Managing the Complexity of Change Managing the Complexity of Change O d d Cl i O d d Cl i i M j P j t b i M j P j t b Order and Claims Order and Claims in Major Projects by in Major Projects by

establishing aestablishing a Change Management Change Management F kF kFrameworkFramework

Pankaj K Sinha Pankaj K Sinha Abu Abu Dhabi, UAE Dhabi, UAE 1818ththAprilApril, , 20112011

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Change ManagementChange Management

1)1) ChangeChange isis anan inevitableinevitable partpart ofof anyany projectproject.. EvenEven thethe mostmostcarefullycarefully plannedplanned projectproject encounterencounter changeschanges.. InabilityInability totoyy pp p jp j gg yymanagemanage changechange effectivelyeffectively isis aa keykey contributorcontributor toto thetheinconsistentinconsistent resultsresults..

2)2) ProjectsProjects dodo notnot suffersuffer duedue toto changeschanges butbut duedue toto lacklack ofofrecognitionrecognition ofof changechange andand ofof clearclear andand consistentconsistent businessbusinessprocessprocess toto managemanage thethe changeschanges..pp gg gg

3)3) NotNot onlyonly ChangeChange ManagementManagement isis aa keykey factorfactor inin projectprojectsuccesssuccess butbut alsoalso aa rootroot causecause ofof muchmuch ofof thethe litigationlitigation ininggConstructionConstruction IndustryIndustry..

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Change ManagementChange Management

4)4) ChangeChange ManagementManagement processprocess shallshall acknowledgeacknowledge thatthat eacheachprojectproject hashas certaincertain risksrisks oror uncertaintiesuncertainties thatthat cannotcannot bebe

ifi difi d ii dd dd h llh ll hh h ih i ff uit bluit blspecifiedspecified inin advanceadvance andand shallshall havehave mechanismmechanism forfor equitableequitableriskrisk sharingsharing..

5)5) PlanningPlanning forfor ChangeChange ManagementManagement byby developingdeveloping guidelinesguidelines5)5) PlanningPlanning forfor ChangeChange ManagementManagement byby developingdeveloping guidelinesguidelinesandand processesprocesses isis crucialcrucial toto thethe successfulsuccessful executionexecution ofof aa projectproject..TheThe changes,changes, ifif notnot dealtdealt withwith swiftlyswiftly andand equitably,equitably, leadlead totodisputesdisputes andand cancan ruinruin Project’sProject’s chanceschances ofof ‘success’‘success’disputesdisputes andand cancan ruinruin Project sProject s chanceschances ofof successsuccess ..

6)6) ChangeChange OrderOrder ManagementManagement isis stillstill performedperformed inin anan adhocadhocmannermanner ThereThere isis tremendoustremendous scopescope forfor improvingimproving ChangeChangemannermanner.. ThereThere isis tremendoustremendous scopescope forfor improvingimproving ChangeChangeManagementManagement practicespractices byby establishingestablishing aa ChangeChange ManagementManagementFrameworkFramework rightright fromfrom ProjectProject inceptioninception toto completioncompletion..

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Current PracticeCurrent Practice

•• TheThe contractingcontractingi ti t iienvironmentenvironment isis

competitivecompetitive andand scopesscopes arearecomplexcomplex..

•• Often Risk Allocation is Often Risk Allocation is through “Aversion” through “Aversion”

•• InappropriateInappropriate entitiesentities areare

ClientClient

ContractorContractoroftenoften burdenedburdened withwith risksriskstheythey can’tcan’t managemanage ororsurvivesurvive..

ContractorContractor

SubcontractorSubcontractor

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Popular Change Management Techniques !Popular Change Management Techniques !

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Typical Components of Changes Typical Components of Changes

ORGANIZATION

COST SCHEDULE

SCOPE

RISK ALLOCATIONSQUALITY

REGULATIONS

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Change and Productivity Change and Productivity

1.1. TheThe moremore changechange experiencedexperienced onon aa project,project, thethe greatergreater thethenegativenegative impactimpact onon productivityproductivity..

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2.2. ChangesChanges thatthat occuroccur latelate inin aa projectproject areare implementedimplemented lesslessefficientlyefficiently thanthan changeschanges thatthat occuroccur earlyearly inin thethe projectproject..

Common Causes of Changes Common Causes of Changes

1.1. AgreedAgreed ScopeScope ChangesChanges2.2. EnactmentEnactment ofof newnew LawsLaws

R l iR l i

4.4. SiteSite AcsessAcsess

5.5. DifferingDiffering SiteSite ConditionsConditionsoror RegulationsRegulations

3.3. ForceForce MajeureMajeure6.6. Errors,Errors, omissions,omissions, inconsistenciesinconsistencies

oror discrepanciesdiscrepancies inin thetheSpecifications/ScopeSpecifications/Scope

7.7. ChangeChange inin RelyRely--uponupon InformationInformation

8.8. AccelerationAcceleration oror disruptondisrupton byby ClientClient9.9. DelayDelay oror SuspensionSuspension byby ClientClient

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10.10. SpecialSpecial RisksRisks11.11. DelayedDelayed ApprovalsApprovals

Causes of ChangesCauses of Changes

• Regardless of the origin, a Change mayg g g yoften trigger additional changes,resulting in various combinations ofthe types of Changes described earlier.

• Once this ripple effect begins, itbecomes increasingly complex tomanage Change Therefore a proactivemanage Change. Therefore, a proactive,disciplined approach to ChangeManagement is vital to the health ofthe Projectthe Project.

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Need for Design Endorsement by ContractorNeed for Design Endorsement by Contractor

Owner’s VisionEngineer’s Design

Owner s Vision

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Contractor Delivery !

Change Management FrameworkChange Management Framework

OwnerOwner ContractorContractor

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OwnerOwner ContractorContractor

Integrated Change ControlIntegrated Change Control

• Project Management Instituterecommends Integrated Change Controlg gMechanism.

• Integrated Change Control is theprocess of reviewing all ChangeRequests, approving Changes andmanaging changes to the Deliverables,P P j t d t d thProcess, Project documents and theProject Management Plan.

• The Integrated Change Control process• The Integrated Change Control processis conducted from project inceptionthrough completion.

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Project Control Department

Typical Change Management FrameworkTypical Change Management Framework

1. 2.

Recognize 5.

Promote a

Balanced Change C lt

gChange

3.

Improve from

Lessons Learnt

Culture

ITT

Agreement

Evaluate Change

ProjectProcedures 4.

Implement Change

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g

Effective Change ManagementEffective Change ManagementIt is essential that Parties (Client & Contractor) include ChangeManagement provisions in the Agreement. The provisions shalladdress the following:address the following:

1. Promote a Balanced Change Culture

2. Articles/Provisions and Formal Change Management Procedure / g gTemplate in the Agreement

3. Mechanism for identification of Change

4. Analysis and Notification Mechanism

5. Review and Adhoc Approval

6 F li ti f Ch O d /A d t6. Formalization of Change Order/Amendment

7. Regular Monitoring of Changes

8 Dispute Resolution Mechanism for Claims

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8. Dispute Resolution Mechanism for Claims

9. Time Limits

Typical Structure of Variation ProvisionTypical Structure of Variation Provision

1. Right to Vary

2. Value Engineering

3. Variation Procedure

4. Payment in Applicable Currencies

5. Provisional Sums

6 D k6. Day work

7. Adjustments for Changes in Legislation

8 Adjustments for Changes in Cost8. Adjustments for Changes in Cost

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Typical Variation Provision (Case A)Typical Variation Provision (Case A)

Variations may be initiated by the Owner at any time prior to issuingthe Taking-Over Certificate for the Works, either by an instruction or bya request for the Contractor to submit a proposal Variation shall nota request for the Contractor to submit a proposal. Variation shall notcomprise the omission of any work which is to be carried out by others.

1. Contractor shall execute and be bound by each Variation, unless theContractor promptly gives notice to the Employer stating (withsupporting particulars) that Contractor cannot readily obtain theGoods required for the Variation,

2. It will reduce the safety or suitability of the Works, or

3. It will have an adverse impact on the achievement of thepPerformance Guarantees. Upon receiving this notice, the Employershall cancel, confirm or vary the instruction.

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Typical Variation Provision (Case B)Typical Variation Provision (Case B)Variations may be initiated by the Owner at any time prior to issuing the Taking-OverCertificate for the Works, either by an instruction or by a request for the Contractor tosubmit a proposal. The Contractor shall execute and be bound by each Variation, unlessh l h ( h l )the Contractor promptly gives notice to the Owner stating (with supporting particulars)

that the Contractor cannot readily obtain the Goods required for the Variation. Uponreceiving this notice, the Owner shall cancel, confirm or vary the instruction. EachVariation may include:

1. Changes to the quantities of any item of work included in the Contract (however,such changes do not necessarily constitute a Variation),

2. Changes to the quality and other characteristics of any item of work,

3. Changes to the levels, positions and/or dimensions of any part of the Works,

4. Omission of any work unless it is to be carried out by others,

5. Any additional work. Plant, Materials or services necessary for the Permanenty , yWorks, including any associated Tests on Completion, boreholes and other testingand exploratory work, or

6. Changes to the sequence or timing of the execution of the Works.

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The Contractor shall not make any alteration and/or modification of the PermanentWorks, unless and until the Engineer instructs or approves a Variation.

Typical Variation Provision (Case C..)Typical Variation Provision (Case C..)

Owner may make any change to the form, quality or quantity ofWork, or any part thereof, that may in Owner’s opinion benecessary or desirable and for that purpose Owner shall havenecessary or desirable and, for that purpose, Owner shall havepower to order Contractor to do and Contractor shall do any of thefollowing:

I d h i f W k i l d d i ha. Increase or decrease the quantity of Work included in theAgreement;

b. Change the character or quality of any such Work;g q y y

c. Change the levels, lines, positions and dimensions of any partof Work; and

d. Execute additional work of any kind necessary for thecompletion of the Work.

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Typical Change/Variation Provision (C…)Typical Change/Variation Provision (C…)It is agreed that Agreement Price and/or Schedule and/or other affectedprovisions of the Agreement shall be adjusted to the extent necessary as aresult of any of the following:y ga. Additions, deletions or changes to the Work requested by one Party

and agreed by the other.b. Work delayed or suspended by Owner excluding concurrent delayy p y g y

attributable to Contractor.c. Additions, deletions or changes to the Work required as a result of

Owner approved variances from basic design conditions as set forth inpp gAgreement. The basic design conditions shall be limited only to thefollowing:• Feedstock to be provided by Owner • Overall Battery Limit Conditions • Subsurface Geo-technical Information • Site Climatic Data for design purposes as specified in ITT

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Site Climatic Data for design purposes as specified in ITTd. Changes in the laws/Specifications/Codes until date of submission of

Price Bid.

Typical Change/Variation Provision (C….)Typical Change/Variation Provision (C….)

e. Impact of Force Majeure.

f Remedial work resulting from Special Risk (Non insurablef. Remedial work resulting from Special Risk (Non-insurableRisks).

g. Additions, deletions or changes to the Work as a result of errors,i i i i i di i h i homissions, inconsistencies or discrepancies or changes in the

Rely-upon Information.

h. Any other provision of the Agreement, which expressly entitlesy p g p ythe Parties to a Variation.

Any adjustment to Schedule as a result of a Variation or acombination of variations shall be considered only if the Projectcombination of variations shall be considered only if the Projectcritical path is affected.

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Typical Change Proposal/Notice TemplateTypical Change Proposal/Notice Template

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Project Control Department

Typical Change Management ProcessTypical Change Management ProcessVariation

Change Alertg

Contrator’s Decision

Change Notice

Client Adhoc DecisionClient Adhoc Decision

Detailed Change Estimate

Change Order/Amendemnt Request

Client Approval

23Change Order/Amendemnt

Responsibilities for Managing ChangeResponsibilities for Managing ChangeClient

• Approval of Change Managementpp g gPlan/Procedure

• Review and approval of Changes.

• Issue Change Order/Amendment to Agreement

Contractor

• Client Interface and Communication

• Development of the Change Management• Development of the Change ManagementPlan/Procedure

• Identification and managing Change

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Identification and managing Change

Benefits of Effective Change ManagementBenefits of Effective Change ManagementEffective Change Management occurs when early identificationof the source of Change and its effect on a project are realized andmanagedmanaged.

Next, a Framework to manage change is developed,communicated to all parties, and implemented. If these stepshave all taken place, the following is likely:

1. Enhanced Customer Relationships

2. Improved Financial Performance

3. Optimized Schedule

4. Better Teamwork

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Thank ou for our Thank you for your attention.

Q & AQ & A

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Copyright: Pankaj K Sinha

Pankaj K Sinha00971-50-1223861

pankajsinha1964@hotmail.com

27Presenatation and content Copyright: Pankaj K Sinha