of the project. Contributions required from the client, roles of external specialists are also key items to be considered when formulating and establishing the design strategy.



4.3.4 Construction Strategy The strategy for construction (including its management) is developed as early as possible during project definition as a key part of the overall project strategy. In addition, it needs to be formally recorded and communicated within the project team. The construction strategy also plays a key part in developing contracting and purchasing strategies and is likely to be refined and developed during the time these are being considered and when detail design is being carried out. Some key aspects of this strategy will include considerations for site establishment, resourcing, contracts, construction SHE, off-site assemblies, construction risk and arrangements during the hand-over to operations. Additional items for consideration are included within the checklists. The Project Manager, in conjunction with construction, formulates and establishes the appropriate construction strategy. 4.3.5 Commissioning Strategy This covers not only the events after completion of the construction, but also the role commissioning plays in the development of the overall project process. Resourcing, the extent of interface with operating plant, batch trials, hand-over sequence, availability of raw materials for start-up, production windows are some examples of the things to consider. The Project Manager in conjunction with commissioning formulates and establishes the commissioning strategy. For a project to be successful, an effective communication strategy is essential. The objective of this is to make certain that all those involved in the project are regularly and effectively informed on the state of the project. Small projects often have teams whose members work very closely to each other and therefore the strategy for projects of this sort will be very different than where the project team is dispersed over great distances. However, considering the following good practice improves any communications process:

• The communication process is established at the start of the project and reviewed thereafter at regular intervals to make certain that any new communication requirements are incorporated.

• The following is typical of the organizations who may need to be kept

regularly informed:

• Business; • Production works;



• Project Team; • Other GBHE management; • Contractors and subcontractors; • Suppliers.

• The amount of information communicated to each individual needs to be

established carefully to make certain that relevant messages are communicated and individuals are not overwhelmed with data.

• The presentation of information needs to be carefully designed to make

certain that it can be effectively absorbed. Use of graphical presentation gets the best results and should be considered.

• The means of transferring information, either electronic, paper or

combinations of both is important and needs to be established as part of the strategy.

• Circulation of the routine project status report (or a summary of it) is a very

good way of communicating project status formally.

• Regular project team meetings, formal or informal can also used to keep the team informed.

• Regular presentations on the status of the project at the following:

• Steering group meetings;

• Appropriate meetings of works personnel, particularly works

management;

• Routine review meetings with contractors, subcontractors and suppliers.

A regular project newsletter is another very effective way of communicating.



4.4 The Project Organization 4.4.1 Introduction The project organization and its roles and responsibilities are a key ingredient for the success a project. The organization and certain of the roles and responsibilities vary from project to project depending on such things as complexity and size. Smaller and less complex projects are less likely to require as many of the roles needed by larger and more complex projects. Multi-discipline projects, for example, will have matrix organizations, whereas single discipline projects may not. The organizational model chosen will reflect such considerations whilst avoiding the need for overly complex interfaces roles and responsibilities. Studies show that team integration is an important characteristic of particularly successful smaller projects. Projects with truly integrated teams cost less than projects without and implement the project around 20% faster. Project Managers often find themselves responsible for multiple smaller projects, and studies show that for each additional project managed the schedule grows longer by 4% and definition worsens. However, setting pacesetter targets, achieving business buy-in and support and communicating effectively the importance of the project on the project team improves cost performance. In addition, results also show that defining the business and project objectives (and communicating these effectively within the project team) clearly and resisting changes can double cost performance. These are key considerations to take on board when building and developing your project team. 4.4.2 Roles & Responsibilities For any project to be successful there needs to be clarity with regard to who is carrying out what role, and what the individual responsibilities are. This needs to be agreed and understood by the key individuals involved with the project, and communicated effectively to all who are in any way connected with the venture as early as possible. Everyone involved in the project should be fully aware of the individuals (by name) assigned to the various projects roles, the extent of their respective accountabilities and the tasks that fall within each person’s remit. It is generally more effective to have one person only accountable for each given task (committee responsibility can result in some tasks not being attended to).



Roles and responsibilities should be clear at all levels of the project organization, with those in leadership positions setting these out for their respective teams. The Project Manager plays a key role at Business and Project levels, and should ensure that these roles and responsibilities are clear, agreed and documented. Note that one individual may adopt more than one of the roles outlined below. It is, however, important that where an individual carries out more than one role, these roles should be complementary and do not create potential areas of conflict. At the Business level, the following roles/persons should be identified: (For larger and/or more complex projects, they should meet regularly as a steering committee, to ensure that the project work is directed towards and functions to meet Business requirements):

• The person who holds the active ownership for the delivery and success of the project; the project’s customer; the person who will champion the project, who is responsible for gaining and retaining the Business support and who seeks the requisite funding and resources.

• The person who sets the technical and SHE standards for the project.

• The person accountable for Business Planning who can evaluate the

project against this background.

• The person who co-ordinates the various Business functions involved in the project, ensures that the project is in the Capital program and who prepares the Expenditure Proposal.

• The person who will accept and operate the assets delivered by the project.

• The person responsible for ensuring that the products manufactured on

the new asset will be marketed and sold.

• The person responsible for managing the execution phase of the project.

• The person for ensuring that SHE performance of the new asset is acceptable.



• The person responsible for overall project finance and ensuring that there is a Business case for the project.

• The person managing the R & T effort which affects the project.

• The person accountable for closing the project and preparing the closure

report. At Project level, the following persons need to be identified. They will need to meet regularly to focus on the delivery of the project and to drive it forward. • (as above) the person who co-ordinates the various Business functions

involved in the project, ensures that the project is in the Capital program and who prepares the Expenditure Proposal.

• (as above) the person responsible for managing the execution phase of

the project.

• The person responsible for preparing and maintaining the project plan, and communicating and agreeing it with all interested parties.

• The person responsible for estimating, preparing and maintaining cost

reports, tracking costs and communicating these as required.

• The Chemical Engineer who specifies the process requirements for the project and who underwrites the process engineering.

• Engineers with the knowledge and experience to lead the design work and

who underwrite the engineering in their respective disciplines.

• The people from the Works which will receive the asset, who ensures that operational and Works needs are incorporated into the project design and execution, and who communicates project information to the Works.

• The person who develops the procurement strategy with the Project

Manager and assists with its execution.

• The person responsible for site work aspects of the project.



• The person responsible for managing the commissioning of the new asset and its hand-over to the Works.

In addition to the above, the Engineering Project Manager needs to appoint the following: • Design Authorities.

• Design Verification Authorities.

• Hazard Study Leader. All of these are defined in the GBHE Engineering Procedures. 4.4.3 The Organization Projects are initiated for a wide variety of reasons and against varying environments. Further, project teams are made up of individual persons, each of whom have their own unique blend of skills and experience. Consequently, projects are set up and organized in different ways, in part to respond to the requirements and constraints laid upon the project and in part to reflect the balance of ability and skill within the team. It is essential that the Project Manager take full account of these issues when determining the project strategy and organization. Likewise, it is rare for a project to be handled completely in-house, and thus the project team is likely to include contractors, consultants, vendors and/or other service providers. The Project Manager needs to consider how each party can best contribute to the success of the project and then create and sustain the working environment that will enable this. The organizational model selected to deliver it is likely to vary from project to project depending upon characteristics such as size, technology, complexity, degree of contractor involvement, role of external authorities, joint venture considerations and many more. Good practice will involve making sure that the organization has clear and unambiguous lines of accountability and reporting, avoids duplication and has uncomplicated interfaces as far as is practicable.



4.5 Project Estimating and Planning/Work Breakdown 4.5.1 Introduction Planning typically involves deciding what needs to be done, how it should be done and who’s responsible. Estimating and planning involves deciding how long it is going to take and when it is best to do it. Monitoring provides the feedback loop required for effecting control by checking whether plans and schedules are being achieved and, if they are not, what forecasts can be made and what re-planning is needed for the future to take corrective action. Good planning relies upon the establishment of project strategy, definition, deliverables, and allocation of responsibilities and subsequent management of the overall project process. The Work Breakdown Structure (WBS) is a key tool for identifying and displaying the basic elements of the project deliverables. The plan and the WBS often develop simultaneously. 4.5.2 Developing the WBS • Breaking down the project scope into clear accountabilities for delivery

and control will help bring about effective project control. The time to do this is when there is reasonable understanding of the project scope. Work Breakdown Structure (WBS) is a technique that can be used to achieve this. Producing a WBS will also provide a framework for the project budget and a structure for progress reporting.

• In order to develop the WBS it is essential that the Project Objectives are

clearly defined in terms of what the Project Team expect to have produced by the end of the project.

• The development of the WBS takes place by identifying the project

deliverables and then sub deliverables which are required to complete the main deliverables. This sub-dividing of deliverables continues to the point where a clearly quantifiable final element is identified.

• A final element sub-deliverable does not need to be a single function task but must be capable of being assigned as a single accountability. In some cases this may mean assignment of a whole work package to a specific contractor, in other cases an individual may be responsible for the provision of a particular element of the design.



• The completed WBS can be displayed either as a hierarchical listing or in the organization chart format.

• When completed, the WBS can be used to help with:

• Identifying resource requirements; • Developing the estimate (from Order of Cost to Grade ’B’); • Assigning Responsibilities; • Resource Identification; • Sequencing and Scheduling the Project; • Monitoring and Controlling Change.

4.5.3 Estimating • It may seem a statement of the obvious, but the key to accurate estimating is

to ensure that everything that is required from the project has been considered. The best opportunity for this is within the WBS.

• Where possible, the production of the estimate should be a team effort with

production of various sections in line with accountabilities within the WBS. In some cases, particularly when developing very early order of cost estimates, the Project Manager/Engineer may have to rely on their own experience to produce the estimate; in such cases the value of a comprehensive WBS will become apparent.

• The first stage in producing the estimate is the identification of the individual

resources needed to complete the deliverables as displayed in the final elements of the WBS. The typical resource types which may be required include:

• Human - designers, planners, construction management; • Facilities - buildings, furniture, team accommodation; • Equipment - types, hire/purchase; • Materials - bulk, one-off, specialist, MPI.

• Having identified the types of resources needed, the next step is to identify

the unit rate of each resource and how much of each resource is needed. • Use of Value Analysis allows for future decision making against Change

Requests to be based on sound cost information.



• At the earliest stage of project definition, identification of resource requirements will facilitate ’ball-park’ or ’Order of Cost’ estimates to be produced. As the definition develops, the same process can be used to produce grade 'B'(±10%) estimates for sanction. Though this level of estimate will normally be produced within a functional group such as piping, vessels etc. it may be expected that each function has considered its own WBS for its contribution.

• As definition improves, uncertainty and risk will, in general, reduce. However,

it is very important that the potential impact of individual risks is assessed when considering the level of contingency required within a sanction estimate. It is entirely legitimate to have a general level of contingency below 10% and in addition to have a specifically defined contingency for an individual risk.

4.5.4 Planning This involves deciding and recording what needs to be done, how it should be done, how long it will take, who should do it and how many resources are needed. The purpose of planning is to organize the delivery of the project and the resources required for delivery in order to avoid future problems. The WBS is the tool which shows WHAT must be done to complete a project; however, in order to plan WHEN it must be done, it is necessary to combine both availability of resources (WHO) required to achieve the task and the logical sequencing of those tasks. • Deciding project strategy is an essential element of planning, and establishing

this as early as possible is good practice, providing a firm basis for detailed planning, scheduling and subsequent project control.

• Establishing appropriate measures of project performance as early as

possible (and agreeing these with the project owner), likely based upon critical success factors, will help in benchmarking the delivery of benefit at completion.

• Deciding and establishing as early as possible, systems for managing hand-

overs will help the effective and efficient hand-over of design packages to construction, equipment and process system packages to commissioning, operating asset to operating management.



• Typically, one integrated project master plan is needed covering all project

stages. From this a hierarchy of plans can be produced of increasing levels of detail to meet the requirements for effective project control (Critical path analysis for planning and Gantt bar charts for scheduling, monitoring and control, are good practice planning techniques).

• Resource management is an essential part of planning. People are the most

common type of resource for whom resource planning is carried out. However, it may be necessary sometimes to look also at other critical resources like equipment. (Resource planning techniques are often embodied in computer software planning packages and can be usefully used to provide indications of resource requirements).

• Agreeing and recording responsibilities and requirements for planning and

control (particularly with a contractor), is important to do and record as early as possible.

• Having the plan formally approved by the Project Owner and Project Manager

will engender joint ownership, commitment and provide a firm basis for effective control.

• When a contractor is employed, it is essential that a contract master schedule

is produced identifying key contract milestones (payment or critical interface milestones, for example). Detailed planning and scheduling is the responsibility of the contractor down to whatever level is appropriate for effective control.

• In order to be able to organize resources, it is necessary to ensure that

responsibility for completing final element tasks is clear. It is essential that only one person is given the prime responsibility for completing a final element deliverable in order to avoid confusion amongst team members and ensure delivery.

• In assigning responsibility it is important to consider the skills and knowledge

that may be required to complete the task. If resources are not available within the immediate project team, the Project Manager ensures an external supply is made available.



• There are many different scheduling techniques such as Program Evaluation

and Review Technique (PERT)) and Critical Path Method (CPM). Choice of technique will depend on project complexity and personal choice; however, project scheduling is now almost universally carried out on PC based planning tools.

All planning techniques and tools require knowledge of: (a) the dependencies and precedence of each task (i.e. what other activities

have to happen before a particular task can start/finish); (b) the duration of each task; (c) the resources involved in each task. • It is common practice to display the output from the planning tool in the form

of Gantt (or bar chart) which shows activities organized against a calendar timeline. In order to interpret and use the plan it is important to know whether Earliest or Latest Start and Completion dates are being used and therefore where float exists.

• Having established a plan it is then useful to review the output for potential

Threats and Opportunities. For example, if a single specialist resource or piece of equipment is on the Critical Path or several other key activities depend upon it, the project team might wish to take specific Preventative action to ensure availability. Where appropriate, Contingency action may also be put in place.

• In such cases the project team must remember to include the activity in the

WBS and incorporate its cost within the estimate. 4.5.5 Computer Software The use of computer planning/scheduling software at an appropriate level enhances planning and scheduling and is highly recommended. However, it does not follow that control will be achieved. Achieving control is a direct function of professional and effective Project Management. • Avoiding changing the contractor’s system will normally avoid cost

implications and impediments to the planning/scheduling capability.



• The decision on the choice of software should be taken at project strategy stage. Bearing in mind that where contractors are being used, a PC based system such as Microsoft Project will probably adequately cope with the demands of GBHE's planning and scheduling needs. (If something more sophisticated is thought appropriate there are numerous other proprietary systems on the market, but they are normally more expensive, need higher specification hardware and more training to use them without offering greater guarantees of achieving control).

5 PROJECT MANAGEMENT PRACTICES - PROJECT IMPLEMENTATION 5.1 Team Building and Team Management Project Managers have long known that building a cohesive, motivated and focused project team is a key step towards achieving a successful outcome. Sadly, however, effective groups or teams do not just coalesce as soon as people are brought together. Effective means working together towards common objectives, without interpersonal or intergroup conflict and with satisfied members. Thus it takes time and leadership to develop an effective group; but time, of course, is something which a dynamic group such as a project team, likely doesn’t have. The Project Manager therefore must be a leader who commands the respect of the team and can effectively bring and hold it together through the probable conflicts that a change management organization will face. An open and participative management style is important to building an effective project team culture. The development of mutual acceptance, trust, co-operation and open communication style can be hampered by the project management style. However, one essential factor is the perceptive capabilities of the Project Manager and their ability to recognize early and resolve conflict within the team. The Project Manager can’t however perform all the leadership roles all the time and leadership responsibilities must be delegated, often within the team. A common feature of successful projects is that the team members have enjoyed working together. This is especially so when they have experienced challenges together and still won through. In essence, they have faced adversity and bonded together as a real team. Another feature is that teams must be built that have a high degree of confidence in their individual and collective abilities. This in itself establishes high self-esteem, mutual respect and collaboration. These are the common requirements of a group of individuals who need to work successfully together towards a common objective.



Conflict both within and without, is a key thing which undermines the success of a project team and rapid resolution is always important. The Project Manager, as well as being the leader, is the mentor and psychologist all rolled into one! Interpersonal skills such as this will play a key part in the selection of the right man for the job. Larger projects where staffs are working fulltime on that project are usually set up for that project and as such develop a culture of their own often heavily influenced by the Project Manager and his supporting senior staff. Where project staff are resident in a more stable project group (e.g. manufacturing site) the culture is driven by the local site management. Not all project teams are successful. So how do we ensure we work in the successful team mode? By taking example from successful teams we can identify behaviors to encourage Characteristic Behaviors: • Mutual respect for each other as people and workers.

• Good communications across the team. • Project Goals are known, understood and supported. • Project Goals remain consistent and steady. Occasionally they do need to

change for business or other reasons. In this case, the changes are communicated throughout the team with the reason why.

• A Management structure that is understood by all and behaves in a firm yet

fair manner. • The team is involved in decision making on local and project issues wherever

practicable. • Roles for each member of the team are understood by all. • Skills within the team are appropriate to the task in hand. • Skill levels of individuals are recognized by management and colleagues. • Rewards for good performance are team rather than individually based. • Personal and team development is valued by management and staff.



5.2 Risk Management 5.2.1 Introduction Risk Management is a structured approach to improve the likelihood of having a successful Project. Risk is any area of uncertainty with the potential to have significant impact on the achievement of the project objectives. These can generally be grouped into: • Business or Strategic Risk:

Probably with 5/10 years perspective; and would address such questions as "Are we in the right business, region or technology"?

• Investment Risk: Probably 3/5 years perspective; and would address whether the investment was likely to be successful, (e.g. IRR or RONA).

• Project Risk: Will address the project period only; and will raise issues like capital cost, time to beneficial operation and plant capacity. SHE is usually a feature.

5.2.2 The Risk Process The Risk Management Process is shown in Figure 3: FIGURE 3 GBHE RISK MANAGEMENT PROCESS



5.2.3 Identify Risks A team based process: Agree level of scope of review, consider appropriate range of risks. 5.2.4 Quantify Risks Develop a risk register: Assess probability and impact, allocate responsibility, explore risk options, and evaluate residual risks. 5.2.5 Model Impact Impact of risks on main project success criteria: Capital cost, time to beneficial operation, production cost, impact on IRR/NPV 5.2.6 Benefits to Your Business

• Clearer comparison of investment opportunities. • Early identification of potential traps and pitfalls. • Builds team trust and confidence. • Ensures that risks are properly managed through the life of the

investment. • Identifies opportunities as well as risks.

5.3 Design Management Effective management of the design process is an essential part of successful project implementation. The design process is characterized by the decisions made and the deliverables produced, right through to information required for operating and maintaining the asset. The main objective for managing the process is to ensure that correct design information of adequate quality and in the appropriate form is produced at the right moment. If this happens effectively, then the success of subsequent procurement, construction and commissioning activities is more likely. • Responsibilities at every phase of the design process are defined as early as

possible during definition as part of the project strategy. It is essential where contractors are being used, that responsibilities between GBHE and the contractors are clearly defined, recorded and communicated within the project team.



These are normally defined in terms of who is managing the various design activities (particularly, for example, design and safety reviews, design verification) and the deliverables themselves (for example, flowsheets, P & I diagrams, data sheets).

• The quality of the output is very much dependent upon the caliber of the

people employed, and the Project Manager needs to take this into account particularly when building his project team and also during the selection of contractors and their specific resources.

• It is important to identify the sources of, and availability, timing, and

contributions from GBHE resources as early as possible at the start of the project. For example, these may come from different organizations such as Business and works, particularly where process engineers are concerned. The characteristics of small projects will inevitably mean that these resources will face conflicts of priorities with concurrent demands from numerous sources.

• Production works, construction and commissioning are specialist inputs

required at an early stage of the project, and it is important that resources such as these are identified and recruited into the team, either part or fulltime, as early as possible.

• The relevant engineering standards and specifications to be used need to be

agreed at the project strategy stage. These need to take into account the requirements of GBHE’s Group Engineering Procedures and Guides appropriate to the specific project. (In addition, there may also be other GBHE standards appropriate such as site, mandatory or national requirements, which need to be identified and followed).

• Key safety and design reviews are identified at the earliest stage of the

project. This involves: procedures to be used (for example GBHE, contractors or combination), responsibilities for organizing and leading reviews should be agreed and recorded. Reviews are also normally scheduled and recorded within the project plan. It is also important that appropriate information of adequate quality is available prior to the reviews and the right individuals are involved and available.

• Checking and approval arrangements for design information are normally

agreed early as part of project strategy and included within the requirements for project information and document management. (See the section on information and document management for good practice procedure and responsibilities).



Where contractors are involved, procedures to be used together with format must be agreed with them and recorded at an early stage. (This is particularly important for design verification, e.g.: relief systems, pressure systems, critical machines etc.).

• Design information required to be updated as part of as-built information at

the end of the project, needs to be identified and agreed with the production works/site as early as possible as part of project strategy. Other information required by the operations team for maintenance purposes also needs to be identified at this stage and confirmed, if involved, with the contractor.

• Where verification of design is needed, requirements should be agreed with

the appropriate design authority as early as possible. • Where contractors are involved, the production of a project contract co-

ordination procedure is good practice and is produced as part of the contract documentation.

5.4 Contract Management 5.4.1 Introduction If you are using contractors, the way you use them will probably vary from Business to Business, site to site and country to country. The use of contractors to execute projects within GBHE is increasing; for example, evidence from some recent GBHE projects around the world shows that around 80 - 90% of the value has been sourced from a single contractor. These suppliers of goods and services include both global multi-nationals and smaller local contractors, but the need for expertise and good practice when engaging and managing each is no less important. The successful use of contractors, whatever the size or complexity of the project, is critical to successfully achieving the investment objectives. Following good practice from the point of formulating contract strategy through to closing the contract is an essential part of this. It is essential that all work done under the contract is consistent with the strategies developed by the Project Manager prior to the letting of the contract. In particular, the Project Manager should ensure that the objectives of the Contractor are aligned with those of himself, and the project, with efficiency of execution paramount.



Where a fixed price contract has been agreed with the Contractor, it is the Contractor’s responsibility to ensure that the execution of the project is in accordance with the strategies identified in the contract. In a reimbursable contract, the Contractor may be required to act in accordance with a strategy developed by the Project team, of which they form a part. In either case, the Project Manager will have determined the following detailed functional strategies prior to defining the scope and objectives of the contract: • Design Strategy. • Procurement Strategy. • Construction Strategy. • Commissioning Strategy. 5.4.2 The Contract Document The contract document forms the basis of the relationship between the client and the contractor. The main purpose of the contract is to define the duties and responsibilities of the contract parties clearly, thereby avoiding conflicts. By agreeing on all contractual matters at the start of the project, problems should never arise. If a problem does arise, the contract should provide the answer without the need to litigate. Litigation anyway is a place of last resort and where there is often no "winner". The contract should at least include the following subjects: the scope of work, responsibilities of the client and contractor, the co-ordination procedure, the price, agreed date(s) of delivery, terms of payment, liabilities and guarantees, availability of key personnel, termination and cancellation, insurance, definition of completion, acceptance and transfer, and general provisions. The Project Manager should be intimately familiar with the contract and must inform all parties involved of the main features of the contract and how these affect their contribution to the project. GBHE maintains a library of standard contract terms and conditions (T’s & C’s). In addition, standard contracts for various types of projects are available from international and national professional associations. Any variations to the use of GBHE’s standard terms and conditions requires the Project Manager, together with the GBHE legal department, to review the change to ensure it is applicable and acceptable.



The proposed contract should form part of the enquiry parcel in order that the contractor may base his tender on the terms and conditions of the proposed contract. 5.4.3 Insurance Huge risks are involved in the execution of projects. For example, the prices of items of equipment can be in the order of $1,000,000 and any damage occurring during construction or transportation can result in a serious financial loss. Also, financial liabilities for personal injuries during construction can be substantial. It is therefore important to have these risks covered by insurances. It is the Project Manager's responsibility to ensure that all parties carry the required insurance. After hand-over of the project, the coverage of GBHE Technology's property is automatically provided under the GBHE Technology Property Insurance Program and will be included in the annual current replacement value (CRV) statement to the insurance division. GBHE Technology's policy on insurance is based on an active risk management approach. It is most cost effective to take account of loss prevention in the design phase. Advice on risk management should be sought by the Project Manager. The contract defines the liabilities of both parties and the insurances they are obliged to maintain. The following insurances are likely to play a role in a project: • Transportation Insurance:

This can be covered by suppliers when delivering to factory/site or place of embarkation. If company blanket insurance for transportation already exists, then suppliers should be advised accordingly.

• Professional Liability/Indemnity Insurance:

Insurance for contractor/consultant against direct financial (not consequential) losses as a result of errors in design or execution.

• Construction (Contractors) All Risk (CAR) Insurance:

It is GBHE Technology's policy to maintain an overall insurance for each project that protects GBHE Technology's interest against physical loss or damage from the time the (building) materials and plant/equipment arrive at the project site until final completion and hand-over of the project as a whole.



This insurance may be either on a project by project basis or a continuous blanket insurance, depending upon the strategy of the operating company. (Sub) contractors, architects, engineers, and so forth are co-insured. Contractor's equipment is only covered if explicitly agreed.

• Third Party Liability Insurance:

During the course of the project, client and contractor are exposed to legal claims from third parties for death, injury or damage to property arising from the carrying out of the project. Again, it is GBHE Technology's policy to cover these risks by incorporating this liability as part of the CAR insurance providing protection to all interested parties. In addition, contractors are often required to maintain employers' liability insurance and motor vehicle insurance.

5.4.4 Managing the Contract The contractor will have contract management duties to perform which will be included within the terms and conditions of the contract. As well as being responsible to the client for the general success of the outcome, the Project Manager will also have contract management responsibilities. He or she will need to ensure specific control mechanisms are established to enable effective management of the contract, contribute to establishing these and be involved in monitoring the outcomes. The extent of involvement may depend upon the type of contract selected but would typically include: • Scope and design development. • Technical reviews and studies. • Site health and safety. • Progressing technical queries.

• Schedule and cost monitoring. • Change control. • Permits to operate.



• Hand-over / transfer of the works.

• Certifying (and paying) invoices. • Final Accounts. • Acceptance. 5.4.5 Closing the Contract The procedure for this is specified within the contract Terms and Conditions. The Project Manager also reviews the post completion guarantees, warrantees and maintenance required from vendors and ensures that these are transferred to the client at completion. Closure of the contract at completion is as an important step as placing the contract at the start. However, the effort and discipline applied is often not as consistent. Closure often lingers on well after physical completion, sometimes due, for example, to inability to agree final accounts, actions on outstanding work etc. leading sometimes to further contractual difficulties and warrantee questions. It has become rare in certain areas to find a fully completed client acceptance certificate and a contract closure certificate. The implications of this on possible future claims or litigation can be enormous. Experience from recent legal judgments show that the existence of these documents carries significant legal weighting on the outcome of disputes (particularly when the T’s & C’s call for them to be produced as evidence of contract closure). Experience shows that clients who have not closed their contracts in accordance with the terms and conditions can be severely disadvantaged. 5.5 Construction Management

Although dependent upon the project strategy selected for construction, in most cases, construction and the management of construction is carried out on behalf of GBHE by contractors. Construction management is increasingly being carried out as part of the duties of a main or prime contractor, although this is obviously not the only model. This contractor will also have the task of managing the activities of relevant subcontractors. This further minimizes interfaces and reduces the management work for GBHE. Construction is another key stage in the project process, and the Project Manager is responsible for ensuring that it is completed safely and in accordance with the project scope and schedule and cost requirements.



Smaller or less complex projects and particular sites may operate different management models, this is much dependent upon the local circumstances. For example, the presence of term agreements with local suppliers or contractors will influence the construction management model; however, the following are some principles of good practice for the Project Manager to follow whatever the circumstances: • The quality and success of construction and its management is largely

dependent upon the caliber of all contractors selected. Site safety can’t be compromised or traded in the search for lower costs or earlier completion dates and the Project Manager’s needs. The caliber of the contractor needs to be examined and determined carefully during contractor pre-qualification, and subsequent tender/bid analysis activities.

• The Project Manager needs to assure himself throughout that the contractor’s

management team is handling the contract in the interests of GBHE. This needs to be done, but without there being a duplicate GBHE management team (even if this is a credible option). The Project Manager needs to ensure, however, that adequate management and supervision arrangements are in place to safeguard GBHE's interests (particularly for SHE) during construction. In particular, responsibilities/resource for handling technical queries, handling any necessary change, safety issues are also important and need to be identified and addressed as early as possible.

• The extent of construction assistance during commissioning needs to be

identified and agreed with commissioning as early as possible. This may require resource from the contractor or specialist suppliers and, if so, these need to be incorporated into relevant contracts.

• The construction safety plan is an essential part of site management

activities. The site contractor needs to develop this and get agreement to it from site management. The Project Manager needs to set up appropriate checks and controls to assure compliance by the contractor and relevant subcontractors

• Interfaces arrangements are a key ingredient for successful construction

management. These need to be defined as early as possible as part of the project strategy. Construction and commissioning interfaces are important, particularly the timing and sequence for the transfer of systems needs to be established as early as possible as part of project strategy and included in relevant contracts.



• Effective project management control arrangements need to be in place during construction, for example:

• Progress and cost monitoring and control; • Formal change control, particularly process for managing technical

queries.

• Inspection, such as eye-witness testing, is often required by GBHE to ensure the quality of workmanship. This needs to be defined as early as possible during project definition and certainly built into relevant contracts. In addition, a control system will need to be set up to assure these standards are maintained.

• Document and information management arrangements need to be defined

and established as early as possible. In particular, a control system for managing the transfer of information (and hardware) from design to construction to commissioning is essential.

5.6 Commissioning Management

The commissioning strategy selected sets the extent of commissioning. It is not solely about the activities that follow on from construction of the plant at the tail end of the project. The contribution from commissioning starts early in the life of the project during definition and extends through to the plant start-up and sometimes beyond. A Commissioning Manager or someone responsible for commissioning is usually appointed by the Project Manager as early as practicable in the life of the Project, although this of course is dependent upon the characteristics of the project. (Not all small projects will require all of the activities below). The typical commissioning activities might include: • Defining and agreeing the responsibility in the project strategy for safe

operation and compliance with statutory & local requirements throughout Commissioning.

• Contributing to the Project Strategy and Organization and providing input on method of Commissioning, resourcing, costs and timetable.



• Initiating and completing Hazard Studies in accordance with PSG-001 and meeting all other requirements of GBHE GEPs associated with completing commissioning and hand-over.

• Attending the various design and Project Reviews and supporting the design

process as required. • Producing specific written Commissioning procedures to deliver the

Commissioning Philosophy covering all activities involved in commissioning the asset, for each plant and system.

• Ensuring that specified Commissioning activities are carried out to validate

the objectives for Project performance and meet requirements of GBHE SSHE Standards & Guidelines.

• Ensuring information, resources and systems are available to an agreed

timetable and cost to help deliver the commissioning activities. • Preparing estimates for commissioning and carrying out commissioning

Planning and Cost Control. • Agreeing the process for acceptance testing and including it in the Project

Strategy statement along with production of test schedules. When acceptance testing is required, agreeing the detailed requirements for testing with the Project Owner to verify that the project will achieve its performance objectives.

This includes for example:

• Legal/statutory requirements;

• Responsibilities for preparing the Test Schedule;

• Responsibilities for conducting the Acceptance Test;

• A system for remedial action;

• Timetable;

• Procedure for resolution of difficulties.



• When acceptance testing is required, agreeing this with the Project Owner and arranging for all the necessary acceptance tests and inspections to be carried out and the relevant documentation produced.

• When the Project has been completed and all necessary tests and inspections carried out, that an Acceptance Certificate is prepared and issued, together with all the other necessary documentation, to the Project Owner for Project Acceptance by the Business.

• When the Acceptance Certificate has been signed and returned by the

Project Owner, and financial provision has been made for any necessary remedial action, the Project Closure is initiated.

5.7 Change Control 5.7.1 Introduction Fighting a tendency for scope "growth" following project sanction or approval is a common pastime for a Project Manager. There is industry evidence that changes can add anything up to 50% to the cost of a project and it is not unusual for it to be more. Thus, one of the most important and, unfortunately, unpleasant and difficult functions of a Project Manager is to control the changes to a project. Changes have the following detrimental effect on project performance: they increase the cost, cause delay, reduce morale and worsen relationships among those involved. Technical Queries are often the start of the opportunity for scope growth (they are changes sometimes just waiting to happen) and good practice will include a process for managing Technical Queries as part of the overall change management process. A formal system for identifying and recording a design change, or change of intent, to an agreed scope of work is therefore essential for effective management control. It provides a means to control changes and their effect on Project scope, cost and schedule by requiring formal authorization before acceptance. The process needs to be in place at the onset of the project and operate through to closure.



5.7.2 Change Control Process and Responsibilities

Having a formal (auditable) process in place from identification to authorization is essential if change is to be controlled. Project changes in GBHE are often classified as either Changes of Intent (any change or modification outside the agreed scope - client authorization will be required for this) or Design changes (any change or modification within the agreed scope). • Look for local good practice which sets down the steps, responsibilities and

authorization levels of the change control process you are required to follow (an appropriate change control form may also exist as part of this process which will need to be completed with appropriate sign off required).

• A change register or log will enhance the control process by providing a

formal record of each change including a description, estimates of cost and schedule, who raised it, its forecast effects on project cost and schedule and some dates to assist progressing and control. (Maintaining this through the projects lifetime will support cost control, help in forecasting final project costs and help in determining final accounts and with managing claims).

• It is usual for any member of the project team to be able to initiate a request

for change, but the Project Manager has the task of establishing responsibilities for authorization. (It is also good practice to establish and record these arrangements at the project strategy stage).

• The Project Manager has the ultimate responsibility (sometimes following

consultation with the client) to authorize changes to the project control schedule or budget. (It is good practice to lay down the process for modifying project schedules or budget documents as part of the overall document management process).

5.7.3 Technical Queries These are raised, for example, when there is a need for clarification. If technical queries are not managed effectively, they can lead to scope growth, possibly contractual claims or problems in resolving the contract final account. Often resulting from innocent requests for information or requests for direction, technical Queries can evolve into unauthorized changes, unmanaged scope growth and loss of project control. Technical Queries are an element of the overall change process and need to be treated in the same way through a formally managed process.



• Like a change control process, look for local good practice which sets down the steps, responsibilities and authorization levels of the process for managing Technical Queries. (an appropriate Technical Query control form may also exist as part of this process which will need to be completed with appropriate sign-off required).

• A register or log will provide a formal record of each Technical Query,

typically include a description of the query, who raised it, likely impact on project cost and schedule and some dates to assist progressing and control. (Maintaining this through the project’s lifetime will support cost control, help in establishing final project costs and help in determining final accounts and managing claims).

• Where a contractor is engaged, they should be required to operate through

the Project Technical Query process. • Efficient response to Technical queries is important (sometimes work stops

until an answer is received), where it is important to get a quick response/resolution this can be done by telephone but it is good practice to formalize and complete the paperwork/process thereafter as quickly as possible.

• If the Technical Query results in a formal change, then this must be followed

through the Change Control process. 5.7.4 Impact Analysis Analyzing effect on scope, cost and schedule is an important part of change management. Good practice will link this to cost and schedule control with appropriate analysis carried out to measure the impact on either project budget or overall timescale as routine. It is also good practice to differentiate between the effects of existing change and impending change (those on the register but not formally authorized) and continuously monitor both so that there is never any surprise to project schedule, budget or anticipated final cost as an overall result of change.



5.7.5 Reporting Formal status reporting of change is essential to maintaining effective project control. The minimum may typically include routinely publishing the Change/Technical Query registers along with a cost/schedule impact report, and it is important to distinguish between approved and unapproved (pending authorization) change. However, look for local examples of good practice to follow. It is good practice to decide the reporting requirements for change management as part of the project strategy. 5.8 Cost Management 5.8.1 Introduction Good cost control needs the early establishment of project strategy, definition, deliverables, and allocation of responsibilities and subsequent management of the overall project process. The effects of poor cost control can be catastrophic, particularly when using a contractor or supplier. When using a contractor or supplier, behave as though they know exactly where their money is at all times (they invariably do!), how they can make profit, what their margins are and when these might be at risk. Therefore, for effective cost management, the emphasis at all times must be on being commercially aware. GBHE’s overall aim must be to be better at cost management than the contractor or supplier. Maintenance of project cost management systems has, historically, consumed a significant amount of time and resource, therefore a key aim for cost management systems should certainly be to avoid this. The following are some of the key components of good cost management practice.



5.8.2 Cost Estimating This is the foundation of effective cost management. • Effective cost management depends much on the quality of the estimate.

Focusing on the quality of definition, or other information being used for the basis of the estimate and estimating data, will help in getting the best basis for subsequent cost control.

• Areas of risk within the scope/estimate (e.g. lack of definition, decisions still to

be made, currency fluctuations, etc.) are key reasons for subsequent lack of cost control. Use of formal contingency planning measures related to risk (e.g. pre-allocation of reserves) will assist effective cost management.

• A policy for estimating is essential (e.g. assumptions, boundaries, program,

data sources, accuracy, roles/responsibilities etc.) for effective estimating and subsequent cost management. Establishing this policy as part of the project strategy is good practice.

• The estimating/cost accounting structure (e.g. code of accounts, cost

breakdown structure) is key to managing costs and particularly to avoiding significant maintenance effort later. Deciding this as early as possible, and making it relevant and as simple as effective control allows (whilst achieving the right balance of detail for control), is good practice.

• Objective validation of estimates prior to and after contract award (or

sanction) will test out such things as the competitiveness of a bid or estimate, value for money. Getting this done by an independent source is worth considering.

5.8.3 Cost Accounting This is the job of ensuring that all project costs are accounted for, are legitimate, and are in the correct slot in the project cost structure. • Putting emphasis on ways to ensure that all the project team understand the

project cost structure and the importance of behaving in a disciplined way when recording or allocating costs, will assist greatly in maintaining the cost management system. Emphasis this, for instance, if involved in selecting or prequalifying contractors.



If employing a contractor, the better your knowledge is of their cost accounting/management system and the more effective their system is, the smaller is likely to be GBHE’s accounting effort and the greater likelihood of successful project control. If the contractor’s cost accounting system is "fit for the purpose", try to avoid asking for changes to it. Instead, concentrate on appropriate interfacing (not necessarily electronic) arrangements. Financial probity is a key element of corporate governance (e.g. the project accounting system must contain legitimate costs and always reconcile with information contained within GBHE's financial accounting systems), so the project accounting system must help to safeguard financial probity. 5.8.4 Cost Control This involves monitoring, analyzing and forecasting costs and taking any corrective action required. • The 2 key components of cost to monitor are expenditure and commitment.

However, there is little sense being within budget if the project is late. Methods of cost control which integrate cost, with time (the project schedule) and quality (project scope development [% complete and growth]) will provide the best basis for effective overall project control.

• It is important that systems and processes in place for paying for work carried

out under any contract, validate, verify and ensure quality of work and in particular safeguard the value/loss of the asset to GBHE.

• AFC's and changes to purchase order commitments should be recorded and

updated as appropriate. • Cost control can be improved if a performance payment approach is used,

and there is often wider benefit to the project from offering such incentives. For example, if the work is being carried out under a contract; consider opportunities for tying payment to the completion of deliverables (e.g. no deliverable no payment).



• A means of capturing the cost impact of scope growth (from technical queries through formal change control) linked into the cost control system, will provide a better understanding and means of forecasting the potential cost of the project. This will also help provide a firm basis for updating the AFC and remove the element of surprise

• It is important that for contract final accounts and particularly to provide

defense against possible contract claims, an audit trail is kept of key cost management information such as through the technical query/change control route.

5.8.5 Cost Reporting Structured cost reporting is essential to an effective cost control system. The project cost coding system selected will enable reports to be produced at a variety of levels (e.g. project area/cost centre/item and to an organizational hierarchy within and external to the project) for cost management and analysis purposes. • Reporting requirements and schedules for their production, agreed at the

project strategy stage (which include the needs of the project team, contractor and client), will provide the basis for effective cost reporting from day one of the project.

• Reporting requirements from suppliers or contractors need to be included

within the contract. • If time and effort is put into formatting reports which are not likely to

overwhelm recipients (making reports, for example, more understandable and with the focus on key issues or exceptions); this can only improve the all round effectiveness of cost management. In particular, the report needs to focus on deviations, explanations/remedies and forecasting effects.

• Maximizing use of graphical output (e.g. expenditure, commitment and %

complete graph) is an excellent way of understanding the key elements of cost management, at a glance.

• As financial systems lag behind actual progress, a reporting system which

includes the effect of work done but not paid for (e.g. approved for payment but not physically recorded as paid), will provide another excellent basis for forecasting AFC and hence improving cost management.



5.8.6 Computer Software Computer software is an essential part of a project cost management system. There will normally be a requirement for an (GBHE) in-house accounting system, the contractor’s/supplier’s system and a means of bringing the information together for project cost management purposes. • Not changing the contractor’s system will help keep contractor’s charges

down and help keep their cost management performance up. • PC based software such as WordPerfect Quatro Pro and Microsoft Excel, will

often provide a sound basis for summarizing costs from within the contractor’s system to provide summary project cost management information.

• Maximizing the contractor’s resources as far as is possible, to provide

information in the form appropriate for entry into the "project summary", will keep the in-house effort required to a minimum. (It may even be appropriate to let the contractor produce this report under certain circumstances).

5.9 Progress Monitoring, Control and Reporting 5.9.1 Monitoring and Control This involves monitoring achieved progress, comparing this with what was planned, using the results to forecast the affects on the schedule and taking any appropriate corrective action. • Establishing and recording, as part of the project strategy, the scope, the

frequency and responsibilities for progress monitoring, will greatly improve the effectiveness of project control. The key elements for effective monitoring and control typically include, physical % complete (earned value) against that planned, and achieved schedule or milestone dates versus planned.

• Integrating schedule with cost, and quality (project scope development [%

complete and growth]) will provide the best basis for monitoring and effective overall project control.

• Monitoring specifically key deliverables, milestones and interfaces greatly

enhances prospects for achieving control.



• The plan/schedule for control should not be fundamentally changed (e.g. activities, logic or milestones, likely to affect project objectives) without the formal agreement of the Project Manager (this is particularly important when in contractual situations). It is therefore good practice to apply appropriate Document Management methods to plans and schedules.

• Recording and analyzing progress trends improves the effectiveness of

forecasting. 5.9.2 Progress Reporting Structured reporting is essential to a project control system. Aligning reports to the chosen project scope breakdown (techniques such as WBS) will help provide focus and improve the effectiveness of the reporting system. • Reporting requirements and schedules for their production agreed at the

project strategy stage (which include the needs of the project team, contractor and client), will provide the basis for effective reporting from day one of the project.

• A system of succinct but formal exception reporting which focuses on

deviations from schedule, impact and possible corrective action (rather than long narrative) is good practice and provides a firm basis for achieving project control.

5.10 Information and Document Management 5.10.1 Introduction Project Documentation is information, either in paper or electronic form, which is required for the specification, design, procurement, construction and commissioning of a project. It includes both design information (including correspondence) and instructions/procedures required for management and control. Managing this information effectively throughout the lifetime of the project, is essential for the efficient operation of the project. It is good practice to specify the requirements (including roles and responsibilities) for effective control of all project documentation throughout the lifetime of the Project (including archiving at Project Closure), at the project strategy stage. These requirements typically cover identification, authorization, revision, issue/transmittal, storage and disposal of both electronic and paper information and all associated responsibilities.



If a sensible approach is taken to Document Management (whatever the scale or cost of project), the result will be not a bureaucracy, but a significant benefit to the effectiveness of Project Management. 5.10.2 Security of Documentation This is arguably the most important aspect of the document management system. • GBHE has standing instructions on security of documentation and these must

be followed; it is also possible that there is a good practice local procedure covering your organization, which also needs to be referred to.

• For Electronic Document Management systems there is a BSI (British

Standards Institution) code of practice for Legal Admissibility of Information Stored on Electronic Document Management Systems (this is a reference document providing good practice, following it however does not guarantee legal admissibility).

5.10.3 Identification and Registration of Documents The effectiveness and efficient operation of the Document Management System is much dependent upon being able to find and retrieve (without danger of confusion with other project documents) the documents within it. • Uniquely identifying documents will enable them to be stored, found and

retrieved as required. A system consistently applied to all documents, which includes minimum attributes such as a unique Project number, title, date, author, file reference, document and revision identifiers, will enable this. Look for guidance from local document management good practice on referencing drawings and types of documents.

• A central project document register provides a formal record of all documents

produced and a communication tool for the project team. Pre-allocating blocks of drawing numbers and other unique identifiers to specific groups within the project team (particularly external organizations), will help safeguard the integrity of the system, avoiding also the need for central administration for allocating document numbers. (When working with contractors or other external organizations, it is essential to have an up to date list of their drawings and documents for both project and contractual reasons).



• External organizations should be required to operate under the project system, even if they are also required to use their own document management systems (for internal reasons). If they are also using their own system, it is good practice to require them to publish copies of their registers at routine intervals.

5.10.4 Distribution of Documents A formal document distribution system, which identifies who gets what and when, is invaluable in maintaining discipline and improving efficiency of the Document Management system. In addition, use of a formal transmittal process will help safeguard the effectiveness of the system, particularly where external organizations are involved. Use of a Document Distribution Chart, which lists the types of project documents, numbers of copies required and the recipients, is a typical example of a good practice. This can be structured by organization, who’s responsible, for example. Use of a transmittal note is an example of good practice for recording what documents are being sent to whom, when and where. There are various local examples of transmittal proforma in use for reference and these can often be easily adapted. 5.10.5 Filing Regarded much as a chore by many but is central to the Project Document Management system It is sometimes under resourced, its structure too individually orientated and therefore not widely understood and often too complicated: to the extent that documents take a lot of time and effort to retrieve. • Important components for a successful filing system include an appropriate

structure (which enables effective storage and retrieval) and discipline to keep it maintained. The use of electronic systems, such as Lotus Notes, is increasing the effectiveness of Project Filing systems (particularly in distributed organizations and even on projects at the lower end of the value range) by improving discipline, efficiencies, and productivity.

• It is strongly recommended that the number of individual file codes is limited

to create an effective filing system that reflects the size and content of the project. Once agreed, the selected coding system should be communicated throughout the project team and subsequently maintained. Look for examples of local good practice to help with structuring/coding the filing system effectively.



• For access and maintenance considerations, a key decision is the choice of location for the files. This is often a particular problem for projects where the team is distributed. Consideration in this situation of an electronic system with multi-user access is beneficial, and Lotus Notes or a proprietary document management system is examples. (Electronic systems obviously require careful consideration of backup requirements and the potential for loss of access to information during off-line periods. However, the increasing integrity of hardware and telecommunications is reducing this concern, and reducing software costs make them increasingly attractive even to projects at the lower end of the cost scale).

• Including a file reference in the document registration system and as part

of the identification attributes, is strongly recommended. It helps both efficient filing and retrieval.

• Large documents such as operating manuals and contracts, for example,

which can’t be incorporated easily into the project filing system, should be filed separately with cross-indexing to help describe them and their location.

5.10.6 Checking and Approval Checking and approval is essential to effective document management. It is important that this policy is not onerous (such that it extends critical examination to all documents, for example) but is selective and appropriate to the project, ensuring as a minimum that key documents are checked by the design authority (particularly where SHE, critical design calculations are involved for example). • As part of the document management strategy for the project, decide and

specify the checking and approval process applicable to specific types of documents; for example, independent check and independent approval, recorded self-check and independent approval, recorded self-check and approval, no recorded checking and approval required, are examples.

• It is good practice to list and communicate those areas requiring formal

calculations as early as possible. For example, these are likely to cover design, fabrication or installation of the following: key equipment, registered equipment, statutory approvals, and structural approvals anything else specified by the design authorities.



• It is important to ensure that individuals with authority to sign documents as checked or approved are formally nominated as early as possible. Where a contractor or supplier is involved, the process for checking and approval, including responsibilities, should be recorded in the contract.

5.10.7 Revision and Amendment It is important that the status of documents is clear at all times. Working with out of date documents is serious and can have enormous consequences for the project (as well as GBHE as a whole). Decide the system to indicate the status of a document as early as possible (for example, Preliminary, Approved, Approved for Fabrication (or Construction), For Checking, For Approval). Typically, it would be applied to drawings, data sheets, calculations, studies and reports. It is important that when amended, documents should carry an updated revision identifier and the amendment identified and recorded. Practice for approving and issuing revised documents should be consistent with that used for approving the original and the document should not be re-issued unless it has been followed. 5.10.8 Control of Vendor Data This involves information provided by a supplier as part of a contract. It is often an area where the project process can be delayed or extra costs incurred (sometimes unknowingly, for example a contractor/supplier is well aware of the opportunities arising from late returns from a client, for final account purposes). Therefore control of vendor data is a key area of document management and worthy of special consideration (quite often a supplier will have a specific organization to deal with vendor data control) • It is important to establish what vendor data is required, when it is required

(and received), how many copies, the recipient, turn round time, usually at the enquiry stage. (This is particularly important when full or part payment is linked to receipt of the document or the start of manufacture of a component for example, delays can be costly both with receipt and turn round).



• The process and management requirements typically for registering receipt, responsibilities for comment or approval and ensuring timely return need to be in place well in advance of the receipt of the documents from the supplier. Look for local good practice for typical examples of ways to do this.

5.10.9 Archiving of Documents and As-Built Documents Archiving documents upon completion involves specifying what needs to be retained, for how long, who’s responsible and the media to be used (for example paper, electronic). • It is important to get these requirements agreed as part of the project

strategy. This would typically involve discussions with client, works (manufacturing plant concerned) and the design authority.

• Prior to project closure it is good practice to close the project files extracting

all documentation (including electronic information) required for archiving. All other material would normally be disposed of taking into account the requirements for the security of information

• Local good practice will provide guidance on archive retention periods

appropriate to the document type some of which will be the subject of statutory requirements such as contract documentation

• Documents updated "As Built" status, usually those essential for ongoing

operation, maintenance and eventual demolition of the plant are normally re-issued to the operating works or client for retention.



6 PROJECT MANAGEMENT PRACTICES - PROJECT REVIEW 6.1 Project Close-out And Reports/Reviews 6.1.1 Introduction The final stage of the project is that of Review and Close-out. The purpose of this stage is to test whether the project objectives were met, complete and close the project financial accounts and to gather and share learning for application on future projects. 6.1.2 Review and Reporting • Project Reviews may be conducted in a number of forms; however the

fundamental purpose remains the same. These are: (a) To compare the final outcome with the original Project Objectives and

Deliverables; (b) To review performance of the project team throughout the project cycle

and identify learning (positive and negative) for implementation on future projects.

• Evaluation of delivery of the project’s objectives and deliverables can be

conducted by a small group comprising the Project Owner, Project Manager and members of the client organization.

• Evaluation of the project team performance requires contributions from the

whole project team and can be conducted in one of two general ways. • For larger projects it is often more practical to review the project’s learning

opportunities via a formal agenda covering Key aspects of the project process. Guidance on the type of subjects to be covered are well presented in GBHE Project Procedures (PP's). Typical areas include Design (contractor/in T house), process engineering, project management, construction (management/contractors), commissioning etc.

• For most projects, learning can be identified through a more informal

brainstorming process asking the questions: o What went well on the project? o What could have been done better?



o What action is needed to ensure success of future projects? This should not be a process of identifying 'guilty parties' but an open sharing of issues and good practices. • The Project Manager should then summarize the outcome of the review and

issue a report on the project performance and future recommendations. • In order for organizations to benefit from learning experiences, it is necessary

to share learning gained 'locally' with the wider corporate organization. It is therefore necessary for the Project Manager to identify to whom the report should be circulated in order to ensure the opportunity for wider learning.

6.1.3 Financial Accounts • This is the final act on the project, and the exact process will be a function of

the local and business accounting practices. • Before authorizing closure of the project accounts, it is essential to ensure

that all contractors have submitted ’full and final’ invoices and that all internal charges have been accounted for. The costs of project review and the close-out activity should be included in these considerations.

• If individual costs have not been finalized through, for example, a protracted

dispute over liabilities with a contractor, it may be advantageous to agree to close the existing project accounts and open a dedicated ’settlement’ account. This will minimize the risk of the project accounts attracting spurious bookings.

6.2 Measurement and Learning 6.2.1 Introduction Measurement provides a means for collecting learning, improving performance and raising shareholder value. Sadly, it is sometimes low on priority when pressured with completing projects to tight targets. Collecting learning takes effort and money and often projects do not allocate much, if anything, to it. However, at the start of a project there is often a large demand for information that will help test a business case, validate an estimate and schedule, remind how things were done before or compare performance with the competition.



The reality is that this data and learning does not often exist and we rely on our informal networks to provide it at the expense, for instance, of time. However, the issue is not only money and effort; it is also about having a process and measuring the right things. Measurement should focus on the critical drivers for improvement and distinguish between the desirable and the essential. The failure of most performance measurement systems is that they often lack clarity of focus; leading to significant amounts of measures being taken, things taking too long, too expensive and lacking an effective feedback loop for analysis, learning and communication. 6.2.2 Measurement Process A Project Review stage is built into the GBHE Project Process, the purpose of which is to establish a formal means of gathering project learning at project completion. However, depending upon the characteristics of the project, there may be various performance measurement or audit stages to consider during the life of a project which will also provide recyclable learning. • Deciding upon a process and appropriate measures at the project strategy

stage and building these into the project schedule, is good practice. In addition, you will need to decide and plan for appropriate resourcing, responsibilities and cost to do the work and build allowances for these into schedules and estimates. (These need not be significant if objectives are clear at the onset and you differentiate between essential and desirable information).

• Specialist SSHE Audits are a requirement of GEP 1. GEN-002 provides

further guidance on carrying them out and you will also need to refer to the requirements contained within GBHE Group.

• Where the Project is carried out under a local QA Registered system; you will need to refer to the local requirements covering independent QA Compliance Audits.

• It is good practice to consider peer reviews carried out by independent

professionals such as other Project Managers. This will help you test, for example, the business readiness, completeness of the technical scope, capability of the organization, value for money of the scope or fitness for the purpose of the project, particularly prior to sanction to proceed (you will need to develop protocol for this or refer to locally available practice).



• Benchmarking performance of your project versus industry standards will provide a basis for comparing good practice with external best practice. For example, measures collected from each project can be tested objectively with industry-wide metrics. A range of typical measures is available for guidance. (GBHE uses external consultants who have assembled a significant industry-wide database of metrics on a range of project sizes and other project characteristics).

• Producing an end of project report will help structure and formalize the project

learning. You will also need to refer to appropriate local arrangements for storing the report and transferring the knowledge and learning as widely as appropriate. Also refer to local good practice for examples of the structure, content and distribution.

• Where the project has been carried out by a contractor, learning from contract

performance is extremely valuable particularly to assist in decisions relating to future use of the same contractor and also in assistance with potential claims.

• Some of GBHE’s projects require a project post event review to be

completed. If this is the case, it will be required typically within 6 months of project completion and the Business owner may call upon the Project Manager to provide certain information for this. It is good practice to plan this requirement into project schedules at the project strategy stage.

7 VALUE IMPROVING PRACTICES 7.1 Introduction Value Improving Practices (VIP’s) are activities/techniques used during Project Definition aimed at reducing absolute costs, thereby improving capital productivity. They are intended to increase the value of the plant by reducing non-critical scope items, increasing reliability, simplifying the process and generally facilitating project implementation. Some of these are fairly generic such as Value Engineering for example but perhaps not all of them will be appropriate to your project and the extent to which you apply these techniques will depend upon such factors as the process, technology that you are involved with. Projects that make extensive use of VIP’s are much more likely than others to meet their business objectives, particularly if the use of VIP’s is combined with well defined definition.



The following are categorized as "value engineering" practices and are defined as follows: 7.2 Types of Value Improving Practice 7.2.1 Process Simplification A disciplined analytical method for reducing investment requirements and often operating costs, by combining or making unnecessary one or more chemical or physical processing steps. (Common examples include: elimination of heating followed by cooling, concentration by diluting, etc. and combination of previously separate reactions). 7.2.2 Technology Selection A formal systematic process by which a company searches for production technology externally, which may be superior to that currently employed in its projects. It is a method to ensure that the technology used for projects is the most competitive available technology. 7.2.3 Process Reliability Modeling This involves the use of computer simulation of processes to explore the relationships between the maximum production rates and design and operational factors such as, quality, yield, production transitions, maintenance practices and requirements, capacity, safety and environmental concerns. 7.2.4 Customizing Standards and Specifications Engineering Standards and Specifications can affect construction efficiency, product quality, operating costs and employee safety. However, sometimes the cost of a facility is increased by the actual needs of the specific facility to be designed. Do you employ a practice of scrutinizing all standards and specifications to ensure that they do not exceed the actual requirements of a particular service? 7.2.5 Design to Capacity Often, equipment is designed with a "safety factor" to allow for additional downtime or some production increases. Designing to capacity requires the evaluation of a maximum capacity of each major piece of equipment. Design capacity can then be limited to the needed capacity without the added cost of the "safety" factor.



7.2.6 Classes of Quality Classifying needed quality is a tool used to establish specifically what kind of facility is needed to meet the business plan. This tool establishes a balance of costs, both operating and capital, versus reliability, expandability, automation, life of the facility, expected stream factor, likelihood of expansion, production rate changes with time, product quality and product flexibility. The class of project quality can be used to determine needed design allowances, redundancy, sparing philosophy and room for expansion. 7.2.7 Traditional Value Engineering A disciplined method used during design, often involving the use of internal or external VE consultant, aimed at eliminating or modifying items that do not add value to meeting business needs. 7.2.8 Constructability Reviews These analyze the design and are usually performed by experienced construction personnel and intended to reduce costs or save time in the construction phase. A Constructability Review usually takes place early in the project process. On projects with a short/intense period of installation/start-up activity it is useful to revisit the "constructability" issues shortly before the start of the work. Such a review: • Clarifies roles/responsibilities. • Reinforces the project objectives. • Assists in team building. 7.2.9 Energy Optimization Modeling This is used for optimizing the capital cost, operating cost, and operability of a process unit, utility system, or manufacturing site. Using the basic thermodynamic data for the process(s), targets for energy consumption and power generation that take into account the cost of equipment, can be determined. The purpose of an energy optimization study is to improve the return on investment for projects by identifying the most economical levels of heat recovery and power generation.



7.2.10 Waste Minimization A process by process stream analysis is to develop concepts and proposals to reduce or eliminate each non-useful stream. This analysis is made before project scope is firm. A formal step-by-step process must be used to qualify this VIP. 7.2.11 Review of Recycled Product Recycled material differs from effluent and by-product streams in that the process requirements for the recycle stream need to be equivalent to the main process stream requirements; whereas this is not necessarily so for effluent or by-products. For batch units, it is also CRITICALLY important to take account of the time delay involved in returning the recycle material in order to avoid cross-contamination issues. 7.2.12 Static/Dynamic Modeling of Batch & Continuous Plants This technique is used to model the continuous operations within batch or continuous plants. The models include material and energy hold-ups in them. For batch plants, this enables the user to find out how hard the plant can be driven when changing state. The modeling will generate the optimal plant control Parameters (e.g. ramp rates, timer values for sequences, controller tuning values). The provision of Right First Time control will simplify/speed-up the plant commissioning. 7.2.13 Benefits Review for Batch & Continuous plants. The review is carried out during Project Definition and possibly even at Project Opportunity. The starting point for the review is the plant operational objectives (e.g. maximize rate, minimize energy, product consistency). The plant measures are used to examine how well these objectives are being achieved on a day-to-day basis. From this, the technique identifies the points in the process which contribute to the failure to meet objectives and, by looking at past plant performance, the amount of benefit which improved control would deliver. 7.2.14 Safety Reviews for Control Systems Projects with a significant level of automation benefit from dedicated safety reviews of the control/automation systems. Two techniques which are commonly used in these safety reviews are:



• CHAZOP (Computer HAZOP).

• FMEA (Failure Mode and Effect Analysis). 7.2.15 CO-OP for Batch Plant A structured methodology which delivers the Control and Operability requirements for batch plants. CO-OP Phase 1 delivers sufficient detail to fix hardware requirements (vessel & pump capacity, instrumentation requirements). CO-OP Phase 2 delivers the detailed software requirements. 7.2.16 Off-line Testing of C/E/I Control Systems The testing is performed to give confidence of equipment/system functionality prior to on-plant installation. The form of the testing depends on many factors (e.g. the degree of complexity/novelty in the technology, the likely impact of failure on operating plant, fall-back options) and will usually include both hardware and software components. (The test platform can often be used to assist with operator familiarization/training). 7.2.17 Modeling/Scheduling for Batch Plants Focused application of modeling and scheduling techniques can provide rapid assessment of the impact of design / up-rate decisions prior to project sanction. For batch processes, the key performance indicators modeled might include throughput, OTIF adherence, and lead-time and plant utilization. These techniques can be used to explore performance against the identified business measures for a spectrum of possible market growth scenarios. SECTION 2 CHECKLISTS AND REFERENCES 8 INTRODUCTION TO THIS SECTION The aims and objectives of Section 2 are consistent with those of Section 1, as is the scope of application. Overall, Section 2 supports and is complimentary to Section 1. The content of Section 2 is made up of helpful checklists, references and information about deliverables and other examples, all of which will provide practical help to Project Managers and their project teams. • For a new Project Manager the checklists will help them carry out projects to

a standard expected within GBHE.



• For a seasoned Project Manger it is hoped that they will provide a useful reminder.

• However, whatever your role in the project process, we hope that you will

find it interesting and useful and a helpful support in carrying through your responsibilities towards a successful project outcome.

9 PROJECT DEFINITION CHECKLISTS 9.1 Business Opportunity Testing & Objectives Setting 9.1.1 Aims To help align the project objectives and Business drivers. To help reduce abortive work to a minimum. To help the project meet both its own targets whilst delivering a benefit and acceptable rate of Business return. 9.1.2 Responsibilities Driven by the Project Manager supported by the Venture Manager and representatives of the Business. 9.1.3 Project Checklist Have you established?

• Whether the project is primarily about financial return, SHE and Licence to operate, strategic development or other issues?

• How the Business will measure project delivery - what are the Critical

Success Factors?

o For financially driven projects, the key customers? o Whether contracts been placed?

• If project Sanction is ultimately connected to customer contract or product

approval?



• For SHE and License to operate driven projects, if commitments have been made to external authorities?

• If the Business is required to undertake the project or if it is being

internally promoted?

o Who in the Business is the Venture Manager/champion of the project?

o Whether the project is part of an agreed Business strategy or development plan?

• Whether the project has been discussed within the Business up to and

including the Sanction Authority and is their support for the project?

o If the project is included in the Business Capital program?

• Whether the intention is that the project will proceed to implementation or is the Business seeking to explore options further before committing itself?

• Whether Pre-sanction funding has been approved by the Business?

• If the Pre-sanction authority is the same as the ultimate Sanction

authority?

• Whether there are political pressures within the Business driving or seeking to halt the project?

• Whether there are political pressures within the Business to hold cost and program below realistic limits?

• The ultimate benefit the project is expected to deliver?

• Whether the project and the envisaged benefit are consistent with the overall Business direction?

• Whether the Business has considered other solutions to achieve the envisaged benefit?

• If these other solutions have been adequately analyzed?



• If the Business expectations for the project cost, program and technical aspects are realistic?

• If the project is expected to deliver the envisaged benefit, is it to deliver a facility, which will enable the Business to realize the benefit? (I.e. is the project required to deliver performance or simply hardware?)

• If the project is to deliver the latter, then who is accountable for the delivery of the actual benefit?

• Whether the envisaged benefit can only be realized within a given time window?

• How much involvement is envisaged from Business personnel? Is this consistent with anticipated Business expectations at the time of delivery?

• What the Business’s track record is on delivering projects of this kind?

• Whether the operational and maintenance organizations that will receive the project delivery have been consulted and have their views been fully expounded?

Once the Business background is fully understood, project issues can be explored and objectives set. Useful questions at this stage include: • What are the hold points on the project?

• At what level will these hold points be released and how long will the

Business take to release them? • Does the Business recognize the implications of the stop/go nature of clearing

hold points? How does the Business wish to manage this? • What constraints are the Business imposing on the project or its

organization? • Have all key Business project personnel been identified and appointed? • Are Business/steering committee roles and responsibilities clear and have

they been agreed and communicated? • Is the project primarily sensitive to cost, program or technical performance?



• What internal and external political issues could affect the ability of the project

team to deliver? • What are Business’s requirements for reporting during the life of the project? 9.2 Developing the Project Scope 9.2.1 Aims To ensure that only viable business options are implemented. To ensure business objectives are aligned with project objectives. To establish and develop the project strategies, objectives, organization and resourcing. To establish the correct level of technical scope definition. The stages included within project definition of assessment, optimization and development, although described sequentially, they will involve perhaps considerable re-cycle as definition is developed progressively towards the necessary level of confidence required for sanction approval. 9.2.2 Responsibilities The Project Manager in collaboration with the Venture Manager and the project team. 9.2.3 Project Checklist Have you: • Obtained client authorization for the project and formally registered it within

your local work management system?

• Considered, clarified and confirmed the basis of the project proposal? • Prepared the project scope document and had it approved by the Venture

Manager? • Prepared a project strategy statement, which includes all project stages?



• Identified, characterized and assessed sources of risk? • Considered the key project deliverables required during project definition and

built these requirements into the project plan?

• Established and agreed the project organization, considering all internal and external roles and contributions, particularly the business, commercial and site representatives?

• Considered the requirements for SHE/statutory approvals? • Carried out Hazard Studies 1, 2, 3 and other appropriate reviews and

studies? • Established sources of resources to meet the project schedule and budget? • Considered the requirements for project control and set these up? • Optimized the project scope/economics, considered and evaluated alternative

technologies where appropriate and utilized appropriate VIP’s? • Established and evaluated appropriate investment models? • Evaluated and developed project risks, incorporating sales and marketing

information? • Refined the project estimate towards that required for sanction approval? • Identified, evaluated and selected the site? • Reviewed and fully optimized the plant in terms of technology, layout, SHE,

constructability, commissioning, operability, maintainability? • Considered the commercial requirements including contracting strategies,

licensing arrangements, strategic alliances? • Completed and submitted documentation for sanction approval?



9.2.4 Deliverables

• Project scope document.

• Project strategy document.

• Project definition package.

• Project estimates.

• Project schedules, progress and cost reports.

• Documentation for sanction approval.

• Contract enquiry package 9.3 Project Strategies 9.3.1 Contract Strategy 9.3.1.1 Aims To produce a comprehensive contracting strategy for the project which is aligned with the Project and Business strategy and which will eventually align with the aspirations of the contractor. 9.3.1.2 Responsibilities Project Manager in collaboration with the Venture Manager. 9.3.1.3 Project Checklist Have you prepared a contract strategy that has considered? • Implications of existing or possible future Joint Venture or other strategic

alliance arrangements?

• Complexity of the process, licensing or confidentiality issues? • How to minimize levels of risk involved?



• Quality standards required? • How to minimize interfaces between GBHE and the contractor? • Maximizing incentives and motivation of the contractor? • How to bring about uncomplicated and effective control arrangements? • State of competition within the market for the contractors? • The number of different contracts and their scope of work? • The commercial basis of the contracts? • The structure of the different contracts and the resulting split in

responsibilities? • The timing of the different contracts?

• The definition required to support the desired commercial approach?

• Resources and skills available in the project team to work with, and

anticipate, the contractor in developing and reviewing definition and design?

• Resources and skills required and available in the organization to manage and administer the contractor?

• What equipment needs to be free issue to the contractor?

• Opportunity to use existing or second hand equipment?

• The use of modular/pre-assembled units? 9.3.1.4 Deliverables A contract strategy which fully aligns with Business and project objectives, the aspirations of the contractor or supplier and which will help bring about a successful project completion.



9.3.2 Design Strategy 9.3.2.1 Aims To develop a strategy for design, which identifies and uses available in-house skills, competencies and systems for specific non-contracted out elements of the project scope. Maximizes the use of the contractor for contracted out elements without duplication of effort. Identifies and maximizes use of effective design processes, techniques and systems within overall project constraints of cost, schedule and scope. 9.3.2.2 Responsibilities Driven by the Project Manager in collaboration with the project team. 9.3.2.3 Project Checklist Have you: • Identified the necessary availability, levels and sources of in-house resources

and skills to complete the definition? • Considered who will do the detailed design.

• Considered appropriate resourcing requirements for detailed design?

• Considered the technical standards to be used?

• Considered the extent of cellular design and standardization appropriate?

• Considered the use of off-site pre-assembled units?

• Agreed the design tools and IT systems to be used?

• Considered appropriate communication arrangements?

• Considered the requirements for information and document management?



• Considered the requirements for design approvals?

• Identified roles and contributions from the client, works, and specialist consultants?

• Considered what management arrangements are required for design?

• Considered what reviews are required?

• Identified the design authorities? 9.3.2.4 Deliverables A project design strategy which maximizes the use of the best available design processes and techniques, systems and skills and competencies and will help bring about a successful project completion. 9.3.3 Construction Strategy 9.3.3.1 Aims To provide effective control of overall site activities. To manage technical queries and control change. To ensure that the works are completed in accordance with project and contract objectives of cost, time, scope and the GBHE SHE requirements. 9.3.3.2 Responsibilities The Project Manager in collaboration with construction specialists and other functional specialists within the project team.



9.3.3.3 Project Checklist Have you considered? • The requirements of the site management and organization?

• The needs of the construction health and safety plan?

• I R issues particularly; what local arrangements are in place?

• Site requirements such as the need for temporary services, access and local

facilities?

• Competency of the (construction) contractor?

• Parceling of construction work within the project contract strategy?

• Requirements arising out of the extent of off-site assembly, such as specialist lifting equipment?

• Sources of Construction risk?

• Requirements for specialist construction skills?

• Implications of the construction program and key milestones and any site schedule constraints?

• Hand-over arrangements? 9.3.3.4 Deliverables A construction strategy which maximizes available resource both within and external to GBHE, aligns with the business and project objectives and enables site works to be completed safely within scope, time and cost targets.



9.3.4 Commissioning Strategy 9.3.4.1 Aims To ensure that commissioning is carried out to meet the project and business objectives. To ensure that commissioning is effectively managed and controlled. To ensure that commissioning activities are always carried out in accordance with GBHE SHE requirements. 9.3.4.2 Responsibilities The Project Manager in collaboration with the Commissioning Manager and site operations. 9.3.4.3 Project Checklist Have you considered? • The commissioning sequence and schedule?

• Operating instructions and who will produce them?

• The organization and responsibilities for commissioning and appointments of

commissioning staff? • Resource requirements? • Training requirements? • Overall requirements of the commissioning plan/schedule, particularly the

presence of time windows to meet operations requirements? • Specialist support required for commissioning, such as trades, vendors

consultants? • The interface between construction and commissioning?

• Timing for and availability of raw materials required?



• Arrangements for disposing of raw materials?

• Requirements of the site at hand-over? • Degree of on-site inspection, testing, cleaning requirements? • Degree of inspection of vendor equipment? • Special material and equipment requirements? 9.3.4.4 Deliverables A commissioning strategy, which ensures commissioning, is safely and effectively completed, meeting business and project objectives. 9.4 Developing the Project Organization 9.4.1 Aims To establish and develop a project organization with clear roles and individual responsibilities defined and which will successfully deliver the project objectives. 9.4.2 Responsibilities The Project Manager in collaboration with Venture Manager. 9.4.3 Project Checklist Have you identified the individual and confirmed the role of: At the Business level: • The person who owns/champions the project within the customer organization

(Venture Manager)?

• The person setting SHE and technical standards for the project? • The person accountable for business planning who will evaluate the project

against this background?



• The person who will co-ordinate the various business functions involved in the

project, ensures the project is in the Capital program and who will prepare the Expenditure Proposal?

• The person who will accept and operate the assets delivered by the project? • The person responsible for ensuring that the products manufactured on the

new asset will be marketed and sold? • The person responsible for project managing the project?

• The person responsible for ensuring that SHE performance of the new asset

is acceptable? • The individual responsible for overall project finance and ensuring that there

is a Business case for the project? • The person responsible for the R&T involvement? • The person accountable for closing the project and preparing the closure

report? At Project level: • The person who co-ordinates the various Business functions involved in the

project, ensures that the project is in the capital program and who prepares the Expenditure Proposal.

• The person responsible for project managing the project? • The person responsible for preparing and maintaining the project plan and

communicating and agreeing it with all interested parties? • The person responsible for estimating, preparing and maintaining cost reports

and communicating these as required? • The person who specifies the process requirements for the project and who

underwrites the process engineering? • The Design/Verification authorities?



• Hazard Study Leader? • Engineers with the knowledge and experience to lead the design work and

who will underwrite the engineering in their respective disciplines?

• The person from the works which will receive the asset, who ensures that the operational and work’s needs are incorporated into the project design and execution, and who communicates project information to the works.

• The individuals who will develop the procurement strategy and assist with its execution?

• The person responsible for the site work aspects of the project? The person responsible for managing the commissioning of the new asset and its hand-over to the works? 9.4.4 Deliverables An effective and integrated project organization containing identified individuals who have clearly defined roles and responsibilities. 9.5 Cost Estimating 9.5.1 Aims To produce a statement of project costs against a specific scope of work which will provide the basis for investment decisions, gaining authorization to proceed and subsequent cost control. 9.5.2 Responsibilities The Project Manager with contributions from relevant specialists within the project team.



9.5.3 Project Checklist Have you checked? • Whether the estimate includes the full scope of work relevant to its stage of

development?

• Whether the quality of project definition including project strategies, has been measured and how well the result benchmarks against industry?

• Whether the policy for managing and using contingency is established?

• Whether all project organization, roles, responsibilities have been defined and

allocated?

• That key project roles are filled, individuals in place and routes for acquiring those not in place, identified?

• Whether the estimate has been independently validated, if not then how it compares with other similar projects?

• Whether there are any (political) pressures holding the cost down? • Whether risks have been assessed and apportioned? • What the large items of cost are and how firm are their prices? (Quotations to

be available where applicable). • Have forecast design rates been used? • What estimating base has been used (GBHE, Contractor, and industry)?

• Whether process and computing design costs have been included?

• Whether levels of spares have been identified, agreed and included? • Whether inflation has been adequately covered, particularly the date for the

calculation (e.g.: 2/3 S Curve)? • Whether all works costs have been identified and included? (E.g.

commissioning spares, first charge of materials etc.).



• Whether pre-commissioning and commissioning needs have been adequately allowed for and agreed with works?

• Whether allowance is needed and included for special freight, duty and

insurance?

• Whether appropriate contingency/reserves has been included, allocated and agreed?

• If this is a project linked with a shutdown, whether sufficient Project

Manager’s reserves have been allocated?

• Whether appropriate exchange rates have been included and agreed?

• Whether the estimate has been broken down into SHE?

• Whether any functional or other specialist signatures are needed?

• Whether any capitalization of pre-sanction moneys has been included and, if so, clearly identified? If not, what value of pre-sanction has been expended?

• Whether any comments are required for the estimate front sheet?

• Whether the Venture Manager needs own copy of estimate front sheets and

any other (sectional) summary sheets?

• Whether the Venture Manager needs marked up copies of the completed estimate checklists?

9.5.4 Deliverables An all-inclusive project estimate which will provide the basis for investment decisions, gaining authorization to proceed and subsequent project cost control.



9.6 Contractor Selection 9.6.1 Aims To pre-qualify appropriate contractors. To select the correct contractors for the specific contract. 9.6.2 Responsibilities Project Manager in conjunction with appropriate specialist technical and commercial staff. 9.6.3 Process A typical selection process is as follows: (1) Production of the long list of potential bidders and questionnaire. (2) Pre-selection. (3) Pre-qualification visit (optional). (4) Short list of potential bidders. (5) Enquiry parcel/ tender. (6) Pre-selection process. (7) Visits, interviews (as appropriate). (8) Final selection. 9.6.4 Project Checklist Have you considered? • Whether you have the necessary skills you require, within the project

organization, for the selection process; and if not where you will find them?

• Potential list of bidders? • The process you will use?



• Responsibilities within the project team?

• The criteria you need answering to complete the exercise?

• The structure of the questionnaire you need for establishing suitability of the

contractors or suppliers?

• The capabilities of local contractors?

• Whether there is any requirement (from the site or business) to use local contractors and are they qualified?

• Experience from past projects?

• Contractor’s workload?

• Suitability of the contractors in regard of skills, competencies and alignment?

• Visiting the contractor’s premises and interviewing their key personnel?

• The formal scope of work?

• The structure of the enquiry parcel?

• Typically:

• Invitation to tender;

• Form of tender;

• Form of contract;

• Technical scope of the project;

• Standards to be applied;

• Process requirements;

• Preliminary specifications and drawings.

• GBHE requirements:



• Site rules;

• SHE standards.

• The structure and content of (and prepared) the invitation to tender? • The criteria you require (and produced it) for comparing and analyzing the

bids? 9.7 Work Breakdown Structure (WBS) 9.7.1 Aims To identify specific outputs/deliverables required at the end of the project. To determine the resource requirements and their associated costs, timing and duration. 9.7.2 Responsibilities Driven by the Project Manager in conjunction with the project team. 9.7.3 Project Checklist Have you: o Identified what you want to achieve through doing this project? o Established the project strategies? o Identified the Major deliverables and Sub-Deliverables? o Structured the Major and Sub-Deliverables into a hierarchical list or WBS

Chart format? o Considered the Type, Amount and Unit Rate of Resources required to

achieve each Sub-Deliverable? o Considered Human Resources, Facilities, Equipment, Materials? o Identified who is responsible for each element of the WBS?



o Identified how each WBS element should be sequenced and scheduled? o Considered what might prevent the resources/schedule from being delivered,

and assigned costs to these risks? o Received (grade ’B’) estimates from WBS element owners? o Considered what opportunities exist for improving schedule timing/sub-

deliverable costs? 9.7.4 Communications Have you:

• Agreed ownership with those responsible for the WBS elements?

• Issued WBS to the Project Team?

• Agreed budgetary control with WBS element owners?

• Reviewed and agreed the project plan with the project team and client?

• Been clear and open with the Venture Manager about the residual risks? • Been clear and open with the Venture Manager about the estimate

accuracy? 9.7.5 Deliverables Work Breakdown Structure; Simple List or Organization Chart format. 9.8 Planning and Control 9.8.1 Aims To produce a plan and schedule for the project to help bring about management control. To establish levels of project resourcing required. To establish effective monitoring, reporting and control.



9.8.2 Responsibilities Driven by the Project Manager in conjunction with the Venture Manager. 9.8.3 Project Checklist Have you: • Established Project Strategy?

• Decided upon and acquired computer software for planning and scheduling? • Prepared a WBS?

• Established appropriate measures of project performance? • Produced an integrated project master plan/schedule covering all project

phases?

• Established the requirements for detailed planning/scheduling? • Established (and secured) appropriate resources (quality and numbers) to

carry out the planning/control activities? • Produced a contract plan (where suppliers/contractors are involved)? • Established systems to manage all hand-overs?

• Established systems for progress monitoring and recording? • Established reporting requirements including frequency and content? • Made arrangements for formal progress meetings and produced a schedule

to operate throughout the lifetime of the project?



9.8.4 Communications Have you: • Consulted (and agreed) on project strategies with the Venture Manager?

• Confirmed the overall project plan/WBS with the Venture Manager?

• Consulted with the project team and confirmed the level of resources

(including source, level and type) required for the project? • Consulted (and agreed) project performance outcomes/measures/key

deliverables with the project owner?

• Agreed the scope of detailed planning (including resources, responsibilities, tools and techniques), monitoring and reporting appropriate to the project and confirmed the level of planning services required with the contractor?

• Prepared the overall project control plan and associated in-house control

plans? • Established responsibility/ownership for the activities identified in the plans? • Estimated durations for the activities on the plans and gained commitment to

these? • Confirmed the use (or not) and choice of computer planning systems? • Checked (and agreed) the contractor’s schedule, particularly that it contains

all work included under the contract? • Distributed the Project Plan, schedules, progress reports and meeting notes? • Consulted regularly with the Venture Manager on critical issues,

contingencies available and potential changes to plan and schedules? 9.8.5 Deliverables • Project master plan/performance measures/key deliverables.

• Project strategy statement.



• Detailed plans.

• Control schedules for managing deliverables/milestones/hand-overs.

• Timetable for progress review meetings. • Progress and critical activity exception reports. • Notes of progress review meetings. 10 PROJECT IMPLEMENTATION CHECKLISTS 10.1 Cost Management 10.1.1 Aims To account for all project costs. Ensure that only legitimate costs are allocated to the project. Ensure that invoices are validated. To establish effective cost monitoring, control and reporting. 10.1.2 Responsibilities Driven by the Project Manager supported by the project team. 10.1.3 Project Checklist Have you: • Established the scope/strategy for cost management?

• Prepared and developed the project estimates?

• Established the project cost accounting/management structure?

• Established the means for collecting cost information from both in-house and

external sources?



• Established the level/frequency of project cost monitoring? • Identified requirements/mechanisms for monitoring, recording and controlling

costs at detailed level, including the maintenance of AFC’s? • Established systems for integrating the affects of project change into cost

management and reporting? • Established systems for approving/validating payments to the

contractor/suppliers and also for internal costs incurred on the project? • Established systems, format and frequency for project cost reporting? • Established (and secured) appropriate resources (quality and numbers) to

carry out project cost control activities? • Made arrangements for formal cost review meetings? 10.1.4 Communications Have you: • Shared your requirements for the project cost structure with the project team?

• Agreed the policy for management and use of contingency?

• Gained a working knowledge of the contractor’s cost management systems? • Agreed the type and extent of computer cost management systems to be

used?

• Agreed the scope of contractor’s cost management services to the project? • Agreed the format/frequency of cost reports required from the contractor?

• Consulted with the client and agreed the scope, format and frequency of cost

reporting required?

• Consulted with the client on (potential) movements in AFC's?



• Agreed a schedule for production of cost reports?

• Agreed a timetable for cost review meetings? • Agreed arrangements for the production of control estimates?

• Consulted regularly with the project owner on critical cost management

issues? 10.1.5 Deliverables • Contractor’s cost/exception reports.

• Project cost/exception reports.

• Client cost/exception reports. • Notes from project cost review meetings.

• Timetable for production of cost reports. • Timetable for cost review meeting. 10.2 Change Control 10.2.1 Aims To help manage change, avoiding uncontrolled growth in scope and also supporting effective cost and schedule control. Formalize recording and reporting of changes including Technical Queries. 10.2.2 Responsibilities Driven by the Project Manager supported by the project team. 10.2.3 Project Checklist Have you: • Established a source(s) of appropriate local procedure/good practice?



• Established the change control process appropriate to the project, including arrangements for incorporating the impact of pending/unapproved change into reporting?

• Established the means to estimate cost, schedule impact and risk associated

with the change? • Established the process for controlling Technical Queries? • Agreed/set up appropriate proforma for recording changes and technical

queries? • Set up a change control register/log? • Set up a register of Technical Queries? • Established monitoring and reporting requirements for changes and technical

queries? 10.2.4 Communications Have you: • Consulted with the Venture Manager client and confirmed strategy for

managing project change appropriate to the project?

• Checked the contractor’s internal change management/technical query system and confirmed they will operate within the project system?

• Agreed responsibilities for levels of authorization of change with the Venture

Manager and within the project team? • Agreed arrangements for rapid response to requests in emergency

circumstances? • Agreed arrangements for authorizing Technical Queries? • Distributed copies of the proforma for change and technical queries? • Distributed the change register/log?

• Distributed the Technical Query register/log?



• Agreed requirements for reporting change and technical queries? 10.2.5 Deliverables • Project specific Change and Technical Query control process statement.

• Change log/register.

• Technical Query log/register. • Proforma for Change and Technical Queries. • Change and Technical Query reports. 10.3 Document Management 10.3.1 Aims To help manage approval of, and change to, documents throughout the lifetime of a Project. Provide for security of electronic and paper and electronic information. To define requirements for storage, recovery, distribution and archiving/disposal of documents. 10.3.2 Responsibilities Driven by the Project Manager in conjunction with the project team. 10.3.3 Project Checklist Have you: • Established a document management strategy for in-house and, where

appropriate, externally produced documents?

• Established a system for uniquely referencing documents, including identifying status of revisions/amendments?



• Set up a document register? • Pre-allocated blocks of document numbers to specific groups within the

project team, including external organizations? • Established an appropriate filing structure (including cross-indexing of

documents held remotely) and considered using it on each document?

• Selected a location for the project filing system and considered using an electronic document system for storage, retrieval and distribution?

• Considered appropriate back-up and security/administration arrangements for

electronic filing systems?

• Established the approvals process for documents, particularly considering

requirements requiring formal external approval, e.g.: statutory approvals, SHE, critical designs/calculations?

• Listed items requiring formal calculations, statutory approvals and others as specified by the design authorities?

• Identified items where vendor data is required? • Established a process for controlling the production of vendor data, including

such things as responsibilities, logging receipt, receipt and turn round time, number of copies?

• Established the location of the project archive and archive retention time?

• On completion of the project, stripped the project file, transferred key

documents to the client and securely disposed of all others? 10.3.4 Communications Have you: • Identified applicable sources of local good practice?

• Referred to GBHE Standing Instructions on security of documentation?



• Agreed system, responsibilities and nominated the individuals involved in

document checking and approval?

• Agreed document management requirements with external organizations?

• Agreed the requirements for archiving documents with the Venture Manager?

• Issued the list of file codes and revision references?

• Issued the pre-allocated document numbers?

• Issued the (up to date) document register?

• Issued the document transmittal proforma? • Distributed the list of documents requiring design calculations and external

approval?

• Issued the document distribution chart? 10.3.5 Deliverables • Document filing structure.

• Hard copy files / electronic system.

• Distribution chart.

• Document register.

• Document management strategy.

• List of documents requiring critical approval/design calculations.

• List of pre-allocated document numbers.

• Transmittal proforma.



10.4 Construction Management 10.4.1 Aims To ensure that appropriate GBHE standards for SHE and specific construction health and safety requirements are met. To manage and control change and technical queries. To ensure GBHE’s interests in terms of business and project objectives are achieved during construction. 10.4.2 Responsibilities The Project Manager in collaboration with site construction management. 10.4.3 Project Checklist Are you managing the site contractors effectively and: • Monitoring construction progress in terms of the schedule, physical

completion and costs on a regular basis?

• Updating the project schedule with information received?

• Updating the cost forecasts and, where appropriate, projecting a new AFC?

• Checking that sufficient site supervision and resources are available?

• Obtaining statutory approvals?

• Maintaining the construction health and safety plan?

• Complying with labor agreements?

• Maintaining safe operating practice?

• Managing arrangements for off-site assemblies?

• Managing interface issues with the local site in terms, for example, of access, security, siting of compounds, safety, interfaces with operating plants, permits to operate etc.?



• Keeping everyone informed on the progress of construction? 10.4.4 Deliverables An installed and tested plant which fully meets the business and project objectives. 11 PROJECT REVIEW CHECKLISTS 11.1 Project Review, Reporting and Close-Out 11.1.1 Aims To ensure the project is financially closed with all records complete. To review beneficial operation, including examination of identified deliverables. To review effectiveness of project delivery strategy, including control of design, construction and commissioning. 11.1.2 Responsibilities Venture Manager in conjunction with the Project Manager and the project team. 11.1.3 Project Checklist Have you: • Included the costs for conducting reviews within the project estimate?

• Identified project reviews required at intermediate stages of the project?

• Considered who should attend the review?

• Considered what the review format should be (e.g. brainstorming, what went

well and what could be done differently)?

• Structured Review of each project stage/activity?



• Linked learning to a particular project stage?

• Identified an improvement action against any learning?

• Reviewed delivery against planned timing?

• Reviewed actual savings against any Value Analysis savings identified pre-sanction?

• Analyzed working relationships with all groups/contractors involved in the project?

• Reviewed the quality of workmanship throughout the project? • Reviewed the scale and effect of post-sanction change on the project? • Reviewed the extent to which the project/business objectives have been met? • Completed hazard studies 4, 5 and 6 and produced a SHE Dossier?

11.1.4 Communications Have you: • Completed hand-over documentation?

• Updated project documentation to ’as-built’ status as required?

• Updated work’s record systems to incorporate the new project? 11.1.5 Deliverables You must have produced: • Hazard Study 4, 5 and 6 reports.

• A SSHE Dossier.

• Project closure report.



• Project acceptance certificate.

• Updated work’s records.

• Financial closure request forms. 11.2 Measurement (Learning Log) 11.2.1 Aims To collect project information to help increase learning and improve performance. To test the viability of a project at critical stages in its development. To carry out specialist project audits and objective performance bench-marking. 11.2.2 Responsibilities Driven by the Project Manager in conjunction with the Venture Manager and supported by appropriate specialist auditors. 11.2.3 Project Checklist Have You: • Established the strategy for performance reviews, measurement and auditing

appropriate to the project?

• Established the key project stage gates and built these into the schedule?

• Established a performance measurement process (including identifying appropriate stage gates) and specific measures appropriate to the project and built these into the project schedule?

• Identified the requirements for appropriate specialist audits and built these into the project schedule?

• Established the basis/protocol for all audits and performance reviews?

• Established sources of (and secured) resource for performance reviews, measurement and auditing and made appropriate allowance in the project budget?



• Completed the performance measurement and auditing activities including

production and submission of information?

• Carried out appropriate validation of estimates and quotations?

• Prepared and submitted the end of project report?

• Provided the project contribution to the post event review? 11.2.4 Communications Have you: • Accessed the GBHE Project Management good practice databases on Lotus

Notes for good practice references?

• Made certain that you know what specialist (SHE) audits are required on your project?

• Determined whether the project is to be carried out under a local QA registered system and, if it is, what procedures are applicable?

• Consulted and confirmed with the client on the form of measurement and auditing appropriate to the project (including the key project stage gates)?

• Consulted with the client and confirmed the project contribution to the post event review?

• Confirmed validation requirements?

• Agreed the measures of project performance that are to be made?

• Agreed the form and structure of the end of project report?

• Compared project measures with best (external) practice?

• Consulted with the client and confirmed the project requirements for the post event review?



11.2.5 Deliverables • Project performance measures.

• Benchmark reports (vs best in class industry performance).

• Specialist Audit reports.

• Reports of peer performance reviews. • Critical project learning (transferred to VULCAN database).

• End of project report. 12 REFERENCES & FURTHER READING (i) GBHE Technology Project Procedures (ii) Factors Affecting Small Projects in Asia Pacific; R. Levine/S. D. Price,

Cranfield University 1997 (iii) IPA Benchmarking Approach. DOCUMENTS REFERRED TO IN THIS INFORMATION FOR ENGINEERS This Information for Engineers document makes reference to the following documents: GBHE RESPONSIBLE CARE MANAGEMENT SYSTEM GBHE Safety, Security, Health and Environmental Policy (referred to in clause 0) GG 4.01 Auditing Conformance with SSHE Standards (referred to in 6.2.2) GBHE ENGINEERING PROCEDURES GEP 1 General Requirements for Group Engineering Procedures (referred to in 6.2.2) GBHE INFORMATION FOR ENGINEERS GBHE Engineering Audits of Manufacturing Sites, Auditors Guide (referred to in 6.2.2) PSG-001 Hazard Study Methodology (referred to in 5.6).

PROJECT MANAGEMENT: A Handbook for Small Projects

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