M Sc P M Lecture No 3 Project Organisation & Procure 2
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Transcript of M Sc P M Lecture No 3 Project Organisation & Procure 2
Project Management
Procurement and Organization Theoretical Organizational Structures –
Hierarchical ManagingDirector
Operations Director
Finance Director
HR Director
BDU Director
Head ofFacilities
Mgt.
Head ofOperations
Regional Managers
H&SManager
Area FM’s
Account Managers
Head ofFinance &
Admin
Head ofHR
PersonnelManager
Training Manager
Head of Marketing
Head ofDevelopment
Project Management
Procurement and Organization Hierarchical – Pros and Cons Pro’s
• Clear chain of Command
• Able to deal with large single projects
• Manager has authority to control subordinates.
• Works well with remote & self contained projects (- construction sites ???)
Cons
• Chain of Command can be easily broken leading to a directionless team.
• Possible suppression of empowerment.
• Project teams may have to dissolve as there is no base work.
• Team size may force multiple roles – diminishing expertise and focus
Project Management
Procurement and Organization Theoretical Organisational Structures –
MATRIX.GENERAL MANAGER
PROJECT MANAGER
(1)
PROJECT MANAGER
(2)
Research &
DevelopmentEngineering
Finance &
ProcurementMarketing
Project Management
Procurement and Organization Matrix – Pros and Cons
Pro’s
• Management of Multiple / Complex projects & operations.
• Better with small projects.
• Can potentially provide expert focus
• Gives an extended life/purpose for the team that goes on after the Project
Cons
• Multiple draw on resources.
• Project manager may have lack of authority and has to act in coordinator role (unless a Secondment Management type i.e. PM has higher authority. )
• Relies on good communication and “goodwill” between departments.
Project Management
Procurement and Organization Theoretical Organizational Structures –
Hybrid (rotational)
Managing Director
HRDirector
OperationsDirector
FinanceDirector
BDUDirector
Head ofFacilities
Mgt.
Head ofOperations
Head ofDevelopment
Head of Marketing
Head ofHR
Head ofFinance &
Admin
Project Management
Procurement and Organization Hybrid – Pros and Cons Pro’s
• Allows range of specialist skills to be tapped into.
• Lets Managers manage.
• Allows directorate team to adopt strategic position away from day to day ops
• Works well with remote & self contained teams departments.
Cons
• Directorates feeling of loss of control
• fuzzy top down structuring.
• Prevailing department alignment.
• Competition for resources.
MScPROJECT MANAGEMENT
ManagingRisk
Roy Clarke
Managing Risk
Reading List:
• Risk Management.John Ridley & John Channing Pub: Butterworth – Heinemann ISBN 0 7506 6833 4
• Project Management in Construction Dennis Lock Pub: Gower ISBN 0-566-08612-3
• Procurement Tendering & Contract AdministrationMark Hackett Pub: Blackwell publishing ISBN 0 7506 8128 4
• Contract Practice for Surveyors Ramus, Birchall, Griffiths Pub: Butterworth – Heinemann ISBN 0 7506 4558 X
Definitions & Context.
• Definition: 'A risk' is either (a) to hazard, danger or exposure to mischance or peril, or (b) the chance or hazard of commercial loss, especially in the case of insured property or goods (Shorter Oxford Dictionary).
• Definition: 'Analysis' is the resolution of anything complex onto its simple elements, or the exact determinations of its components (Shorter Oxford Dictionary).
• Definition: 'Risk Analysis' is techniques for examining and coping with risks within the project (Reiss, 1995).
Latham on “risk”
No construction project is risk free. Risk can be managed,
minimised, shared, transferred or accepted. It
cannot be ignored.(Constructing the Team, Latham
Possibility of Gain
Possibility of Loss
Contractual Risk Management
Pro-Active vs Re-Active
PROACTIVE
- To prevent before the event
- To assess and predict
- Damage never occurs
REACTIVE
- To react after the event
- To review/investigate
- Damage already done
The Time to Act.C
um
ula
tive
C
ost
Conceive Design Plan Allocate Execute Deliver Review Support
TimeTime
Contractual Risk
RISK MANAGEMENT
IDENTIFYDETERMINE
IMPACT
TAKE ACTION
PRIORITISE
AVOIDANCE
ACCEPTANCE
MITIGATE(LIMIT)
TRANSFER
MONITOR
IGNORE
The Identification of Risk
• What unplanned or unintentional events can affect the project –
Disruption of Time based sequencing.Reducing the Quality of the building.Adversely affecting the Cost of the construction.
Damaging reputations and creating bad publicity.
Identification Techniques
• Additional Focus - Project Risk Management Team.
• Brainstorming (Risk Matrix & Risk Register Development)
• Case study and document review.• SWOT• Assumption Analysis.
The evolution of risk management studies
Project Stage
Focus on the Risk Management Study
Inception Are the risks Acceptable?
Strategy Are conditions in place to proceed?
Feasibility Are risks allocated appropriately?
Pre-Construction Are risks under control?
Use What can we learn for the future?
Source: Hackett et al. (2007) Aqua group guide to procurement ……..
Balancing RisksBalancing Risks
Probable Likelihood V’s Potential Severity.
Risk can be broken down into two factors:
ProbableProbable Likelihood Likelihood =
How often is the Risk likely to happen?Are there other factors that may increase
the likelihood (compounded risk)
PotentialPotential Severity Severity =
What would the outcome be? Death, Major Loss,
Cessation of works
Likelihood Severity
Hierarchy of Control Methods
1. ELIMINATEStop doing the activity / job / task
or using the materials plant equipment
2. REPLACESubstitute / mechanise
3. REDUCEPersons / numbers of times used / quantities
used
4. CONTROLBarriers / permits to work / safe systems of
work / personal protective equipment
Contractual Risk Management
IDENTIFY RISK
ANALYSE RISK
QUANTIFY RISK
Identify Means of
RE-EVALUATE
Choice of Action TRANSFERRetain
INSURE CONTRACT OUTSelf Fund Revenue account
EventCause
Probability
Reduction
Effect
Severity
Elimination
Source – Facilities Management : Alexander
Transfer of RiskInsurance
Risk?
That can andmust be Insured
Risk that can beInsured if required
Risk that aredifficult or impossible
to Insure
The contractor or Client must Accept
the risk
Statutory Requirement
Management Choice
Contractual Requirement
Examples
•Employers liability for injury to employees
•Liability to 3rd parties arsing out of the use of motor vehicles on public roads
Examples
•Liability for damage to customers property
•Indemnifying the customer against injury to persons
Examples
•Loss or damage to tools and equipment at the project site.
•Pecuniary loss through an unforeseeable cause
Examples
•A loss where the insured would stand to benefit as a result of the insurance
•Unreasonably high chance of the loss occurring
Source: D. Lock 2004
Insure (Transfer)
Insurance can be seen as a straight foreword
transaction –
where the party paying the premium will have any named
damages recompensed.
Contractual Risk Management
Contract out (Transfer)
Normally results in the client paying a premium to transfer
the risk to the Contracted Party –
The transfer does not eliminate the risk.
-ITS NOT FREE !!!!
Contractual Risk Management
Standard Form Contracts.
Elements of a SFC that help mitigate risk -
LiquidatedAscertained
Damages (LAD’S)
Performance Bonds
Provisional cost SumsPC Sums
Defects Liability & Retention Sums
Insurance(SFC Clause 6)
Limit of Contractors Design
Liability
Liquidated Ascertained Damages
• SFC (CD) Clause 24.2.1
“Require in writing the Contractor to payto the Employer liquidated and ascertaineddamages at the rate stated in appendix1…. For the period between the completiondate and the date of practical completion.”
Defects Liability and Retention Sum (1)
• SBC (CD) Clause 16.2 [Defects Schedule]
“Any defects, shrinkages or other faults which shall appear within the Defects liability period and are due to the failure of the contractor to comply with his obligations under this contract ……….
.…….. and within a reasonable time after the receipt of such a schedule of defects, shrinkages and other faults therein specified shall be made good by the contractor at no cost to the Employer”
Defects Liability and Retention sum (2)
• SBC (CD) Appendix 1 [Defects Liability Period]
- The Contract requires the parties to agree a Defects Liability Period (in months).
- 6 months is the default period if no other period is inserted into the Appendix.
- The defects liability period starts at Practical Completion.
Defects Liability and Retention Sum 3)
• SBC (CD) Clause 30.4 [Retention Monies]
“The retention which the Employer may deduct and retain…. is such percentage of the total amount”
30.4.1.1 “the Percentage referred to in the conditions and appendix 1 as the “retention percentage” shall be 5% unless a lower rate shall be agreed.”
NOTE 2.5 % of the retention money is released at Practical Completion
Contractual INSURANCEJCT SFC Section 6 (See H/O)
Clause 6.1 The Contractor indemnifies the employer in the event of death and personal injury.
Clause 6.2
The contractor indemnifies the employer against any expense / loss / claim or proceeding arising from injury or damage to property.
Guarantee’s &Bonds
• Guarantees and Bonds are arrangement whereby the obligations that one party owes another are guaranteed by a third party
• The third party is usually and insurance company or bank
Source: Contract practice for surveyors – J Ramus
Guarantee’s &Bonds
The Use of Bonds-
i) To protect the interests of a one off developer.
ii) Where a new or unproved contractor is involved in a project.
iii) Tender bonds in respect of nominated subcontractors.
iv) Where a bond is thought appropriate for the risk inherent in the project.
Source: Contract practice for surveyors – J Ramus
Performance Bonds
• Aims to ensure the performance of one party to a contract – Usually the Contractor.
• Usually the limit for compensation is 10% of the contract sum.
• A Guarantee from a “Mother Company” may be sufficient.
Source: Contract practice for surveyors – J Ramus
Practical Risk Mitigation
• Over costing of Preliminaries (front loading).
• Contingency Sums.
• Provisional Sums.
• Defined Schedule of Rates (for use in Variations).
Definition of Design Risk
The failure of the design through –
Poor detailing.Incorrect material selection.Miscommunication.
Leading to unfitness for purpose.