60R-10

Total Cost Management® Framework:

This Recommended Practice (RP) is brought to you as public service by AACE International, the Authority for Total Cost Management. The AACE International Recommended Practices are the main technical foundation of our educational and certification products and services. The RPs are a series of documents that contain valuable reference information that has been subject to a rigorous review process and recommended for use by the AACE International Technical Board. AACE International is a 501(c)(3) non-profit professional association serving the total cost management community since 1956. AACE International provides its members and stakeholders with the resources they need to enhance their performance and ensure continued growth and success. With over 8,500 members world-wide, AACE International serves total cost management professionals in a variety of disciplines and across all industries. AACE International has members in 87 countries. If you share our mission to “enable organizations around the world to achieve their investment expectations by managing and controlling projects, programs, and portfolios and create value by advancing technical knowledge and professional development”, then we invite you to become one of our members. In addition to this and other Recommended Practices, here are just a sample of the products and services that AACE has to offer you: Recommended Practice

Total Cost Management is a systematic approach to managing cost throughout the life cycle of any enterprise, program, facility, project, product or service. AACE’s flagship publication, the TCM Framework: An Integrated Approach to Portfolio, Program and Project Management, is a structured, annotated process map that for the first time explains each practice area of the cost engineering field in the context of its relationship to the other practice areas including allied professions.

Visual TCM Framework: Visual TCM graphically demonstrates the integration of the strategic asset management and project controls process maps of the TCM Framework. The Visual TCM application has been designed to provide a dynamic view of the TCM processes, from the overall strategy process maps to the mid-level processes and detailed activities. The processes are hyperlinked, giving the user the ability to move to and from related process maps and reference Recommended Practice

material. This allows for the optimal effectiveness of understanding and using the process and sub-process in the context of and relationship to associated sub-processes that share common strategies and objectives. Visual TCM allows the user to view and apply TCM section-by-section, at a sub-process or functional level. Visual TCM is available to members at no extra fee.

management. Comprehensive, well organized, and timely, each PPG is a collection of selected articles covering a particular technical topic area or industry segment. The PPGs provide an excellent source of reference material and is a welcome addition to any reference library.

Certification: Virtual Library: Members receive free access to the Virtual Library, an online collection of over 5000 complete technical articles on virtually every aspect of cost engineering. Search this extensive database and immediately retrieve the best techniques and potential solutions to the problems confronting you and your organization.

Recommended Practice

Since 1976, AACE has been certifying individuals as Certified Cost Consultants (CCC)/Certified Cost Engineers (CCE); Certified Cost Technicians (CCT); Certified Estimating Professionals (CEP); Certified Forensic Claims Consultants (CFCC); Earned Value Professionals (EVP); and Planning & Scheduling Professionals (PSP). In the midst of staggering business and economic turmoil, you need all the tools at your disposal to help shore up your career prospects. AACE certification can help you and the organizations that rely on you for help!

Professional Practice Guides (PPGs):

Online Learning Center:

Professional Practice Guides contain the most worthwhile contributions to the field of total cost

The Online Learning Center features modules based upon actual technical presentations captured Recommended Practice

at our Annual Meetings. Each recorded unit includes a live audio recording of the speaker synchronized to the slides accompanying the presentation. Each unit includes the technical paper associated with the presentation, and a downloadable audio-only version that you may play on your mobile device or iPod. Completion of each unit earns 0.1 AACE recertification credits (i.e. 0.1 CEUs). An electronic certificate of completion will be attached to your profile.

Conferences: AACE International’s Annual Meeting brings together the industry’s leading cost professionals in a forum focused on learning, sharing, and networking. Over 100 hours of technical presentations and an industry tradeshow that will challenge you to better manage, plan, schedule, and implement technology for more effective and efficient business practices. The International TCM Conference is a similar event that is held outside of North America – complete with technical presentations, seminars and exhibits.


Discussion Forums: The discussion forums encourage the exchange of thoughts and ideas, through posting questions and discussing topics. They provide a great means for networking and interaction with your peers. Participate anytime at your convenience and receive automatic e-mail notifications on topics that are of interest to you. With several thousand users, if you have questions or concerns about a technical subject, program, or project - the forums are a great resource for you.

Mentoring Program: Looking to gain more knowledge from an experienced professional or an opportunity to help another professional? Included with your membership, AACE offers a comprehensive mentoring program for individuals interested in sharing knowledge with others or advancing their own careers to the next level.


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Members receive a complimentary subscription to the Cost Engineering journal, AACE’s bi-monthly professionally peer-reviewed publication. It contains best-in-class technical articles on total cost management related subjects. It is published as both a print version and an online version. Our bi-monthly digital publication, Source, focuses on AACE activities and items of interest to the total cost management community, with special features for our members.

Salary and Demographic Survey: Conducted annually, salary survey is a great resource for employers that want to gain a better understanding of the competitive marketplace for talent and for employees interested in knowing how their compensation compares with their peers in the profession.



AACE International Recommended Practice No. 60R-10

DEVELOPING THE PROJECT CONTROLS PLAN TCM Framework: 8.1 – Project Control Plan Implementation Rev. December 21, 2011 Note: As AACE International Recommended Practices evolve over time, please refer to www.aacei.org for the latest revisions.

Contributors: H. Lance Stephenson, CCC (Primary Author) John K. Hollmann, PE CCE CEP Michael A. Farin Copyright © AACE® International

Rob Hartley, PSP Rajasekaran Murugesan, CCE W. James Simons, PSP AACE® International Recommended Practices

AACE® International Recommended Practice No. 60R-10

DEVELOPING THE PROJECT CONTROLS PLAN TCM Framework: 8.1 – Project Control Plan Implementation

December 21, 2011 INTRODUCTION This recommended practice is intended to serve as a guideline, not a standard. As a recommended practice of AACE International, the intent of the guideline is to improve the communication among stakeholders involved with preparing, evaluating, and using project controls information. This recommended practice (RP) of AACE International defines the overall development, implementation and management of a project controls plan. This deliverable can be included as part of an overall project execution plan (PEP), or considered a stand alone document that describes specific approaches that each functional entity will use (engineering, procurement, construction, safety, quality, etc.). The project controls plan describes specific processes, procedures, tools and systems that guide and support effective project control. The plan is a narrative or qualitative representation of the project control process, while the estimate, budget, schedule, etc. represent the quantitative aspects. Organizations may use this RP to develop a fit-for-use template as a model document, which is further customized for each specific project.

Purpose This RP is intended to provide guidelines (i.e., not a standard) for the development of a project control plan that most practitioners would consider to be good practices that can be relied on and that they would recommend for use where applicable. The purpose of the project controls plan should include, in part: •

• • •

A plan to implement an integrated set of work processes, procedures and applications to plan, monitor, execute and control the work. For all intense purposes, the TCM Framework will provide the basis for general work processes. Procedures and applications (systems) can be specific to an organization or a project, and therefore, all procedures and applications to be used should be stated in the project controls plan. A plan to implement an integrated suite of applications (systems). A plan to identify the roles, responsibilities, and accountabilities for the project controls team members. A plan to produce the project control deliverables, expectations and scope of work

The use of a project controls plan is considered a leading indicator for assisting in the success of the delivery of the project. The time invested in preparing, documenting, and communicating a solid project controls plan will increase the success of the execution of the project. The introduction of the project controls plan and all aspects within this document assist the project team in reducing project delivery risk. Therefore, any consideration not to implement the project controls plan in whole or portions of introduces a level of risk to the project.

Background This recommended practice (RP) describes the important elements of defining the project controls plan and the requirements for communicating project information to the project team and its stakeholders. This recommended practice coincides with the TCM Framework. As part of the TCM Framework, the project controls plan should provide the project team and its stakeholders the Copyright © AACE® International

AACE® International Recommended Practices

60R-10: Developing the Project Controls Plan

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process model based upon the PDCA management or control cycle. As stated in the TCM Framework, the PDCA model is a generally accepted quality driven, continuous improvement management model. The project control process is the recursive process cycle nested within the “do” step of the strategic asset management process cycle. Therefore, the project control plan will only apply to the project control process. The PDCA steps of the project control process cycle include: 1. 2. 3. 4.

Project Planning Project Implementation Project Performance Measurement Project Performance Assessment

Project control is a process for controlling the investment of resources in an asset. The project controls plan is considered the communication tool for instituting the project control process.

Figure 1 – Project Controls Process - Total Cost Management Framework Project control may be considered the quantitative resource control subset of the project management process, and therefore, the project controls plan should be considered a subset or compliment to the overall project execution plan. Prior to developing the project controls plan a requirements elicitation and analysis process should be completed. The requirements elicitation and analysis process will assist the team in identifying the stakeholders (decision-makers and those who interface with project controls) needs, wants, and expectations; and documenting

Copyright © AACE® International




them in a form that supports planning, communication, implementation, measurement, and assessment. Figure 1 represents the project controls process of the Total Cost Management Framework. As identified earlier, the project controls process is an integrated and quality driven process model. Also, the application of the project controls process provides our membership and others in exercising due diligence in the stewardship of the six elements of project controls, which are: • • • • • •

Know what has to be done Know what has been done Know how actual performance compares with baseline Know what remains to be done Identify and implement corrective actions to bring performance in line with expectations Check results of corrective action

Using the Project Controls Plan with a Phased Project Process A phased project process, often known as a stage-gate process is a conceptual and operational road map for moving new projects from proposal to closure. Stage-gate divides the effort into distinct stages separated by management decision gates (gate keeping). Project teams must successfully complete a prescribed set of related activities in each stage prior to obtaining management approval to proceed to the next stage of project delivery. In its simplest terms, the stages of a phased project process can be: • • • •

Ideation Planning Execution Closure

Specific industries, such as IT, pharmaceuticals, and the process industry have identified the stages that reflect their business models. In some cases, stages are supported by AACE International Recommended Practice No 17R97, Cost Estimate Classification System. A key concept for project control plan implementation is phased control (continuously involved in all phases of a project), which recognizes that project control must start when work begins for a project phase. Implementation of project control cannot wait until the start of execution phase.

Continuous Improvement during the Project Life Cycle It is expected that the project controls plan continuously be updated during the life of the project in order for the project team and its stakeholders to be kept current of the requirements and expectations of the project controls team. The project controls plan is considered a dynamic document, and as such, revisions will be required and be distributed (revision control is required for the purposes of ensuring that the most current information is communicated to the project team and stakeholders). The project controls plan recommended practice and the plans of practioners using this RP are dynamic and may undergo change based on contemporaneous practice.

RECOMMENDED PRACTICE The project controls plan is considered the scope of work (SOW) for the project controls team that will support the Copyright © AACE® International




overall project team and its stakeholders. To further assist in understanding the requirements of project controls, the project controls plan is divided into five (5) sections, with each section defining the recommended requirements for the development of the project controls plan. Section Two describes the major steps or subprocesses of project controls as per the TCM Framework. The major steps or sub-processes are organized by the PDCA model, as described earlier. The following can be considered the table of contents of the project controls plan: 1.

2.

3.

4.

5. 6.

Project Control Plan General Requirements a. Mission Statement b. Delegation of Authority Guideline c. Compliance d. Revision Control e. Organization for Project Control i. Organization Chart ii. Organizational Breakdown Structure (OBS) Development iii. RACI (Responsible, Accountable, Consulted, and Informed) Charts iv. Transition Planning Functional Applications of Project Controls (as per TCM Framework) a. Project Planning i. Project Scope and Execution Strategy Development ii. Control Account Development iii. Schedule and Cost Planning: Iterative and Concurrent Processes 1. Schedule Planning Development 2. Cost Estimating and Budgeting 3. Resource Planning 4. Procurement Planning iv. Value Analysis and Engineering v. Risk Management b. Project Performance Measurement i. Project Cost Accounting ii. Progress and Performance Measurement c. Project Performance Assessment i. Project Performance Assessment ii. Forecasting iii. Change Management Project Historical Database Management iv. Systems and Data Integrity Plan a. Systems b. Data Integrity and Backup c. Electronic File Transfer Communications Plan a. Meeting Requirements b. Reporting and Frequencies c. File Structures Project Controls Deliverables Project Controls Plan Implementation a. Review and Validation b. Communicating the Project Controls Plan c. Training d. Audits





THE BODY OF THE PROJECT CONTROLS PLAN The following provides the user of this recommended practice with an understanding of the requirements in order to develop an appropriate plan for a specific project. 1.

Project Controls Plan General Requirements a.

Mission Statement The purpose of the mission statement is to assist in providing the appropriate guidance of the actions of the project controls organization and project controls team. The mission statement will provide the framework or context within which the project strategies are formulated (e.g., do we encourage limited reporting or introduce analysis and recovery strategies? Do we include causal measurement such as work sampling or only lagging metrics assessment (EV)? Is speed paramount or accounting perfection? Do we prefer actionable intelligence or data, etc.). The mission statement will provide justification for the actions that the project controls team will undertake.

b. Delegation of Authority Guideline The purpose of the project contols plan is to implement an integrated set of work processes, procedures and applications to plan, monitor, execute and control the work as well as a plan to produce the project controls deliverables. In order to ensure compliance that the project controls plan is being developed and instituted as the official document, a governing body and governance support needs to be assigned. This governing body may be a subject matter expert, corporate governance officer, project sponsor, executive director, or even the project manager. In accordance with the project controls plan, administration and compliance to the document is assigned to the appropriate authority level.

c.

Compliance Once the project controls plan has been developed and implemented, the project team will be required to comply with all associated sections of the project controls plan. Compliance of the requirements of project controls provides the necessary project stewardship and reporting deliverables so that the project team can maintain the execution of the approved scope of work. A brief description should be written in the project controls plan identifying the compliance requirements, responsibilities, and corrective actions.

d. Revision Control Since the project controls plan is considered a dynamic document (continuously updated during the life of the project), a management of change policy should be introduced to allow for any editing or the addition / deletion to the body of the document. Any changes can only be made by re-issuing the project controls plan with a new, approved revision number. Since this is considered a controlled document, you may want to use your document control department for the release of project controls plan. A revision log identifying the revision and a brief description should be available for all stakeholders of the project. The management of change policy should also determine who approved the changes, who distributes the changes, and how copies (obsolete or new) will be managed. New and revised project controls plans should be issued as per the delegation of authority document. Copyright © AACE® International




To support revision control, a consolidated list of all supporting documents (i.e. procedures, processes, roles & responsibilities, estimates, baseline schedule, and key performance indicators, etc.) should be included as part of the attachments to the project controls plan. The consolidated list should identify the document name, document ID, revision number, and revision date.

e.

Organization for Project Control The risk or size of the project, or a combination of both, will determine the requirements for the development and dimensioning of the project controls organization. For smaller projects, the project control process may be managed by the project leader, or designate. For larger projects, discrete personnel may be required to carry out functional aspects of the project controls responsibilities, such as planners/schedulers, cost engineers, estimaters, etc.

i.

Organization Chart The design of the project team is dependent on the size of the project, complexity, contract type, scope of work, required deliverables and level of detail. As part of the project controls plan, please provide a brief understanding of the project controls resource requirements. The project controls plan should identify the various key team members and their responsibilities. This should include the roles and functions of each team member. An organization chart should be developed and submitted as part of the project controls plan.

ii.

Organization Breakdown Structure (OBS) Organizational breakdown is focused on translating resource provisions into general approaches for what work is to be performed, and by whom. Similar to the WBS, organizational responsibilities can be broken down in a logical, hierarchical manner resulting in an organization breakdown structure (OBS). Depending on the integration / interface requirements of a project, the project team may want to assign organizations responsibilities to specific scope elements, specifically, an OBS / WBS Relationship Chart. The OBS / WBS Relationship chart is a matrix table that identifies the WBS Elements on the vertical axis (left-hand column) and the organizations responsible for delivering the WBS elements on the horizontal axis (top row). Organizations may include the owner, engineering / architectural firms, equipment vendors and constructors.

iii. RACI (Responsible, Accountable, Consulted, and Informed) Charts Similar to the organizational breakdown structure, the RACI chart is developed to communicate each party’s or individual’s specific involvement in task and deliverable creation and review. The RACI chart is a matrix table that identifies the tasks on the vertical axis (left-hand column) and the roles of the tasks on the horizontal axis (top row). Again, please consider the risk and size of the project as well as the agreed-to deliverables to ensure that your project has the appropirate coverage to manage and execute the work. A RACI chart should be developed for each project, regardless of size or complexity.





iv. Transition Planning Transition planning is a partnership involving the project controls specialist, their expectations and deliverables, the project team, stakeholders and other key people involved with the project. Part of the transition planning is preparing for individuals that leave the project due to unforeseen circumstances. The project controls plan should indentify the requirements for replacing project personnel and transitioning new project members in an expeditious effort to minimize learning curve and possible delays.

2.

Functional Applications of Project Controls (as per TCM Framework) a.

Project Planning i.

Project Scope and Execution Strategy Development The project scope, contract requirements, internal corporate requirements, and execution strategy provide the project team with the basis for the development of the project controls plan. The project scope should be supported by the following documents. Ensure that all documents and their revision numbers are documented as the “control source” for the project. The following documents may be included as a separate attachment to the project controls plan: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

Contract, complete with addenda, omissions and exclusions General and particular conditions Project specifications Scope of work (included and excluded) Work breakdown structure Project control accounts Drawings Bid price (estimate), estimate basis, risk / event log, assumptions Tender schedule, schedule basis, risk / event log, assumptions Execution plan

The execution strategy should describe and identify three (3) items. 1. 2.

3.


Briefly describe the type of work (new project, addition or expansion, revamp, relocation). Briefly describe the execution strategy, specifically whether the project is considered one of the following: a. Standard execution (standard workweek, spot overtime, non-shutdown) b. An aggressive execution approach (non-standard workweek, high overtime) c. Fast-track approach (engineering incomplete at the start of construction plus aggressive execution) d. Shut-down (planned shut-down, non-standard workweek, high overtime) Briefly describe the contracting strategy. a. Self-perform, prime contractor, multiple contracts, alliance, joint venture. When entering into an alliance, joint venture or mutiple contract environment, the project team must consider how coding structures, systems, accounting practices, etc. will be intergrated (or mapped) with in the environment. AACE® International Recommended Practices



ii.

Control Account Development A key concept for project control plan implementation is that the control account integrates all the project control plan components (i.e., cost, schedule, resources, risk, and procurement). The control account relates directly to a work package component from the work breakdown structure (WBS) for which responsibility has been assigned (in accordance with the organizational breakdown structure (OBS) and the procurement plan), and for which cost budgets and resources have been assigned, and activities scheduled. At the start of the planning process, the control accounts are developed by the project control person or team. The following is an example of typical control account characteristics: • • • • • • • •

WBS OBS Work package: scope description Responsibility: contractor, discipline, lead person, etc. Budget: costs and revenue Resources: labor hours, material quantities, etc. Schedule: network activities Code of accounts: cost category, type or element

iii. Schedule and Cost Planning: Iterative and Concurrent Processes The following section describes the iterative and concurrent processes that are required to develop and communicate the integrated performance measurement baseline documents, such as the estimate, schedule, resource histograms, etc. Therefore, close and iterative integration of the cost and schedule elements is essential to the development of the performance measurement baseline in order to ensure the successful execution of the project.

1.

Schedule Planning Development The project schedule is considered one of the most important aspects for the execution of the project. Therefore, the development of the project schedule will be given full consideration, since it (the schedule) sets the baseline measurement for the project. The project schedule supports the time distribution of resources for activities, which support earned value management methodologies. For the development of the schedule to be complete, the planning and scheduling requirements must be established and integrated with estimate development. This will include internal (developer / owner) and external (contract) conditions and requirements, as well as a common WBS, resources, codes, etc. The project controls plan will address the integration of the schedule development, basis of schedule and schedule validation process. The plan will identify the level of detail required for the various schedules that are prepared during the project, including resource loading and leveling (i.e. the schedule must be detailed enough to show the effect of a changed condition to an activity sequence as well as to accrue costs associated with scheduled work activities based on the estimate and/or budget).





2.

Cost Estimating and Budgeting The project controls plan must outline the methodology for establishing the effort to perform the scope of work and the associated project budget, and to address the integration of the budgeting process with the schedule to ensure a performance measurement baseline is properly established. Like the Schedule Planning Development Section (2.a.1), the project controls plan will address the integration of the estimate development, basis of estimate and estimate validation process. The project estimate should be delivered in a standard hierarchy, for example. Cost Estimate Hierarchy • Direct Costs • Labor • Material • Equipment • Subcontract • Indirect Cost • Taxes • Risk • Profit • Contingency • Overhead • Escalation One final thought to consider is for the project team to provide an understanding as to how revenue (price) versus the cost of the project will be managed and communicated. Based on contract type (lump sum, cost plus, or unit pricing), clients or other parties may want to communicate or have communicated the profits (price minus cost) of the project.

3.

Resource Planning The project team is required to understand how the appropriate resource requirements were determined to support the execution of the project. The resource management section may want to specifically outline the requirements for labor resources and site equipment. For material planning, see Procurement Planning (2.a.4). Labor Management Planning Labor management planning is designed to facilitate the collection and reporting of the project labor (home office, field office, engineering disciplines, and field trades). Timephased usage profiles and histograms based on the project schedule and estimate should be developed as an output for measuring actual hours / costs against the planned hours / costs to support the evaluation of performance and prediction of final forecast hours / costs.




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Equipment Management Planning Like labor management, equipment management planning is designed to facilitate the collection and reporting of the site equipment. Usage profiles will be developed as an output for measuring actual costs against the planned costs to support the evaluation of performance and prediction of final forecast costs.

4.

Procurement Planning Procurement planning is the part of the project control planning process that ensures information about resources (e.g., labor, material, etc.) as required for project control is identified for, incorporated in, and obtained through the procurement process. The project controls plan does not explicitly include the procurement process. The project controls plan only addresses the project control interface with procurement. Procurement planning is crucial to the success of the project. The project team is required to determine and communicate the procurement plan, which must include information on both equipment and bulk purchasing, and subcontracting as identified by the scope of work. Procurement planning should identify the relationship of the scope of work to the work breakdown structure (WBS) and organization breakdown structure (OBS). Equipment and Bulk Purchasing Plan This section provides the project team with the opportunity to communicate the requirements on how permanent materials and equipment will be purchased, as well as delivered. The procurement plan requirements should also indicate on site material management and logistics for transporting materials. The equipment and bulk purchasing plan should include for imported goods and services, as well as freight and logistics considerations. Finally, the plan should identify site material storage and management requirements. Contractor Plan Contractors generally prepare their own control plans and control accounting. However, these must be consistent with the overall control plans and accounting to the extent required by the contract. A complete list of contractors and subcontractors should be provided. The list should outline their scope of work, start and completion dates, and the original budget.

iv. Value Analysis and Engineering The objective of value engineering is to improve the value for the intended asset or project objectives. Improvement techniques could either be improving the function or reducing the cost or both. This section of the project controls plan should communicate how value engineering will be introduced and supported throughout the life of the project, and identify the decisions and outputs derived from the VA/VE process. The project controls plan does not explicitly include the value analysis and engineering process. The project controls plan only addresses the project control interface with VA/VE. Copyright © AACE® International



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Further to understanding value analysis, also known as value enhancing practices (VEP’s), certain industries have identified two main categories to recognize and improve the value analysis process. The two categories are: • •

Value Improving Practices (VIPs) Project Execution Best Practices

Examples of value improving practices and project execution best practices are: • • • • • • • • • • • •

v.

Project Functional Objectives Energy Optimization Technology Selection Waste Minimization Process Simplification Effective Design Tools Design to Capacity Constructability Customized Standards and Specifications Value Engineering Predictive Maintenance Reliability Modeling

Risk Management Risk management is the process of identifying risk factors (risk assessment), analyzing and quantifying the properties of those factors (risk analysis), mitigating the impact of the factors on planned asset or project performance and developing a risk management plan (risk mitigation), and implementing the risk management plan (risk control). This section of the project controls plan should communicate how risk management will be introduced and supported throughout the life of the project. The project team should further describe both qualitative and quantitive aspects of risk.

b. Project Performance Measurement i.

Project Cost Accounting The project controls plan will address the interface requirements with cost accounting to develop the methods for the collection of cost commitments and expenditures. The project cost accountant will support the adminstration of cost collection, analysis, and forecasting. It is not only important to have a cost accounting structure that supports the development of the estimate and budget; it is equally important for the project team to ensure that all actual values are coded correctly. The financial system is usually considered the repository for all cost transactions for the organization. Other systems may import data from the financial system to support reporting for control accounts, work breakdown structures, schedule of pay values, etc. The following identifies other aspects the project team and the accountants need to be aware of:




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• • • • • • •

ii.

Work In Progress (WIP), Accruals Cost of Money (Financing) Invoicing Cash Flow Cost vs. Revenue Taxation & Depreciation Etc.

Progress and Performance Measurement The progress and performance measurement section identifies the process and methodology necessary to perform progress and performance measurement and reporting. The progress and performance measurement process will allow the project team to review the current performance of the work from inception to completion through periodic updates, and to facilitate the adjustment of their efforts to meet the changing circumstances. In order to ensure that proper earned value management is applied and understood, the project team should describe the methodologies to be used for capturing work accomplished. Different industries and companies may apply different methodologies when communicating work accomplished. The following identify the methodologies used in progress measurement. •

Units Completed – This measurement method can be used when work package scope can be further decomposed into fairly homogenous units of work (e.g., units of material, drawings, lines of code, function points, etc.) that each require approximately the same level of effort to produce, and for which work is usually completed, and can be measured, for some units while work continues on others.

•

Incremental Milestone – This measurement method can be used when work package scope is one deliverable (i.e., not many units as described above) or a set of deliverables done together, for which multiple activities must be performed in sequence and for which the completion of incremental tasks can be observed.

•

Judgment or Supervisor Opinion - This measurement method is the most subjective and is used when more objective methods are not reasonable. In this method, the person responsible for the work package estimates the percent complete based on his or her informed judgment.

•

Resource Expenditure (Level of Effort) or Cost Ratio - This measurement method is generally used when the work package scope does not include discrete deliverables or milestones and for which the activities are of long duration and of a relatively constant level of effort. These most often include management and support labor cost accounts (e.g., project management, project control, quality assurance, etc.).

•

Weighted or Equivalent Units - This measurement method is a hybrid of units completed and incremental milestones. It is used when the work package scope includes non-homogenous units of work and/or work tasks that overlap such that the other methods don’t work well.




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c.

Project Performance Assessment i.

Project Performance Assessment The project performance assessment section of the project controls plan identifies the process and methodology necessary to perform performance assessments and reporting. The use of each assessment method (e.g., earned value, work sampling, etc.) should be planned in a way that optimizes the identification of variances, and opportunities and risks for all aspects of the project. Optimally, the assessment should provide the team with an understanding of work accomplished. Another aspect is to ensure that the interfaces (i.e., data transfer) between measurement systems (e.g., payroll systems, material management systems, etc.) and systems used for assessment (e.g., scheduling software, cost processors) is complete and understood. Also, the interaction/interface with any owner, supplier, and contractor should support the reporting systems in order to address the performance measurement and assessment responsibilities. After project performance measurement and assessment have been planned, and the measurement processes and systems have been initiated, the use of assessment methods can begin. The areas that require assessment are: • • • • •

Cost Performance Schedule Performance Resource Performance Work Process & Productivity Risk Factors

Once completed, the project team needs to report the assessment that has been completed. These observations—along with schedule, resource, productivity, and work process and performance assessments—will be used in the forecasting process.

ii.

Forecasting Forecasting is the process of evaluating project control baselines in consideration of assessments of ongoing project performance. The forecasting process should be performed in a proactive, systematic approach based on an established update frequency, rather than being performed in reaction to performance problems. For the purposes of this section in the project controls plan, the project team will define the forecasting process to be used to assess each applicable element of the project, which may include scope, schedule, budget, resources, and risks. The inputs to the process include plans, performance and progress assessments (which include project cost accounting, and progress & performance measurement), values analysis, risk management and change management information. These forecasts should be reported in a way that highlights performance variances and issues that need project management attention. This section of the project controls plan should address quantitative forecasting for both cost and schedule values. Cost Forecasting There are three basic forecasting approaches, as identified below.




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• • •

Estimate At Completion = Actual Cost + Estimate To Complete Estimate At Completion = Actual Cost + Budget At Completion – Earned Value Estimate At Completion = Budget At Completion ÷ Cost Performance Index

The project team must determine the best possible solution that identifies an accurate EAC, and supports the mitigation of cost and schedule overruns that may surface. Caution must be used as the project team may be ignoring the warning signs necessary for project recovery. Schedule Forecasting When forecasting schedule completions dates, the project team must be aware of the project’s define critical path. The critical path method is a project time modeling technique designed to calculate the project’s longest path of activities. The CPM is defined by the relationships that activities have with each other, and their respective durations to complete the activity. The CPM calculates the earliest and latest dates that each activity can start and finish without making the project longer. From this calculation, the total float of an activity is identified (total float is the amount of time an activity has without delaying the overall timeline of the project). The main purpose of defining the critical path is to determine which activities are considered critical. These activities cannot be delayed and are crucial that the team manage properly for project success. The following is an example of a basic forecasting approach for schedules: • •

Schedule At Completion = Actual Duration + Remaining Duration Schedule At Completion = Project Duration ÷ Schedule Performance Index

When forecasting remaining duration, the project team will need to be aware of (to name a few): • • • •

iii.

Past performance Remaining hours to complete versus available resources Material and equipment delivery and support Start and finish dates based on activity to activity relationships

Change Management Change management imposes the required structure and discipline in the project control process by protecting the integrity of the control basis (performance measurement baseline) as a valid baseline (i.e., it represents a project plan in alignment with project objectives and requirements) for performance measurement. The process objective is not to limit or promote change, but to manage (identify and mitigate) and report it. The project control plan should address the methodology and processes for managing changes (whether internal and/or external to the business plan, project or contract) throughout the project regarding scope, quality, cost and time. The plan will address both the various types of changes and/or trends, as well as the desired approval process. Change can be positive or negative, and should always be carefully evaluated. Upon approval, the change should be methodically incorporated into the revised performance measurement baseline.




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Also, change increases the risk that there will be disputes and legal claims; these are generally detrimental to project performance. Therefore, developing plans and applying methods for resolving disputes and claims are part of the change management process. Due to the importance of managing change within a project, it would be best that a separate procedure be developed or incorporated to identify the process for supporting the specific project. At a minimum, the process should provide explanation on the following items: • • • • • • • •

iv.

Identify deviations, variances, and change Analyze variance Define deviation or change in scope Assess impact Record and track disposition Manage contingency and reserves Resolve disputes and claims Revised control basis (PMB)

Project Historical Database Management A very important aspect of any project is to ensure that the project team prepares the appropriate close out reports at project completion. This section of the project controls plan should identify how and who will be collecting the project information. The following is a list of typical requirements that should be collected: • • • • • • • • • • • •

Lessons learned, historical from past projects and previous phases / stages (action plans and continuous improvement strategies) Budget and estimate, estimate basis Final cost report Baseline schedule, schedule basis Final schedule Final executive project report Resource histogram(s), cash curves, progress charts Final change order log, complete with costs, hours, and quantities Final progress and performance report Qualitative and quantitative metrics & analysis (i.e. questionnaires, installed quantities per discipline or commodity ID, etc.) Contractor evaluation report Etc.

Implementing the practice of retaining original and final data and records will support the historical data collection process, and subsequently, improve the delivery of future projects.

3.

Systems and Data Integrity Plan a.

Systems This section of the project controls plan should address how project information will be collected and processed, as well as identify the systems interface requirements based on the organization, or




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within the alliance or joint venture. The plan will describe how information will be transferred between the systems in order to expedite the data mining process for increased usability and data integrity. The project controls plan should also describe the systems to be used during the development, execution and closeout of the project. Each function will be comprised, in part, of the entire integrated system. The expectation that the process of how information flows should still be represented in the project controls plan. The following diagram is an example of how systems will integrate with other systems.

Figure 2 – Example of Project Controls Systems Intergation The plan should include how information will be mapped throughout the systems, the data collection cut off times as well as synchronization times. The following identifies some of the types of coding structures that support the transfer of project data: • • • •

Work breakdown structure (WBS) Organization breakdown structure (OBS) Cost breakdown structure (CBS) Schedule of pay value (SOPV) structure




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• • • •

• •

Project control accounts Code or chart of accounts Resource classifications Accounting code structures • Balance sheet • General ledger • Taxation and depreciation Cost classifications, cost types Etc.

Prior to the start of the project, and depending on the use of the coding structures, the project team should construct a mapping index that identifies the relationships between coding requirements in reference to the systems and their requirements. The project team should provide the system architectural criteria and the validity of the match information (in comparison to all structures). Also, the plan should also include who will have access and security rights to certain systems within the project environment. The following identifies some of the types of users that may be assigned to or support the project: • • • •

Administrators Super-users Read / write access Read access only

The project team may want to use the OBS (organization breakdown structure) or RACI (responsible, accountable, consulted and informed) chart to determine who can have access to certain project areas, whether they are geographical or functional. Please note: Due to effort required for setting up the project systems, it is imperative that the coding structures identified for use are approved and “frozen” (not to be changed under any circumstances). Most financial systems are transaction based, and therefore, depending on the size of the project, thousands of records can be produced in a single day. If the coding structure were to change after the project has started, the past records (and budgets, mapping, etc) would be required to be corrected and updated.

b. Data Integrity and Backup Systems / files are the foundation of most enterprise applications and business processes and contain some of the company’s most important and sensitive information. In order to ensure a robust system, as well as reliable, secure and efficient information, the project team should develop a plan that identifies the responsibility of who is backing up information, what information is being backed up, the frequency, and the storage requirements. As part of data integrity, the project team should define how information will be shared between users. This will include a connectivity plan for computer connectivity. The connectivity plan will communicate how information will be shared, whether a server is placed on site for network purposes, stand alone computers are used, or satellite and fiber optics are used.




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c.

Electronic File Transfer Electronic file transfer is the transmitting of files over a computer network or the Internet. There are numerous ways and protocols to transfer files over a network. Therefore, the project controls plan should communicate how electronic file transfers will be executed. The electronic file transfer protocol of the project controls plan will describe the convention of how to transfer files between two computing endpoints.

4.

Communications Plan The purpose of the communication plan is to provide the project team with an understanding as to the methods and protocols required for conducting communications for the development, publishing, reviewing and approval of project information between project team members and the project stakeholders. The following information should also be included as part of the project controls plan.

a.

Meeting Requirements The purpose of the project meetings table is to provide the project team with the understanding of meeting requirements to manage the project. An example of meetings and frequency is presented in the following table. The organization may include more reporting requirements and frequencies based on the needs of the stakeholders of the project. Method Project team meetings Technical steering team meeting Individual status report Weekly project status report Weekly change management meeting Monthly project status report Monthly performance update meeting Monthly stewardship and financial update meeting Table 1 – Example of Meetings and Frequency

Frequency As required, based on project milestones (at least monthly) As required to support project milestones Weekly Weekly Weekly Monthly Monthly Monthly

b. Reporting and Frequencies The project reporting section defines the scope, format, content and responsibilities for the preparation, submittal and approval on the project reports. This section will also include the required information necessary to provide management with a period-specific evaluation and consistent measurement of the plan versus actual and forecast values in terms of overall cost expenditures, performance and schedule progress, etc. A list of all project reporting deliverables which identifies the frequency, and who the report is distributed to should be attached to the project controls plan.




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c.

File Structures The purpose of the file index structure section is to provide the project team with a repository for storing information. The project team should fully understand how documents are stored, whether this is a paper copy, or an electronic copy. Therefore, the file index should include a dictionary that explains what information is stored where.

5.

Project Controls Deliverables Area Project controls pre-planning and preparedness Project controls

Coding structures

Estimate and budgets

Schedule

Risk management Change management Graphical reports

Others Communications

Systems

Deliverable Project controls service agreement (as per functional specifications and client expectations) Project controls preparedness index Project controls kick-off meeting Delegation of authority log Audit calendar Project control organization Roles and responsibilities RACI chart WBS OBS CBS Code of accounts rd Client / 3 party codes Estimate Estimate basis document Estimate risk report, log Estimate validation report Budget Contingency report (drawdown) Cash flow Cost report by area, function, classification, estimate hierarchy, etc. Forecast reports Schedule Schedule basis document VIP schedule (when VIP's will be introduced) Schedule risk report, log Schedule validation report Schedule reserve report Forecast schedules Risk log Risk forms Change log Change forms Commodity reports Resource histogram Equipment plan (timescale) Indirect and staffing plan (timescale) Subcontract report Meeting requirements list Reporting matrix File structure Project calendar Mapping index Data synchronization schedule Backup log Access and security log

Table 2 – Example of Deliverables that Support Delivery of a Project Copyright © AACE® International



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The purpose of the communication plan is to provide the project team with an understanding of the outputs, also known as deliverables that are required for the execution and management of the project. The deliverables are outputs that support the team in their decision making process to support the identification of threats and impacts to the project, and determine corrective action where necessary. Table 2 is a list of deliverables that are used to support the delivery of the project; it is an example only. The project team may want to add or delete items.

6.

Project Controls Plan Implementation As defined in the TCM Framework, the project control plan implementation is the process of intergrating all aspects of the project control plan; validating that the plans are comprehensive and consistent with requirements and ready for control; initiating mechanisms or systems for project control; and communicating the integrated project control plan to those responsible for the project’s work packages. The following diagram represents the project controls plan implementation process of the Total Cost Management Framework:

Figure 3 – Process Map for Project Control Plan Implementation

a.

Review and Validate The project controls plan, control accounts, and documentation should be reviewed and validated by the project team to determine whether the project controls plan, control accounts, and documentation provide the required information and is suitable as a manageable basis for control. The documentation should also be reviewed and validated to ensure that they meet project objectives and requirements, and whether they are competitive with industry best practices and




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historical approaches. The project team may want to introduce a readiness checklist to support the implementation of the project controls plan.

b. Communicating the Project Controls Plan At the conclusion of project controls plan implementation, the project controls plan will have been documented and communicated to the project team, those responsible for work packages will understand their control responsibilities and their control accounts, and project controls systems and tools will be set up and ready to support the project controls measurement, performance assessment, forecasting, and change management processes.

c.

Training The project controls plan should also provide an understanding of the training requirements for the project team and stakeholders. This training would include: • Implementation of the project controls plan • Deliverables; set up; maintenance and use • Systems; set up; maintenance and use • Others The training plan should identify the project teams training goals, and the expected topics and skills one would expect from the training. Finally, the training plan should identify the timelines of when personnel would be trained.

d. Audits Once the project controls plan has been approved, it is recommended that a separate entity audit the project team to ensure compliance of the project controls plan throughout the delivery of the project. If items within the project controls plan are no longer warranted, then the project controls plan will need to be updated and redistribute. A list identifying who will be performing the audit and the frequency at which the audit(s) will take place should be attached as part of the deliverables for the project controls plan. The audits will provide valuable information as to what is working well, what isn’t working well, what needs to be changed and what needs to be deleted. The audits should also provide an understanding as to compliance, and the reasons for non compliance, such as: • • • •

Process Design – Is there a flaw in the project controls plan, implementation or monitoring? Resource Constraint – Is there a lack of resources to complete the deliverables as identified by the project controls plan? Training Requirements – Is there sufficient skill, training, or knowledge to ensure compliance? Process Discipline – Is the project team displaying proper process discipline to carry out the deliverables as identified by the project controls plan?




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SUPPORTING INFORMATION FOR DEVELOPMENT AND IMPLEMENTATION The following is a list of procedures that may be developed to support the use and implementation of the project controls plan: • Team development procedure

• Risk management procedure

• WBS development procedure

• Value improving practices (VIP) procedure

• Project control account development procedure

• Accounting and invoicing procedure

• Estimate and budget development procedure

• Financial stewardship procedure

• Schedule development and management procedure

• Contingency management procedure

• Cost management procedure

• Claims and dispute resolution procedure

• Change management procedure

• Project closeout procedure

• Progress measurement procedure

• Historical data collection and benchmarking procedure

• Performance assessment procedure

• Communication procedure

• Forecasting procedure

• Systems integration procedure

• Purchasing / contract administration procedure

• Audit / compliance procedure

• Glossary of terms, acronyms and formulas

REFERENCES 1. 2. 3. 4. 5. 6. 7. 8.

AACE International Recommended Practice No. 10S-90 Cost Engineering Terminology, AACE International, Morgantown, WV, (latest revision) Hollmann, John K., Editor. Total Cost Management Framework: An Integrated Approach to Portfolio, Program and Project Management, Morgantown, WV: AACE International, 2006. Amos, Dr. Scott J. (Editor), AACE International, Skills & Knowledge of Cost Engineering, 5th Edition, 2004. O’Brien, James J., Plotnick, Fredric L., CPM in Construction Management, 7th Edition, New York: McGraw-Hill, Inc. 2010. Westney, Richard E., The Engineer's Cost Handbook: Tools for Managing Project Costs, New York: Marcel Decker Inc., 1997. Humphreys, Kenneth K., Project and Cost Engineer’s Handbook, 4th Edition, New York: Marcel Decker Inc., 2005. Wozniak, Timothy M., Significance vs. Capability: “Fit for Use” Project Controls, 1993 AACE Transactions, A.2, AACE International, Morgantown, WV, 1993. Douglas, Edward E. (Ted), Establishing a Project Controls Organization, 1999 AACE International Transactions, CSC.07, AACE International, Morgantown, WV, 1999.

CONTRIBUTORS H. Lance Stephenson, CCC (Author) John K. Hollmann, PE CCE CEP Michael A. Farin Rob Hartley, PSP Rajasekaran Murugesan, CCE W. James Simons, PSP



60R-10

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