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8th May 2006
Course Objectives – Module 3
Participants to: • Apply techniques to a Saipem Ersai project • Understand more advanced aspects of planning & cost management
SaipemP&CMod3 CC SLIDE2
Eni Corporate University
Module 3 – Planning & Cost Control
Monday - Planners 9.00 – 12.30 (Tutor) • Review of Prepared Case Study work 14.00-17.30 (Tutor) • Presentation of Prepared Case Study work • PM in Saipem Monday - Cost Controllers 9.00 – 12.30 (Tutor) • Review of Prepared Case Study work 14.00-17.30(Tutor) • Presentation of Prepared Case Study work • PM in Saipem
SaipemP&CMod3 CC SLIDE3
Eni Corporate University
Module 3 – Planning & Cost Control
Tuesday – Planners 9.00 – 12.30 (Tutor) • Contract Management – Contract types • Producing subsiduary management plans (schedule management) • IBIS introduction 14.00-17.30 (No Tutor) • Re-estimates • ‘what-if’ analysis Tuesday - Cost Controllers 9.00 – 12.30 (Tutor) • Contract Management – Contract types • Producing subsiduary management plans (cost management) • IBIS introduction 14.00-17.30 (Tutor) • Claims & change management • Managing cash flow
SaipemP&CMod3 CC SLIDE4
Eni Corporate University
Project Management in Saipem
Contents • Saipem Document Management System • Roles & Responsibilities • Roadmap SaipemP&CMod3 CC SLIDE6 Eni Corporate University .
Contents • Saipem Document Management System • Roles & Responsibilities • Roadmap SaipemP&CMod3 CC SLIDE7 Eni Corporate University .
Saipem Documents System: Corporate role and Company role Operating Company SAIPEM GROUP Operating Company overall vision & strategy steer Operating Company coordinate Corporate define the common rules control Operating Company Operating Company SaipemP&CMod3 CC SLIDE8 Organization .
Saipem Documents System: Overview CORPORATE • Mission • Processes’ Mission • Policies Saipem Group Companies • Mission • Processes’ Mission • Policies Procedures Guide Lines General Procedures Standards Work Instruction Criteria & Specifications SaipemP&CMod3 CC SLIDE9 Organization .
which define and govern the process and relationships between the Corporate and group companies. specific duties and responsibilities SaipemP&CMod3 CC SLIDE10 Organization .Saipem Documents System: Corporate Documents These documents aim to establish common rules for the various Operating Companies in the Saipem group Mission Specific statement of the main purposes of an organisation and the main objectives to achieve Policies Statement of the procedures the organisation will use in order to achieve the objectives defined in its Missions. define the technical and operative details. Corporate Procedures These are management or technical/operative documents which describe the ways of carrying out the Corporate activities. Standards Documents issued by the Corporate relating to a given process which contain common rules. Guidelines Documents issued by the Corporate coherently with the relative missions and policies. criteria and methods to all Group Companies for the application of the Guidelines.
to be followed by all the Saipem group companies SaipemP&CMod3 CC SLIDE11 Organization . defining also Corporate activities Corporate Procedure Procurement Process Standards Needs Definition and Requisitioning Order Management Expediting & Ispection Shipping and Transport Vendors Management Strategic Sourcing Reporting Standards Describe the single segment of the main Procurement Process or a single transversal process.Example of Procedure and Standards: Procurement Corporate Procedure Describe the overall Procurement Process to be followed by all the Saipem group companies.
forms and specific competencies and responsibilities Specification Complete and referenced definition of technical requirements requested during the bidding stage from Vendors and Contractors depending on the product or service to provide. in order to organise the correct development of the project’s technical documents SaipemP&CMod3 CC SLIDE12 Organization . which defines the technical and operative details. in accordance with reference standards. respective responsibilities and reference documents Work Instruction Management or technical-operative document describing the procedures for conducting individual activities. interfaces with other processes.Saipem Documents System: Company Documents General Procedure Document schematically describing a company process. indicating the activities. Criteria Full and referenced definition of the basic technical principles.
to be followed by all the functions within the Operating Company SaipemP&CMod3 CC SLIDE13 Organization .Example of Company General Procedure and Work Instruction Company General Procedure Describe the overall Procurement Process to be followed by all the functions within the Operating Company General Company Procedure Procurement Process Work Instruction Needs Definition and Requisitioning Order Management Expediting & Ispection Shipping and Transport Both are to be consistent with the Corporate Documents Work Instruction Describe the single segment of the main Procurement Process or a single transversal process.
Contents • Saipem Document Management System • Roles & Responsibilities • Roadmap SaipemP&CMod3 CC SLIDE14 Eni Corporate University .
• Typical Project Organisation CLIENT PROJECT MANAGER PROJECT QUAL. ENGINEER PROJECT SE ENGINEER DOCUMENT CONTROLLER MEDICAL COORDINATOR PROJECT CONTROL ENGINEER PROJECT ENGINEERING MANAGER PROCUREMENT COORDINATOR CONTRACT ADMINISTRATOR DESIGN (DISCIPLINE) ENGINEERS INSTALLATION ENGINEERS PLANNER ENGINEER COST ENGINEER WORK SITE ORGANISATION SaipemP&CMod3 CC SLIDE15 Eni Corporate University .
Typical Worksite Organisation QC SUPERVISOR CONSTRUCTION MANAGER SE SUPERVISOR SITE PROJECT CONTROL ENGINEER SUPERINTENDENT DOCTOR PERSONNEL ADMINISTRATOR LOGISTIC SUPERVISOR COMMISSIONING MANAGER SITE MAINTENANCE ENGINEER FIELD ENGINEER SUPERVISOR TEAM SITE MATERIAL CONTROLLER SUBCONTRACTS SaipemP&CMod3 CC SLIDE16 Eni Corporate University .
lead and motivate the project team • Manage the Client and stakeholders’ expectations SaipemP&CMod3 CC SLIDE17 Eni Corporate University . monitor and control project to handover of deliverables Make tactical decisions and recommend/request strategic decisions from Sponsor • Build. performance objectives Plan. cost.Project Manager Key Responsibilities • • • • Define the project scope and strategy Provide project deliverables to time.
Project Engineering Manager • Understands the business requirement • Owns and is responsible for • Completeness. coherence and integrity of the solution • Ensuring the solution meets the requirements • Estimates for technical activities and bought-in (with PM) • Will often select the key suppliers and products • Assesses and manages impact of customer change on the solution • Provides technical consultancy to the team SaipemP&CMod3 CC SLIDE18 Eni Corporate University .
Eni Corporate University SaipemP&CMod3 CC SLIDE19 . Preparing the Quality and Quality Control Plan and all the Project procedures. Submitting the work progress to the Client. Guaranteeing the general and detail planning and the organisation sides of the Project in cooperation with the other corporate functions. Superintending administration of the contract. Preparing and approving the Project Plan in cooperation with the Project Management Team (PMT). Managing and controlling all the contract activities. Guaranteeing the control and definition of the Project activity progress and of the relevant costs. Guaranteeing the interfacing with the Client and the preparation of the reporting documents for him. Contributing to single out the corrective actions and to implement them.Typical Yard Responsibilities (Intermare Sarda) Project Manager • • • • • • • • • • • • • • Representing Intermare Sarda with the Client for all that regards the contract. providing PROD with all the necessary information and documentation to allow the correct development of the production activities. Managing the Client’s complaints. Guaranteeing the control over the Project purchasing documentation and working together with APGA-RTS Saipem for the carrying out of the necessary expediting activities. Approving the technical documentation produced by ATEC for the Project activities. Keeping and coordinating the contacts with the other Project functions as Certifying Bodies for all that regards the execution of the works.
verification and validation of the Project Engineering. Updating and revising drawings and other technical documents in compliance with the contract changes. Picking out each step which might prevent or minimize delays in the engineering activity. coordinating and verifying the Project engineering activities. Managing the control. in the formulation of corrective actions. Taking part in the formulation / preparation of the Purchasing Plan and of the relevant program. handling. the work deviations Examining. Taking part in the contract verification activities. Eni Corporate University SaipemP&CMod3 CC SLIDE20 . handling and classifying all the Project technical documentation provided by the Client and produced for the execution of the Project. Guaranteeing the coordination of the Project specialized technical resources and of those outside the Company. guaranteeing a continuous control of the interfaces between them .Typical Yard Responsibilities (Intermare Sarda) Project Engineer • • • • • • • • • Defining. Guaranteeing the preparation of the Engineering Plans and taking part in the preparation of the Construction Plan. together with the functions involved.
SaipemP&CMod3 CC SLIDE21 Eni Corporate University . the corrective actions to be undertaken. Monitoring and cooperating with PM in order to avoid possible technical problems. changes and circumstances beyond his control to affect the Project planning.Typical Yard Responsibilities (Intermare Sarda) Planning Engineer • • • • • • Managing the Project Control and Planning activities. industrial relations. Preparing and updating the Project Planning documents. useful for the necessary cost control actions. for the PM and for the Client. when necessary. Preparing and handling the Work Progress reports. Monitoring the Project activity progress indicating. Preparing the Progress Reports.
cash flow. quantity. cost of labour. productivity standards.Typical Yard Responsibilities (Intermare Sarda) Cost Control Engineer Going through the contract in detail. SaipemP&CMod3 CC SLIDE22 Eni Corporate University . from the estimate cost produced by business departments (basis hypothesis. equipment. for what falls within his competence. plans).
Purpose of Cost Control • To achieve or improve the profitability targets defined during the budgeting/commercial phase (not to check actual and forecast economic progress) • Compare the overall cost budget with the original/revised budget and singles out any potential negative deviation • The aim is to enable the necessary corrective actions to be taken to achieve goals SaipemP&CMod3 CC SLIDE23 Eni Corporate University .
Cost Control Steps • Issue and Revision of Cost Control Budget • Accounting and Cost Analysis • Estimates to Complete and definition of corrective actions • Reporting SaipemP&CMod3 CC SLIDE24 Eni Corporate University .
Definitions Acronyms PM = Project Manager CE = Cost Control Engineer PCON = Project Control Commercial Budget Budget finalized by the Commercial function after the acquisition of the project. drawn up on the basis of the available project engineering. physical progress and resource commitment scheduling. cash flow control. cost control. physical quantities for implementation and relative costs Project Control Set of activities aimed at keeping to the established project goals. control of economic progress and spread forecast Cost Breakdown Structure (CBS) SaipemP&CMod3 CC SLIDE25 Standard cost division scheme. This budget. This is achieved with various methods: time scheduling and control. lists budgeting conditions. adopted by Project Control for cost monitoring activities Eni Corporate University .
prevention and protection measures. contributing to implementing the corrective actions. guaranteeing the coordination between the technical-operating personnel and the personnel in charge of special working processes. for what falls within his competence. the general and detail planning of the Project Production activities. verifying their constant and accurate application. putting into effect the safety. so as to guarantee the quality levels prescribed in the Project. in cooperation with PROG. SaipemP&CMod3 CC SLIDE26 Eni Corporate University . organising the working phases for the preparation of the final product. preparing. in the prescribed times and ways. guaranteeing the compliance with the Project Specifications in the different production stages. keeping properly in contact with QUALS. implementing the Quality Control Plans.Typical Yard Responsibilities (Intermare Sarda) Construction Coordinator Engineer • • • • • • • • coordinating and planning the production activities on the basis of the instructions and technical documentation received. following up non conformities detected in the production processes.
in cooperation with QUALS. Project Procurement Coordinator. who act as experts in the different construction disciplines and make use of the specialized support of the yard competent Units Project Quality Engineer who. with his constant presence in the yard. for managing the human resources and for superintending the correct work performance. Quantity Supervisor. Safety Engineer. in compliance with the construction documents Construction Coordinators. is responsible for all the operations performed therein. carries out the controls in compliance with the Project Quality Control Plan. Welding Inspector. Document Control (DCC) • • • • • • • • • • • SaipemP&CMod3 CC SLIDE27 Eni Corporate University . being under QHSE as a function. Project Expediting Coordinator. verifies that the Quality Plan requirements are correctly implemented and. Subcontractors Control Quality Control Inspectors Welding engineer.Typical Yard Responsibilities (Intermare Sarda) Other Functions • Production Supervisor (PROD) who.
Contents • Saipem Document Management System • Roles & Responsibilities • Roadmap SaipemP&CMod3 CC SLIDE28 Eni Corporate University .
Saipem RoadmapBid/Project Management for Project Managers Process Process extracted from Change Management in Saipem Group SaipemP&CMod3 CC SLIDE29 Activity: Decision Approval / acceptance Not Obligatory Deliverable: Obligatory Not Obligatory (Release ? Versione ?.--/--/----) .? .
PROCESS Bidding Engineering Procurement Fabrication/ Installation/ Construction Initiation/ Bid/No Bid • Appoint Bid Manager • Complete first analysis of Client Requirements • Estimate Bid Effort of Engagement • Qualify bid (is the Client serious/does Saipem want to bid?) • Request Authorization to Bid • Tender Kick-off Meeting Planning & Proposal Preparation • Prepare Technical Solution • Develop Project Scope Statement and WBS • Develop Project Schedule • Establish Project Resource Requirements • Develop Project Risk Management Plan • Develop Additional Preliminary Project Plans • Develop Project Budget • Prepare and Present Client Proposal • Perform Planning and Proposal Review Negotiation & Selection • Confirm Engineering Interfaces • Produce Final Proposal and Project Baseline • Reach Agreement on Proposal • Complete Contract • Transfer Meeting Commercial/Project Manager • Develop & manage Engineering plan & Document Progress Register • Develop detailed engineering design • Prepare & evaluate requistions • Carry out Site engineering activities • Prepare Procurement Plan/Material Staus Report • Prepare Request for Bid/Proposal • Analyse Bids/Proposals and place orders • Inspect and expeditite • Plan and manage shipping • Evaluate Supplier performance • Plan and Manage Construction and Commissioning/Start up • Plan and carry out Constructability reviews • Site Contractor evaluation and management ACTIVITIES Client Request for Bid/Requirements/ Technical Specifications Project Mission and Objectives Initial Risk Analysis Bid Authorization Form Proposal & Contract (Client) Scope of Work Project Plan Project Baselines (Saipem) Estimates & Budget (Costs) Resource Schedule Risk Final Proposal (Scope of Work and Project Plan) Contract/Commercial correspondence Contract Qualification Document Signed Contract Revised Project Baseline (Costs/Resource/Time /Risks) Commercial Close-out Report Engineering Management Plan Document Progress Register Drawings/Material Take-off etc. Material Requisitions & Supplier Assessments Field Engineering & Construction Supervision Documentation DELIVERABLES Procurement/ Material Management Plan Procurement Schedule Material Status Report Construction Management Plan Constructability Plan Heavy Lift Schedule… Construction Status Report (CSR for the Worksite) Project Management SaipemP&CMod3 CC SLIDE30 .
Communications Mgt. Prepare Quality and ‘As Built’ documents De-mobilise resource Perform administrative closure Prepare Closure Report Fulfill Warranty Commitments ATTIVITIES Client Request for Bid/Requirements/ Technical Specifications Final Proposal (Scope of Work and Project Plan) Contract/Commercial correspondence Contract Qualification Document Signed Contract Revised Project Baseline (Costs Transfer from Control Budget Form /Resource/Time/Risks) Commercial Close-out Report Project Execution Plan Engineering Procurement Fabrication Transport & Installation Hook-up & Commissioning Overall Project Quality Plan Project HSE Plan Procedures: Project Co-ordination Planning & Scheduling (Project WBS) (Cost Breakdown Structure (SAP PS WBS)) Progress Measurement & Reporting Procedure Change Instructions Document Management Document Progress Register Material Status Report DELIVERABLES Kick off Checklist/Presentation Meeting Agenda/Minutes Project Status Report (PSR) Weekly Meeting Agenda/Report Risk Register Issue/Change Register (Critical Action List/Change Instrucution Register)) Closure Report Planning Initiation Closure Execution Control SaipemP&CMod3 CC SLIDE31 . Contract and Procurement Mgt.PROCESS Initiation/Interface with Commercial Provide technical support during bid Receive and assess Commercial Documentation Transfer Meeting Commercial/Project Manager Planning/Replanning Review Project Scope Statement and WBS Develop Project Schedule Review Project Resource Requirements Develop Project Risk Management Plan Develop Additional Preliminary Project Plans Develop Project Budget Baseline Resolve Inconsistencies in Project Plan Execution Control Closure Perform Kick off Implement Solution Manage to the Project Plan Project Teams Client Expectations Project Deliverables Perform Commissioning/ Client Acceptance Transfer to Warranty and Support Schedule Tracking and Control Financial Tracking and Control Risk Management Issue management & Change Control Human Resources Mgt. Quality Control HSE Management Document/Configuration Mgt.
2004.PMI Project Management Institute. Copyright and all rights reserved.Project Procurement Management . A Guide to the Project Management Body of Knowledge (PMBOK® Guide) – 2004 Edition . Project Management Institute Inc.. Material from this publication has been reproduced with the permission of PMI SaipemP&CMod3 CC SLIDE32 Eni Corporate University .
not necessarily money) Legal capacity – separate legal parties. offer. Written is preferred SaipemP&CMod3 CC SLIDE33 Eni Corporate University . competent parties Legal purpose – you cannot have a contract for sale of illegal goods A contract. or acceptance may be written or spoken.What do you need for a Contract? • • • • • An offer Acceptance Consideration (something of value.
PMI View • • • • • A contract is a formal agreement All requirements should be specifically stated in the contract All contract requirements should be met Changes must be in writing and formally controlled Most governments back contracts by providing a court system for dispute resolution PMI Procurement Management – ‘includes all the processes required to acquire goods or services outside the performing organisation’ SaipemP&CMod3 CC SLIDE34 Eni Corporate University .
contracting or legal professionals may handle the procurement – PM can greatly assist in making the contract appropriate to the project – Contracts are risk allocation and mitigating tools! – A contract should not be created before a PM is assigned to a project • A PM must understand and work within the procurement process and contracts The Project Management Team should support the PM to ensure appropriate contracts are negotiated • SaipemP&CMod3 CC SLIDE35 Eni Corporate University .Role of the Project Manager in Procurement • • Project Manager (PM) is the authority on project risks Although procurement.
6 Steps • • • • • • Step 1: Plan Purchases and Acquisitions Step 2: Plan Contracting Step 3: Request Seller Responses Step 4: Select Sellers Step 5: Contract Administration Step 6: Contract Closure SaipemP&CMod3 CC SLIDE36 Eni Corporate University .
Plan Purchases and Acquisitions – determining what to purchase or acquire and determining when and how. reviewing and documenting how a seller is performing or has performed to establish required corrective actions and provide a basis for future relationships with the seller. choosing among potential sellers. Select Sellers – reviewing offers. including the resolution of any open items. Plan Contracting – documenting products. managing contract-related changes and. quotations. SaipemP&CMod3 CC SLIDE37 Eni Corporate University . and closing each contract applicable to the project or a project phase. as appropriate. Contract Closure – completing and settling each contract. offers. or proposals. and results requirements and identifying potential sellers. managing the contractual relationship with the outside buyer of the project. bids. and negotiating a written contract with each seller. when appropriate. Contract Administration – managing the contract and relationship between the buyer and seller. services. Request Seller Responses – obtaining information.
Step 1: Plan Purchases and Acquisitions • • Make or buy analysis Contract types and risks – – – – – Cost plus percentage of cost (CPPC) Cost plus fixed fee (CPFF) Cost plus incentive fee (CPIF) Fixed price plus incentive fee (FPI) Firm fixed price (FFP) • Contract incentives Procurement Management Plan – a formal or informal element of project plan describing how procurement will be managed SaipemP&CMod3 CC SLIDE38 Eni Corporate University .
Make or buy analysis • Consider direct and indirect costs (include management of purchase) • Possible decisions: – Procure • all or virtually all (single or multiple suppliers) • a significant portion • minor portion – Make everything SaipemP&CMod3 CC SLIDE39 Eni Corporate University .
Contract Types and Risks Seller Risk High Low Seller Risk High Buyer Risk Low Buyer Risk CPPC CPFF CPIF FPI FFP Cost Plus Percentage of Cost SaipemP&CMod3 CC SLIDE40 Cost Plus Fixed Fee Cost Plus Incentive Fee Fixed Price Incentive Firm Fixed Price or Lump Sum Eni Corporate University .
Cost plus percentage of cost (CPPC) • Seller obliged only to make best effort to fulfil contract within estimated amount • Buyer funds overruns • Prohibited in U. federal contracting SaipemP&CMod3 CC SLIDE41 Eni Corporate University .S.
Cost plus fixed fee (CPFF) • Buyer reimburses allowable costs • Fixed fee paid proportionately as contract progresses • Used where effort remains uncertain until project is well underway SaipemP&CMod3 CC SLIDE42 Eni Corporate University .
buyer & seller share savings – Sharing ratio defined (by convention Buyer/Seller) e. 80/20 • Used for contracts with: – long performance periods – substantial development & test requirements SaipemP&CMod3 CC SLIDE43 Eni Corporate University .Cost plus incentive fee (CPIF) • Reimburse allowable cost • Pay predetermined fee as a bonus for superior performance • If actual < expected cost.g.
80/20 • Used for high-value projects with long performance periods – ship-building – system development SaipemP&CMod3 CC SLIDE44 Eni Corporate University .Fixed price plus incentive fee (FPI) • Pay fixed price plus predetermined fee as a bonus for superior performance • Risk shared by buyer & seller – Sharing ratio defined (by convention Buyer/Seller) e.g.
Firm fixed price (FFP) • Seller bears all risk. but has highest profit potential (profit is unknown) • Most common type of contract • Must have reasonably definite specifications SaipemP&CMod3 CC SLIDE45 Eni Corporate University .
000 $126.000 $110.000)= -$4.000 $4.000 $94.000 80/20 $130.000 Fee $14.000 $120.000 $10.000 $80.000 $110.000 Fee $6.000 Fee Final Price Actual cost $80.000 Fee Final Price $14.000 80/20 Fixed Price Plus Incentive Fee Target Cost Target fee Target Price Sharing ratio Ceiling price Actual cost $100.000 $10.000 Actual cost $120.000 $10.000 SaipemP&CMod3 CC SLIDE46 Eni Corporate University .000 $ 6.000 Actual cost Fee Calculation 20% of $20.000-$120.000 20% of ($100.000 Fee Calculation Target fee $10.Examples of Incentive Contracts Cost Plus Incentive Fee Target Cost Target fee Target Price Sharing ratio $100.
SaipemP&CMod3 CC SLIDE47 Eni Corporate University .Target Cost & Price Contract target cost • Total anticipated value of all the negotiated costs in a contract. Target profit/fee • Amount of profit the contractor will receive if its total allowable costs equal total target costs in an incentive contract. excluding fee and authorised un-priced work.
000.Example A buyer has negotiated a fixed-price incentive contract with the seller.000 B. $51.000 C. how much profit will the buyer pay the seller? A.000 and a share ratio of 70/30.000 D.000. If the seller completes the contract with actual costs of $170. The buyer has also negotiated a ceiling price of $270. $35. $21. $39.000.000 SaipemP&CMod3 CC SLIDE48 Eni Corporate University . and a target price of $230. The contract has a target cost of $200. a target profit of $30.000.
000 Fee $39.000 $170.000 $230.000 30% of ($200.000 Actual cost $170.Examples of Incentive Contracts Fixed Price Plus Incentive Fee Target Cost Target fee Target Price Sharing ratio Ceiling price Actual cost $200.000 70/30 $270.000)= $9.000 $30.000 Fee Calculation Target fee $30.000 $209.000-$170.000 SaipemP&CMod3 CC SLIDE49 Eni Corporate University .000 Fee Final Price $ 39.
$30.000.000. $24.000 SaipemP&CMod3 CC SLIDE50 Eni Corporate University . If the seller has actual costs of $ 380.000.000 B. $104.Example The buyer has negotiated a cost-plus-incentive fee contract with the seller.000.000. a share ratio of 80/20. and a minimum fee of $10.000 C. a target fee of $40. a maximum fee of $60.000 D. The contract has a target cost of $300. $56. how much fee will the buyer pay? A.
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