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Effective ChangeManagement Webinar
November 2010
Integrated Consulting LLC – Strictly Confidential – www.icpcs.com – [email protected]
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Webinar Objectives
• Share the importance of change management
• Present proven control points within the PLC of which increase a
project’s success rate
• Managing schedule baselines
• Forecast / trend changes compared to budget changes
• Properly documenting the change to remove subjectivity
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Change Management Definitions
Project change:
Any event that occurs (or could occur) and causes (or potentially causes)deviation from the plan (either positive or negative)
Project change management:
The rocess of identif in and trackin chan es to ro ect deliverables,
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schedule, design, scope or cost. It includes documenting an assessmentof the impact, cost, benefit and risk of proposed changes.
Change control:
The process of controlling and documenting change orders. This includesproposing the change, evaluation of the change, approval, rejection orplacing on hold for re-evaluation at a future time, and tracking.
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Why is Project Change
Management Important?• Projects do not run according to plan for the most part. Project deliverables must be
maintained by carefully and continuously managing changes, either by rejectingchanges or by approving changes so those approved changes are incorporated into a
revised baselines (Budget and Schedule)
• Enables the PMT to identify potential problems in a timely manner and take correctiveaction to minimize the impacts
• Ensures the PMT and stakeholders have an accurate understanding of what hasbeen completed to-date and what will be delivered at project completion
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Change Impacts within PLC
Opportunity /
Appraise /
Stage 1
Assessment /
Select /
Stage 2
Definition /
Define /
Stage 3
Execution /
Execute /
Stage 4
Ops /
Operate /
Stage 5
Significant Influence Minimal InfluenceRapidly Diminishing Influence
I n f l u e n c e
K n o w l e d g e
Knowledge of the project
Ability to influence risk
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Documenting the Changes – Change Policy
The vehicle that provides the method for execution and implementation of changes shouldbe the approved Change Management Policy.
Approved changes, The PMIBOK terminology, is a Baseline Change Authorization (BCA).
Changes not warranting a BCA are acknowledged and the project is expected to “Carry theVariance” and report explanations each period.
The followin list re resents the t ical method of ro ression for develo ment and
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implementation of a project change.
• Notification of Project Change / Impact with quantificationsand recommendations
• PMT Reviews Notification
• PMT Suggests Path Forward (Approved or No Change)• Incorporated into project baseline or forecast
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Following the Process
Often team members will be persuaded to make a change without using the approvedchange management policy where it may seems necessary. This can seem practical tothose involved, but it represents a potential risk to the project. The PMT should alwayskeep be alert for uncontrolled changes.
The change management policy should run continuously throughout the project life cycle.
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e s ou a m n s er e pro ec c ange managemen po cy.
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1. Identify the Change
– from any source
2. Categorize and quantify the change
– within project scope or not
– required for project success
– impact on project goals/product functionality
Documenting the Change
–
budget and schedule impact/contingency allocation
3. Review and accept or not
– stakeholder sign-off
–project manager review (preferably approval)
4. Forecast and classify the change
– budget
– forecast (EAC)
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What are project changes?
1. Budget Shift
Shift in responsibility or budget category
2. Design Definition to Technical Documents
Safety/HAZOP/Environmental definition
Operability/Maintenance definition
Constructability
Change in assumptions for field routings
3. Estimate Adjustments
Estimate errors and omissions (e.g. quantity)
Shift in project cost economics (significant change in prices, labor productivity, laborwages)
4. Field Changes
Differing site condition or hidden site condition
Field Operation/Maintenance definition
Inspection Findings
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What are project changes?
5. External ChangesChange in facility capacity (or throughput)
Technology change
Legislative change
Pre-investment / return on investment
Change in feedstock or product specifications
Add or delete major feature of project
6. Execution Revisions
Schedule changes: acceleration, slowdown, early possession by OwnerSequence Changes
Change in contracting strategy
7. Owner Preferences
Substitution of owner-desired items
Opportunity Work
Asset Request
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What are project changes?
8. Start-up Changes
Safety/HAZOP/Environmental definition (at start-up)
Operability/Maintenance definition (at startup)
9. Event Driven Risk
Force majeure events: storms, wars, strikes, acts of the public enemy, etc.Currency de-valuation or re-valuation
Uncovering & removing hazardous materials at site
Uncovering & removing archaeological features
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• Determine the appropriate category – engineering / design – quantity – price
– scope – delays
• Review all areas for impacts and quantify
Categorizing and Quantifying the Change
– budget – scope – schedule – risk – quality
• Create different case scenarios to provide a range of potential impacts (Impact Analysis)
• Determine the most probable with the latest information and use that as a forecast
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Sample Change Order
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Budget ChangesScope addition or deletion
These are changes to the project objective or performance of the project~ adds capabilities that were not previously part of the project~ initiated by the PMT / Customer or other external factors~ require approval and are added to the project deliverables and the
approved budget and schedule
Examples are:• customer request to increase capacity requiring the addition or modification
of equipment to the project scope• -
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• PHA identifies additional equipment to meet technical requirements
Change in executionBudget Shift
~ shift in responsibility or budget category
~ no net schedule or cost impact~ These changes can increase or decrease contingency depending on categoryand allocations.
Examples are:
• shifting procurement responsibility from owner to contractor• separating coating from pipe milling
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Schedule Change
Change should be broken down into different types or classifications for reportingpurposes.
Additional Scope:
Any work added after the project authorization date
Removed Scope:An work that has be removed after ro ect authorization date
Discovery:During project execution only, work that was unforeseen
Example: during excavation the team discovers underground lines that need toremoved
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Managing Baselines
Schedule changes should be addressed through the change control process if theycannot be brought back in line with the baseline.
• Once approved, baseline changes will be incorporated into the schedule and futurestatus-ing will be compared to the revised baseline.
• Setting 2 baselines at the beginning of any project should be done for the followingreasons:
1. Original baseline is one that is nevertouched and stored as the originalauthorized
2. Working baseline is used to input andmanage change. It is also the baselinethat you will use to run variance andearned value reports.
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SpreadOn hire
Date Work DateDelta from
Completion Daily Cost
Direct
ProjectCost
Indirect
ProjectCost
Vessel 1 All Season 4/27/2006 28 $53,080 $1,486,240
1st AHT All Season 4/27/2006 28 $9,316 $260,848
2nd AHT All Season 4/27/2006 0 $25,964 $0
Supply Vessel All Season 4/27/2006 0 $16,044 $0
ROV Boat All Season 4/27/2006 0 $13,429 $0ROV 3/16/2006 4/27/2006 43 $900 $38,700
Junk Barge - CB-3 All Season 4/27/2006 0 $1,200 $0
Tug for Junk barge All Season 4/27/2006 28 $9,164 $256,592
Survey - Personnel 4/25/2006 4/27/2006 28 $945
Survey - Equipment 4/10/2006 4/27/2006 28 $1,419 $39,732
Impact Analysis Sample
In this sample
the project was
Delayed for 28days and theimpact analysiswas developed todetermine the
Diving Personnel 4/25/2006 4/27/2006 28 $16,200
Diving Equipment 4/10/2006 4/27/2006 28 $5,200 $145,600
Diving Comsumables 4/10/2006 4/27/2006 28 $405 $11,340
RT (Eq. & Personnel) 4/25/2006 4/27/2006 28 $4,700 $131,600
Umbilical Equipment 4/10/2006 4/27/2006 28 $88 $2,456
Umbilical Personnel 4/25/2006 4/27/2006 28 $0 $0
Shipping Agent 4/25/2006 4/27/2006 0 $500 $0
QC Personnel 4/25/2006 4/27/2006 0 $900 $0Communication 4/25/2006 4/27/2006 0 $1,250 $0
Welding Personnel 4/10/2006 4/27/2006 28 $8,361 $234,097
Direct Labor 4/10/2006 4/27/2006 28 $9,154 $256,317
Liquidated Damages 6/5/2006 28 $47,143 $1,320,004
Totals $225,362 $2,048,246 $2,003,680
total Impacts
ContractorExample
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Where to track / forecast changes
Once you have completed the quantification and approval process you nowneed to Forecast and track the change.
Two options for tracking the change: Budget or Forecast (ETC)
Budget:
Budget Shift – Shift in responsibility or budget category – no net
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Approved Change - Changes to the approved project budget cost. This canbe an increase or decrease in actual project fundingrequired, or a budgetary shift moving available fundsfrom one task to another within the current project
plan.
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** Contingency may be utilized to offset**
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Where to track / forecast changes
Forecast (ETC):
Depending on the case you can classify the majority of the categorized
changes into the forecast (ETC).
The total forecast cost for a project, predicted in advance through tracking,analysis, interpretation, and project experience.
Typical Examples:ProductivityCPI trendingSPI trendingMaterial delaysDesign delays
Each change should be looked at carefully to determine where to track
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** Contingency may be utilized to offset**
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• Understanding what you have allocated forcontingency
• Release contingency from the forecast as thechanges impact those allocated areas
Contingency Management
• Re-evaluate contingencies monthly as projectprogresses for either releasing or increasing
• Realign contingency in the budget as the
changes impact those allocated areas
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Change and Contingency Log Sample
WO #: ISSUED:
Change # itiato ast Update
Yes- Approved Line Pipe Manufacturing Savings Scope Budget 6,598,612
In Process Coating of Line Pipe Budget Forecast (615,464)
POTENTIAL CHANGES TOTAL $5,983,148
APPROVEDDATE APPROV
FINAL
APPROVED BY CATEGORY OTHER PPLEMENT CONTINGENCY $
Yes- Approved Line Pipe Manufacturing Savings Scope Budget
Yes- A roved Coatin of Line Pi e Bud et Forecast
Project Change Order and Contingency Log Version 3
Project XYZ
STATUSPOTENTIA
DESCRIPTIONCONTINGENCY
$
SUPPLEMENT
$ESTIMATED COST
Classification
(Budget or
Forecast)
OTHERCATEGORY
(6,598,612)
615,464
COST
(6,598,612)
615 464
(5,983,148)
$0 $0APPROVED
$0 CONTINGENCY BUDGET SPENT REMAINING
$0
$0
$0
$0 Contingency with App Changes $29,508,031 ### ($615,464) $28,892,567
$0
$0 Contingency with Pot Changes 36,106,643 ### ($615,464) $35,491,179
$0
$0
($5,983,148)
SCOPE
SCHEDULE
DESIGN
TOTAL OF APPROVED CHANGES
2) Changes should be Classified to where they will be captured - (Budget or F
Budget Classification - Cost or Budget shift
BUDGET SHIFT
TOTAL
Definitions and Guidelines
1) Changes should be Categorized
OTHER
QUANTITY
SUMMARY BY CATEGORY:
BUDGET
,
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Questions and Answers
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About Integrated Consulting
Integrated Consulting is a consulting firm that specializes in providingunmatched project management and controls implementation andsupport.
Our team has a variet of ex erience includin
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RefineryChemical
Upstream
Downstream
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Summary of Services
Project Controls Support• Project Controls Implementation
Project Management Support•
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• Cost Estimating and Validating• Earned Value Tracking• Formal Risk Analysis• Resource Profiling• Document Control• Cost and Schedule Review & Progressing
Training• Project Controls Training
• Risk Management Training• Schedule Development and Maintenance Training
• Cost and Forecast Training• Earned Value Management Training
• Stage Gate Implementation• Process and Procedure Rollout• Construction Management• Advisory and Assistance Services• Value Improved Practices (VIP) Eng
• Administrative Support
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