THE INFLUENCE OF PROJECT COMMUNICATIONS TO COST MANAGEMENT

Name: Mahmoud Amin Member Number: 59554

Date: 15th August 2010

i.

T ABLE OF C ONTENTS

i. Table of Contents ........................................................................................... 2 ii. LIST OF GRAPHS & ILLISTRATIONS................................................................... 4 iii. ABSTRACT....................................................................................................... 5 1 INTRODUCTION .............................................................................................. 6 2 WHAT IS?? Communication ............................................................................ 7
2.1 2.2 In general .............................................................................................................................. 7 In project management .......................................................................................................... 7

3 WHY TO?? Communicate (GOALS) .................................................................. 8
3.1 3.2 3.3 3.4 Communication leads to success............................................................................................. 8 It is critical ............................................................................................................................. 8 It is Professional ..................................................................................................................... 9 It is cost management tool ..................................................................................................... 9

4 HOW TO?? Communicate (METHODS) .......................................................... 10
4.1 4.2 4.3 4.4 4.5 Introduction......................................................................................................................... 10 It is no accident .................................................................................................................... 10 It is Leadership ..................................................................................................................... 10 Methodology of communication........................................................................................... 11 Phase 1: Design .................................................................................................................... 12
Project communication (1A-1) ......................................................................................................... 12 Drawing issuing and distribution (1A-2) ........................................................................................... 12 points of contact (1B) ...................................................................................................................... 13

4.5.1 4.5.2 4.5.3

4.6

Phase 2: Construction........................................................................................................... 13
Kick off meeting (2A) ....................................................................................................................... 13 Technical standards and advice (2B, 2D) .......................................................................................... 13 Upwards feedback (2B, 2D) ............................................................................................................. 13 Project Meetings (2C) ...................................................................................................................... 14 Keep people "in the loop" (2) .......................................................................................................... 14

4.6.1 4.6.2 4.6.3 4.6.4 4.6.5

4.7

Advice applicable for the whole construction project ............................................................ 15
Take your time with communication ............................................................................................... 15 New communication technology ..................................................................................................... 15

4.7.1 4.7.2

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5 IMPROVING COMMUNICATION SKILLS (TECHNIQUES) .................................. 16
5.1 5.2 5.3 5.4 Improvement expected effects ............................................................................................. 16 Social and Communication Skills ........................................................................................... 16 Improvement considerations ................................................................................................ 17 Clarification of roles and responsibilities within a team:........................................................ 17

6 Communication Plan Template (TOOLS) ....................................................... 18
6.1 6.2 6.3 6.4 6.5 6.6 6.7 6.8 Format for communications ................................................................................................. 18 Points of control .................................................................................................................. 18 Media .................................................................................................................................. 18 Kick-off meeting ................................................................................................................... 18 Biweekly project team meetings........................................................................................... 18 Weekly status meetings ....................................................................................................... 19 minutes of meeting .............................................................................................................. 19 Meeting agenda ................................................................................................................... 19

7 Communication Influence to Cost Management ........................................... 20
7.1 7.2 7.3 Communication and total cost management (TCM) ............................................................... 20 Contract communication and cost impact ............................................................................. 21 Communication between management and the job site........................................................ 22
Why we need this communication to control? ................................................................................ 22 communications cost impact ........................................................................................................... 23 Communication cost for project categories ..................................................................................... 24

7.3.1 7.3.2 7.3.3

8 ILLUSTRATIONS............................................................................................. 28 9 Case study .................................................................................................... 31
9.1 Summary ............................................................................................................................ 31
Project summary: ............................................................................................................................ 31 Case summary: ................................................................................................................................ 31 9.1.1 9.1.2

9.2

Analysis .............................................................................................................................. 32
Failure in achieving communication goals ....................................................................................... 32 Failure in achieving communication methods.................................................................................. 32 Results of miscommunication .......................................................................................................... 33

9.2.1 9.2.2 9.2.3

9.3

Recommendations ............................................................................................................... 34

10 CONCLUSION ................................................................................................ 35 11 References .................................................................................................... 36

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ii.

LIST OF GRAPHS & ILLISTRATIONS

Figure (1) Project communication management………………………………7 Figure (2) Project communication methodology …………………….11 Figure (3) Cost influence curve………………………………………………20 Figure (4) organization physical control points………………………...…24 Diagram (3) Project management, knowledge and skills areas……………28 Diagram (4) Basic elements of the proposed Quantity Surveying Model…28 Diagram (5) The sequences of the model……………………………………..29 Diagram (6) Contract procurement……………………………………………29 Diagram (7) Claims………………………………………………………………29 Diagram (8) The model……………………………………………………….…30

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iii.
behavior.

ABSTRACT

Communication as an English word is simple to say, but can influence an industry

“Every year defects in the UK construction industry cost at least £20 billion to repair or rebuild. Some of the defects will be the result of poor communication, for example, a poorly detailed drawing, operatives being given, incorrect instructions or technical information not being available”
3

Communication leads a project to proceed in a timely, cost-effective and quality manner which no doubt satisfies all the people involved in the business. This paper explores the definition of communication, what is the need of communication, how to plan for communication, how to improve existing communication skills. Also how the communication can influence cost, illustrating a study case for current running project. One of The project management goals is planning; controlling and coordinating budgets and cost plans, as well as limits Claims and facilitates the processes of contract management. Therefore a proper effective communication tools should be implemented in the project since day one.

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1 INTRODUCTION
Communication as an English word is simple to say, but can lake of its efficiency change a project original contract value of 11,000,000.00 (AED)1 and 120 working days duration to revised contract value of 18,000,000.00 AED and 300 working days duration? The answer is yes2, it happened and that is the actual situation motivate me to explore the magical effect of the word communication in cost management “Every year defects in the UK construction industry cost at least £20 billion to repair or rebuild. Some of the defects will be the result of poor communication, for example, a poorly detailed drawing, operatives being given, incorrect instructions or technical information not being available”
3

With the intention to monitor and control project performance, cost, time and safety, we cannot ignore communication role and influence to the project. Therefore any organization should consider communication aspics implantation and improving. All the people involved in developing the project should have the basic knowledge of what the project communication management is, or a least the team leaders so that they can convey it’s concept to the hole team. Project communication management knowledge may include the definition of communication, what is the need of communication, how to plan for communication, how to improve existing communication skills. The purpose of this paper is to explore communication in construction filed , and how it leads a project to proceed in a timely, cost-effective and quality manner which no doubt satisfy all the people involved in the business.
1
2 3

AED is local currency for United Arab Emirates Study case to be mentioned later in this paper illustrating the miscommunication effect BSI Business Information (http://www.bsigroup.com/en/)- PD 7503 – 30 September 2003
th

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2 WHAT IS?? C OMMUNICATION
2.1 I N
GENERAL
4

“Communication is a process whereby information is enclosed in a package and is channeled and imparted by a sender to a receiver via some medium.” “Communication is one of the most persuasive, important, and complex aspects of human life.”
5

Even while driving a car you need to communicate with others, using car indicators, lights and horn in a proper way. Otherwise the probability of accidents is increased.

2.2 I N

PROJECT MAN AGEMENT

“Project Communication Management includes the processes required to ensure timely and appropriate generation, collection, distribution, storage, retrieval, and ultimate distribution of project information.”
6

Generation
Data / Information

Storage Distribution

Collection

Retrieval

X
Fig. 1: Project Communication Management

Figure (1) illustrates the flow of data or information, and the criticality of retrieving the historical information.

You might lose your life if started losing blood, so no project can continue its life cycle without communication, which is the blood of any project.

4

http://en.wikipedia.org/wiki/Communication Littlejohn, 2002, p.3 6 @ th PMBOK Guide 4 Edition -Chapter 10 - Project communication management, page 243
5

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3 WHY TO?? C OMMUNICATE (GOALS)
3.1 C OMMUNICATION
LEADS TO SUCCESS

One of the reasons leads the projects to success is people using their abilities to the maximum, encouraging and supporting team work efforts, and keeping in their mind project’s success.

Selecting the people who affect the work environment in a project, also defining team member roles, and give approaches that encourage team members to maintain a positive environment, finally helps to start any project on the right path.

“Effective communication creates a bridge between diverse stakeholders involved in a project, connecting various cultural and organizational backgrounds, different levels of expertise, and various perspective and interests in project execution or outcome.”
7

Keeping all the individuals involved in controlling a project coordinated and aware of project progress and changes is critical, and only good communications can achieve that.

3.2 I T

IS CRITICAL

“Whenever more than one individual is engaged in an activity, communication is a critical factor in achieving successful results.”8 All projects have a great amount of paperwork, which is necessary for the execution of the project. Such as time schedules, reports, shop drawings, other submittals, variations or change orders, the payment certificates, etc. which is the recorded history of the project development, so it is critical in case of any dispute raised. Refer to (Fig. 1 – Page 7) which showing that retrieving the historical information is critical. Therefore a proper document control system will be one of the effective communication tools.

7 8

PMBOK Guide 4 Edition -Chapter 10 - Project communication management, page 243 The Keys to Forecasting—#6 Communications - Cost Engineering Vol. 46/No. 7 JULY 2004 by James E. Baar and Stephen M. Jacobson, CCC

@

th

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3.3 I T

IS

P ROFESSION AL

Poor communication result to lake of the information, which gives a negative affects to technical performance of project team members. So the intention to establish a professional team work is essential, and can be achieved through a well prepared communication planning. If you fail to plan, you plan to fail. Even when a professional engineer goes for any worldwide international certificate, he must be familiar with communication management. As our parents used to advice us “you get out what you put in.”

3.4 I T

IS COST MAN AGEMENT TOOL

“TCM is an integrative process in which the practices and methods all rely on the creation, collection, communication, understanding, analysis, and/or use of data, information, and knowledge.”9 “In applying TCM, cost engineers not only use information (e.g., process steps of estimating, scheduling, etc.), but facilitate its flow (i.e., communication) in respect to cost management.”7

9

Total Cost Management Framework - An Integrated Approach to Portfolio, Program, and Project Management First Edition - Edited by John K. Hollmann, PE CCE - 2006

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4 HOW TO?? C OMMUNICATE (METHODS)
4.1 I NTRODUCTION
The unique nature of construction projects result that communication plan for cretin project may not be applicable for another project. “A project is a temporary endeavor undertaken to create a unique product, service, or result “10 However, these recommendations should offer some relevant information to any construction project or site. This paper shows how communication can be improved to a construction site. Improvements in communication should increase the quality of the work executed and decrease defects probability, which helps avoiding delays, claims and controlling the cost.

4.2 I T

IS NO ACCIDENT

Effective communication never happened without proper planning. Using the communication planning to identify, who?? Needs what information?? How and when it will reach them? Having many types of communication decreases the probability of missing any required information.

4.3 I T

IS

L EADERSHIP

Only a professional leader can achieve the desired communication, we have to start with assigning a leader to manage this process. Leadership

defined as the total influence of a person over another or over a group of members; through leadership we can drive a team into the right path. Monitoring and controlling any team members executing specific tasks cannot be achieved without the leader. A company could not run only with workers, High level of leadership required to maintain the company on the right path as well.

10

PMBOK

@

Guide 4 Edition -Chapter 1 – Introduction , page 5

th

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4.4 M ETHODOLOGY

OF C OMMUNICATION

Figure (2) demonstrate the simple methodology for communication during the different

phases of a construction project.
Designer – Client Meeting

Transfer of drawings:
Post / Fax & E-mail

1A

Appoint the contractor

Appoint the Supplier

Phase1: Design
Time Minutes 2A

Appoint the
Subcontractor

1B Contact Detail Who to invite Agenda

Kick of Meeting
Structure

Project Progress 2B

Construction

Quality of Work

Project Meeting
Actions from Previous meeting 2C 2D Construction
Structure

Outstanding actions New actions

Defect Reported

Subcontractor Contractor Architect
Amended Drawings

Phase2: Construction
Project Completion & Handover

Phase3: Completion

Figure (2) Project communication methodology

For each phase position in figure 2 is noted. Therefore, the text should be read in along with the communication methodology.

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4.5 P HASE 1: D ESIGN
4.5.1 P R O J E C T C O M M UN I C A T I O N (1A-1) “Pre-construction communications management – ensures the proper collection, dissemination and reporting of pre-construction information.” 11 Before construction stage the ways in which project will communicate to be agreed include the following, even if mention in the contract agreement: What kind of Meeting required and frequencies? How the drawing will be transferred? How to amended missing or unconfirmed drawings. How to communicate with sub-contractors, etc. “Cost managers should be continuously involved from design to the ordination and auditing, to insure best cost results, especially in commercial property, where investment is required to yield the best financial returns.”12 “Cost managers while communicating alternatives and options to the designers and client, should remember the role of relative quality, affordability , returns , as well as the latter’s link to design and specifications “13 4.5.2 D RA W I N G I S S UI N G A N D D I S T RI BU TI O N (1A-2) Drawings considered as a technical communication tool, if produced in good quality. Therefore, careful attention must be paid to how drawings are going to be produced, checked and distributed. The following points might be helpful if considered: Having the drawings as early as possible and complete for all stages. Ensure that drawings are detailed enough and checked before site work starts. Follow the standards in drawings presentation, to help construction work progress smoothly (e.g. color coded, by trade or element, laminated, small or large sized) How and where to keep the drawings? Involve the manufacturers in preparing drawings, in case of any special or new method used. “A complete set of correct drawings is important as ensuring that materials and manpower are available.”

11

COST ENGINEERING -The AACE International Journal AUG 2010

12 Managing cost, Contracts, Communication and Claims: A quantity surveying perspective on future opportunities – Page 2.

JIP (Baise) Verster – University of free State , Bloemfontein, South Africa 13 Managing cost, Contracts, Communication and Claims: A quantity surveying perspective on future opportunities – Page 3. JIP (Baise) Verster – University of free State , Bloemfontein, South Africa

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4.5.3

PO I N TS O F CO N T A C T

(1B) In subcontractors and suppliers appointing stage, points of contact to be clearly defined and distributed officially. This should avoid delays, confusion and double effort.

4.6 P HASE 2: C ONSTRUC TION
4.6.1 K I C K O F F M E E TI N G (2A) Kick off or “pre-start” meeting is very important for project communication, because of benefits may be gained from such a meeting, as the following:

It helps people to know each other, “Ice breaker” this leads to better communication and less tension atmosphere as the work progresses. It offers a good chance to discuss how communication will go. It offers a good chance to record contact details for each organization, and make sure that all stakeholders are connected and aware of each other. 4.6.2 T E C H N I C AL S T AN D A RD S AN D AD VI CE (2B, 2D) There are too many of best practice information documents on design, material selection and construction which available from many sources like the following: Manufacturers and suppliers British Standards Institution Building regulatory authorities Trade associations Insurance companies Consultants and research organizations 4.6.3 U PW A RD S F E E D B A CK (2B, 2D) While construction is going in progress, information should be effectively fed back up through the management chain. At this time two areas are important, as follows: Workers or supervisors to site office (e.g. reporting on incorrect or missing details in a drawing). Site office to head office (e.g. if an incorrect detail is discovered, this should be reported back to the design office and the drawings to be corrected).

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4.6.4 P R O J E C T M E E TI N GS (2C) Communication, safety and quality improvements are the benefit of a proper number of well prepared meetings. These benefits should make the time spent useful and not a wasted time. Technical or co-ordination meetings have also a respected benefit, especially helping site work to progress smoothly. The success of any meeting comes from well prepared conditions, as the following: Chairperson. Agenda. Set start and finish times. Minutes recorded.

Minutes should always be circulated after the meeting and include action points with the responsible person identified and dates to be completed by. Consider inviting all concerned people to any meetings, also some people may only need to attend only parts of a meeting.

4.6.5 K E E P PE O PL E " I N TH E L O O P " (2) It is to provide everyone with the right information and involve them in the decision making . If any information or data passed outside the correct channels we have to inform all relevant parties. For example, if the architect issues a revised drawing straight to a sub-contractor, the main contractor must be informed officially and given a copy of the drawing.

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4.7 A DVICE

APPLICABLE FOR THE WHOLE C ONSTRUCTION PROJECT
Y O U R TI M E W I T H CO M M UN I C A TI O N

4.7.1 T AK E

Paying attention to and spending the proper time on implementing communication plan and recommendations leads to success of the project, avoid any delay might happened due to ignoring it and keep the professional performance of the organization. The following are some typical examples: Prior to make any communication we must be sure of the availability of the requirements to support it, (i.e. ensure that someone given an instruction has the support, resources and enough information to complete the task properly). Make sure that the way of communication used as planned and as per common professional practice. Make sure that the message is clear and inform all people relevant to this issue. Communicate as early as possible, to provide the sufficient time for the process. Follow up and check that the instruction or any sort of communication has been carried out. Make use of the historical information or experience from old projects, either positive or negative impact.

“Don’t Miss Out on Informal Communication”14
“While it is important to plan for communication, it is also true that some of the best communication takes place informally and unexpectedly. You can nurture the opportunities for informal communication. Be available. Get into the places where the work is being done or the team members are eating their lunch. Listen. Watch for the nonverbal, unofficial signs of excitement, confusion, accomplishment, or burnout.”11 4.7.2 N E W
C O M M UN I C A TI O N TE C H N O L O GY

The past few decades have seen a hug development in the communication field, new technologies such as mobile phones, two way radios, digital cameras and internet access become the most useful communication tools. For example, documents, drawings, minutes of meetings and periodical reports can be e-mailed between all parties, also we can use the digital cameras to record progress, accidents and bad workmanship. Useful Information such as building standards and good practice guidance can be downloaded from the internet as well.

14

The Fast Forward MBA in Project Management- 3 Edition – page 76, by Eric Verzuh

rd

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5 IMPROVING COMMUNICATION SKILLS (TECHNIQUES)
5.1 I MPROVEMENT
EXPECTED EFFECTS

If you don’t have history you don’t have future, therefore developing projects communication methods and technologies based on historical information and expertise, may help the organization to improve future projects communication. Expectation of improving future projects communication maybe the way activities and work are designed, planned and performed. For example providing internet access will help saving time and get all stakeholders aware of changes happening to cretin project. Improving communication skills became a critical issue for the construction field in the last few decades.

5.2 S OCIAL

AND

C OMMU NICATION S KILLS

The key of any project success is people (starting with client himself ending with the unskilled labor); In order to improve social and communication skills within a project team, there shall be some considerations will reflect on communicative behavior and his effect on dispute management. Most of international projects might gather different kind of nationalities, religions and mentalities. Providing seminars or training for team members will improve the communication skills. Role plays, simulation of work situations etc. will improve speaking skills (how to express themselves, respond properly, give accurate information to superiors, engineers, employers representatives etc.) also listening skills (Understanding simple explanations and instruction in order to carry out the desired work ) Steps of social skills improvement as following: Team work structure Team awareness Team sprit Social responsibility of the individual within the team work. Cooperation between individuals

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5.3 I MPROVEMENT

CONS IDERATIONS

- A positive atmosphere of good relations and trust to be provided and everyone should feel comfortable and responsible to work on improving communication skills. - Individuals to take their time to develop communication. - Everyone should understand that effective spoken communication is important in construction work. - Transferring the information clearly is essential to everyone's safety and successful work outputs. - To develop communications skills we have to: Always speak clearly Report things quickly but also carefully and always in an understandable way Keep to the facts Remember to report all necessary facts Keep facts in order Referring to actual experience can be used as good examples.
OF ROLES AND RESPONSIBILITIES WITHIN A T EAM :

5.4 C LARIFICATION

The difference between roles and responsabilties within the team members should be clayrified : What is the role of each one at the site? - By identifying the role of the project personnel we avoid the negative competition atmosphere. What is the responsibility of each one at the site? - This is a critical issue; by identifying the responsibility of each one the project, we can easily evaluate, monitor and reward the proactive people. What is the mechanism between team members? - What is the flow of work progress, what comes first and what comes after? Who gives orders to whom? - Whose got the power to take the decision, and to whom also? Means that everyone have his own range of power

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6 C OMMUNICATION P LAN T EMPLATE (TOOLS)
Communications Plan defines what are communication methods, channels and techniques and how will be implemented in the project. The Communications Plan defines the following: What is the required communication for each role? What kind of data or information to be communicated? What is the method that any data or information will be communicated? What is the optimum time required to distribute any information? Who will be implementing the communication for each team? Who receives the communication?

6.1 F ORMAT

FOR COMMUNICATIONS

Communication templates prepared by the project manager should be in clear format and easily to understand, then to be forwarded officially to all stakeholders and team members.

6.2 P OINTS

OF CONTROL

The project manager will be responsible to implement all communication plan templates; Team leaders will assist the project manager by following up communication plan within and between team members.

6.3 M EDIA
All project communication templates shall be distributed in written form, Copies will be filled in the document control system. E-mails will be helpful in distributing such formats.

6.4 K ICK - OFF

MEETING

Any project manager should arrange for kick-off meeting (per-start meeting) inviting all stakeholders to review in detail the “Statement of Work”15 as soon as it has been completed.

6.5 B IWEEKLY

PROJECT TEAM MEETINGS

Every two weeks, at a specified time, the project team members will meet to review the following items at a minimum: a. Overall progress status. b. Any missing or required data/information. c. Any new risk might come in future. d. Outstanding escalations.
15

“A statement of work (SOW) is a formal document that captures and defines the work activities, deliverables and timeline a vendor will execute against in performance of specified work for a customer. Detailed requirements and pricing are usually included in the Statement of Work, along with standard regulatory and governance terms and conditions.” http://en.wikipedia.org/wiki/Statement_of_work

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6.6 W EEKLY

STATUS MEETINGS

Every week, on a specified day, the project team leaders will meet at least for 30 minutes to report on the following: a) Progress update vs. target plan of the project. b) Risk management feedback. c) New escalations feedback.

6.7

MINUTES OF MEETIN G

The project manager will distribute minutes from all above mentioned meetings through document control system. Team leaders will be responsible for forwarding minutes of meetings that they held.

6.8 M EETING

AGENDA

Meeting Agenda should be distributed 5 business days before the meeting, and to identify the responsible for each minute with a time limit for that topic. Review of action items from the previous meeting will be discussed prior to add any new topic.

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7 C OMMUNICATION I NFLUENCE TO C OST M ANAGEMENT
7.1 C OMMUNICATION
AN D TOTAL COST MANAGEMENT

(TCM)

Total cost management starts from the deployment process, from the briefing stage to completion. Total cost management benefits are gained during project different stages including the briefing, sketch plan, approved sketch plan, production drawings, receipt of tender, and construction stages. “Communication systems are a subset of information systems, but an area of concern for cost engineers because of their role as translators and communicators in TCM. They may translate customer needs to requirements, requirements to technical scope; technical scope to cost plans, cost plans to measures, and measures to knowledge about the scope that can be acted upon.”14 In fact this is not an easy job especially in case of poor communication, which lead to misunderstanding of what does the customer actually need? What is the plane to achieve it? What are the risk expectations?

Figure (3)16 Cost influence curve

Figure (3 ) illustrates cost influence curve, which showing that planning and design phases has the great ability to influence the project cost at the starting time, and becoming less during execution. During the project cost influence curve keep increasing up to the highest when project over, so cost engineers communicate with other project team members to assist them, monitor work progress and advice which actions required to meet the planned time and cost.
16

Project Management for Construction - Fundamental Concepts for Owners, Engineers, Architects and Builders – Figure 2-3: Ability to Influence Construction Cost Over Time - by Chris Hendrickson, Department of Civil and Environmental Engineering, Carnegie Mellon University, Pittsburgh.

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7.2 C ONTRACT

COMMUNICATION AND COST IMPACT

“In law, a contract is a legally binding agreement between two or more parties which, if it contains the elements of a valid legal agreement, is enforceable by law or by binding arbitration.”17 Therefore contract should serve this partnership by satisfying each party needs and obligations, which should be clearly communicated to all parties and people involved through contract terms, in order to avoid any misunderstanding of each word in the contract. Planning, controlling and coordinating budgets and cost plans, as well as communicating leads to limitation of claims and facilitate the processes of contract management. It is clearly understood that the contract is a communication tool for issues related to rights, obligations and administration of the contract and by all the parties involved. Therefore it is important to understand all issues related to contract communication to avoid cost impact of claims and facilitate the processes of contract management “For this reason the following constrains are used by courts to evaluate contracts: Avoidance of absurdity Upholding the contract or clause as opposed to ineffectual or void interpretations Equitable interpretations The intentions of parties The recitals are subordinate to operative part of the contract The grammatical meaning of the words used The contract will be interpreted as a whole in respect of the purpose and scope The technical meaning of words The written contract itself as opposed to verbal explanation “18

17 18

http://en.wikipedia.org/wiki/Contract MANAGING COST, CONTRACTS, COMMUNICATION AND CLAIMS:A QUANTITY SURVEYING PERSPECTIVE ON FUTURE OPPORTUNITIES - by JIP (Basie) Verster – University of the free state, Bloemfontein, South Africa

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7.3 C OMMUNICATION
7.3.1 W H Y

BETWEEN MANAGEMENT AND THE JOB SITE

W E N E E D T H I S C O M M UN I C A TI O N TO CO N T RO L ?

We need this flow of information between management and the job site for the following: 1) At that time before “international crisis year 2007 – 2008”19 construction costs were huge and booming in this filed made a good business environment, one of the best in the history of the business. Therefore construction costs needed a proper constant control to handle that amount of investments. 2) At this time (year 2009 till date end 2010) construction costs are less than past few years and the international crisis made a risky business environment. Therefore construction costs needed a proper constant control, to create an optimum estimations as well as monitoring the construction costs trending. 3) Any project works within a limitation of time, budget control, and agreed cash flow. So the last thing that the management or stakeholders need is a wrong indication of their business, which is the result of poor communications between them and the job site. 4) Periodically updates of the project conditions and forecasts are essential to purchasing department, manufacturer, supplier, sub-contractors as well. These updates created through planners, who are responsible to communicate this updates to the top managers, to forward any concern to the stockholders who are influencing and controlling the direction of the project.

19

“Is the 2007-2008 U.S. sub-prime mortgage financial crisis truly a new and different phenomena” Social Science Research network - Is the 2007 U.S. Sub-Prime Financial Crisis so Different? an International Historical Comparison - Carmen M. Reinhart & Kenneth Rogoff - January 2008

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7.3.2

CO M M UN I C A TI O N S C O S T I M P A C T

In order to achieve the required successful communication to any project, there are some considerations; what is the project scale? What is the budget? What are the minimum communication tools to achieve the optimum results? For big scale projects We have to consider the availability of the following communication tools: Qualified team members who understand the basics of communication with top management and stakeholders. Establish a system to keep everyone informed with what has happened, what is happening, and what is expected to happen in the project. Selecting and assigning team leaders who can take the most efficient and economical concerted action. The expected expenditure here is the overhead for: cost engineers, computer time, hardware and wireless devices expense, equipment rental, etc. all this should be included in the allowance for modern communication. This modern

communications and techniques can also be helpful in reducing the impact of the "curve of diminishing returns"20 which faces the construction projects. For smaller scale projects A very high percentage of small projects are executed by small organizations. In order for those small contractors to continue their job, they should apply cost management tools; in this case a proper communication is the key to their cost control. Those small contractors do not have to apply a complex estimating and cost control systems.

20

“Diminishing return (also called diminishing marginal returns) refers to how the marginal production of a factor of

production starts to progressively decrease as the factor is increased, in contrast to the increase that would otherwise be normally expected. According to this relationship, in a production system with fixed and variable inputs (say factory size and labor), each additional unit of the variable input (i.e., man-hours) yields smaller and smaller increases in outputs, also reducing each worker's mean productivity. Conversely, producing one more unit of output will cost increasingly more (owing to the major amount of variable inputs being used, to little effect).”

http://en.wikipedia.org/wiki/Diminishing_returns

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7.3.3 C O M M UN I C A TI O N

C O S T F O R P R O J E C T C A TE G O RI E S

Cost control of any project starts before, at the beginning and during the project up to completion, also like any project is usually divided into about nine principal categories. Six happens before the actual start of construction then construction and job close. 1) Planning. 2) Organizing. 3) Staff availability. 4) Application of systems or procedures. 5) Time and cost control which has to start with the estimation. The estimator should start his job from the first step until the job completion. 6) Pre-planning and engineering, in order to accomplish the job. 7) Job start. 8) Coordination and direction of the actual physical construction accomplishment. 9) Job closing, completion, acceptance, payment, project functional and the historical report. Those nine categories are handled and controlled by three physical control points: a) Head office or management control b) Job site or construction control c) Accounting or financial control
Accounts
Communication

Head Office

Job Site

Figure (4) organization physical control points

Communication let each of these control points aware of what the plane is? What is completed? What is in progress and what the target is? Usually an individual is assigned to coordinate all three control points, maybe known as “projects director”.

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Briefly we will go through the nine categories to mention where communication can influence cost.

1) Planning
Why Planning comes first? The answer is profit, if the objective very simply is to spend less money than we receive, so we plan to accomplish the project in time, to avoid any delays and penalties, which will be deducted from the profit. Therefore we consider planning one of the communication tools that can influence and direct the project cost in two directions: Project accomplished on time That means a proper plan was prepared to cover all project requirements and the planned budgeted was met Project delayed beyond the plan Maybe a poor plan missed some of the project requirements or an unexpected event caused project delayed beyond the planned completion date and project overrun the planned budgeted.

2) Organizing (OBS)
To start preparing organization breakdown structure (OBS) first we have to define the company existing structure as a basic then add any requirement in order to successfully complete the project requirements. That means new assignments can be made to fulfill those requirements. Good selection of a professional stuff helps the project go smoothly and improve the technical performance as well.

3) Staffing
Completing the OBS successfully is the start of market search to make sure that the right overhead is allocated to the budget. Then start with project manager assigning, to make complete overview the project. Then determine who will be in the estimation team and planning team depending on the size of the organization and the size of the project. These two departments will be responsible for the projected cost and schedule.

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4) Systems and Procedures
Systems and procedures like construction methodology and program methodology should be reviewed and utilized for each project regardless project scale. Also authorities regulations in project specified area or zone should be well studied and reviewed, to avoid any unexpected constrains might influence the cost or the sequence of work of this project.

5) Project Control
The assigned estimation and planning department’s role in controlling the project start from the beginning, a written description of controls and responsibilities can be a part of the job file. Any expected cost of these controls or responsibilities should be considered in the estimation stage.

6) Pre-planning and Engineering
Description of controls and responsibilities is one of the necessary tools to be used in the pre-planning and engineering, which is preparation procedures may includes the necessary detailed drawings, descriptions, specifications, necessary permits and permissions. Under pre-planning and engineering comes a work schedule, which includes the main contractor and the sub-contractors scope of work, and includes prequalification, material and shop drawings submittal approvals. Also the long lead materials and equipments delivery time (which sometimes by others). It is necessary to clearly mention that in work schedules to control the change orders which may have appeared during the execution period.

7) Job Start
Knowing how we are going to execute this project, who will be responsible for this project and its several divisions, where our material and equipment is coming from, and when it is planned to arrive on the site. So moving onto the job-site, the engineering is done, the material is there, and the job actually begins to go. A project manager or his assistants have to report work done daily, this information can then be faxed, mail, or delivered to the head office management.

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8) Coordinating the Job
During project life cycle and incase of any problem arises, site supervisor has to report daily to project manager helping him overcoming his difficulties and in accelerating his activities to accomplish the job within the time and budget. The same people who have been involved in planning, organizing, staffing, setting up the procedure, estimating, pre-planning and engineering, can be informed as well to know exactly what is going and where the problem arise. Their roles or outcomes can be established through proper communication channels for saving time, before regretting when it is too late to resolve the problems.

9) Job Closing
The project has been completed and the reports or tests are made, the inspections are proceeding, then we have come to job closing. This is a critical period, where full team efforts has been fulfilled, and the action at this point is de-snagging of punch list after punch list and getting the owners and inspectors acceptance of the project function. In this stage a selected supervisor leads his minimal crew through the walk-throughs, internal-inspection, internal-testing, final as built documents, the owners punch list, the scheduled project closing procedures, final inspection, and its final acceptance by the owner or his representative. Then he has the final closing which is general cleaning and housekeeping, material shifting, moving of all tools and equipment back to main stores. a historical report which can be in details, or can be one sheet, but it should cover the problems and achievements, who are the people recommended for the next job, and who are not, a comparison of the actual labor productivity vs. estimated, and the reason for any variance.

Files for all of these procedures and activities covering even the daily reports and the daily problems and accomplishments can all be then assembled into a final file which is still a very small package. These can then be filed in the home office historical file for reference as similar jobs with their similar problems must be estimated and accomplished in the future.

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8 ILLUSTRATIONS
All the following diagrams was copied from good article21, it was really helpful to understand the interrelation between communication and other project management areas. Note: Same diagrams reference number from the mentioned article kept as it is for quick reference.

21

MANAGING COST, CONTRACTS, COMMUNICATION AND CLAIMS:A QUANTITY SURVEYING PERSPECTIVE ON FUTURE OPPORTUNITIES - by JIP (Basie) Verster – University of the free state, Bloemfontein, South Africa

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9 C ASE STUDY
9.1 S U M MA R Y As a planning engineer currently I am following up a running project. Base on the below, I analyzed the current project status and miscommunication influence to the contract duration and value. 9.1.1 P R O J E C T
S U M M A RY :

Project: Roads and Infrastructure Deferred Package for 50 villas & 7 towers Project contract value: 11,000,000.00 AED (Eleven million Arab Emirates Dirham) Project contract duration: 15 days for mobilization + 120 working days for execution Scope of work: to complete Roads and Infrastructure Deferred Package as shown on the tender documents and to the directions of the Engineer. including the preparation, submitting and approval of drawings, technical submittals, procurement, delivery, installation and commissioning, including all required permits, No Objection Certificates and approvals from all local authorities, and includes handover of the complete Works in accordance with the terms of the contract. 9.1.2 C AS E
S U M M A RY :

Project status as on September 1st, 2010: Advance payment 40% of original contract value released to the main contractor Time elapsed 40% of original contract duration Actual site progress 1.8% Vs. planned value 8% Earned value 2.12% Vs. planned value 12% Critical issues as on September 1st, 2010: Design No Objection Certificates to be renewed from local authorities No work to start prior to obtain No Objection Certificates from local authorities

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Existing sewerage network connections not aligned with existing hose connection

9.2 A N A LY S IS After exploring the communication role in successes of any project on this paper, it was very easy to analyze the main reasons of this case failure to meet the planned duration and cash flow. So I will refer to specified section and mention how it was carried out in this case? And what are the sequences? 9.2.1 F AI L U RE
I N AC H I E VI N G C O M M U N I C A TI O N GO A L S

Section 3.1: Regarding selecting the people who affect the work environment in a project, also defining team member roles. The fact is a project manager was assigned to the project after commencement date also with no previous experience in the same kind of projects, which is here infrastructure and road works. That leaded to miscommunication with the interfered authorities’ regulations and requirements (Permits & No objection Certificate). And the result was that it was discovered (No work can start in this specified area without obtaining No objection Certificate) Section 3.1: That Poor communication gave the client and the supervisor consultant a negative affects to the organization technical performance, because of starting the work without a communication plan. 9.2.2 F AI L U RE
I N AC H I E VI N G C O M M U N I C A TI O N M E T H O D S

Section 4.5.2: Regarding drawings was issued to the contractor, it was issued as follows: - Roads and Infrastructure Deferred Package issued by one party - Villas drawings issued by second party - Towers drawings issued by third party

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No communication happened between the three parties and the villas or main sewerage network contractors. Every one executed the work separately then when making the final connection problem raised, after studying Infrastructure as built drawings and comparing with Villas drawings it was discovered that the executed main sewerage network connections not aligned and not matching with villas connection. Section 4.6.2: Regarding Building regulatory authorities, this is the first time that the company executes infrastructure and road works project; the fact happened is no one contacted with the roads authorities to get the latest regulations and requirements to execute such project. The result was that work is on hold due to missing “No objection Certificate”. Also after applying to roads authorities to obtain this certificate, it was rejected, the reasons is as per local authorities’ regulations the company should be registered and listed in the approved contractors list, otherwise to subcontract of the list. Another reason is that the design approval was expired and will take 2 to 3 weeks for renewal 9.2.3 R E S UL TS
O F M I S C O M M UN I C A TI O N

The client paid advance payment 40% of original contract and no progress happened. Time elapsed 40% of original contract duration Actual site progress 1.8% Vs. planned value 8% variance -6.20% Earned value 2.12% Vs. planned value 12% variance -9.88% Delay of project completion due to Design No Objection Certificates renewal ,obtain No Objection Certificates from local authorities and Existing sewerage network connections not aligned with existing villas connection The company may lose a client and left bad impression to the supervisor consultant Project revised contract value: 18,000,000.00 AED (Eighteen million Arab Emirates Dirham) due to the wrong drawings received for construction, expiry of design approval from local authorities and additional corrective works. Project revised contract duration: 15 days for mobilization + 120 working days for execution + 180 working days extension of time due to the wrong drawings received for

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construction, expiry of design approval from local authorities and additional corrective works.

9.3 R EC O M M EN D A TIO N S Selecting experience and professional stuff improves the technical performance and give good impression to other parties. A defined communication plan is essential to start the project smoothly and to avoid any misunderstanding. More time to be spent studying and coordinating the project different trades, will save a lot of project time and cost. Before starting new kind of project either to assign team members with pervious expertise or to make sure that every regulation and requirement is clear and covered.

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10 CONCLUSION
It is clear that good communication is a major factor to all successful projects achieving the planned duration and budget, by coordinating their roles, agree on responsibilities, monitor and control the cost, time and quality. Setting up the methodology that enables communication like progress meetings, reports and change management puts the project on a stable basic. The project control checklist should include communication planning and methods, to make it easier for people to coordinate. Team leaders should understand the basics of communication to help implementing its methods. “Communication is the foundation of relationships. The project manager’s attitude and style will color all relationships on the project. Consciously choose to lead by example in every action you take.”22 The purpose of this paper was to explore communication in construction filed , and how it leads a project to proceed in a timely, cost-effective and quality manner which no doubt satisfy all the people involved in the business. Therefore a proper effective communication tools should be implemented in the project like: Communication plan Approved work program Proper documents control system Minutes of meetings Periodically reports to update progress New communication technologies

22

The Fast Forward MBA in Project Management By Eric Verzuh – clear communication – page 315

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11 R EFERENCES
The Keys to Forecasting #6 Communications - Cost Engineering Magazine Vol. 46/No. 7 JULY 2004
James E. Baar and Stephen M. Jacobson, CCC

CONSTRUCTION COST MANAGEMENT, COMMUNICATION IS THE KEY
J. R. Grizzle Construction Consultant Member, AACE

A Communication-Based Critique of Traditional Cost Models
1996 AACE TRANSACTIONS Dr. Paul A. Bowen, P.J. Edwards, and Cliff Hardcastle

A STANDARD FOR ENTERPRISE PROJECT MANAGEMENT
MICHAEL S. ZAMBRUSKI

RETHINKING COMMUNICATION IN CONSTRUCTION
PUBLISHED: May 2007 at http://itcon.org/2007/23/ EDITOR: B-C Björk

IMPROVING CONSTRUCTION COMMUNICATION
Robert S. Done, Ph.D. Data Methods Corporation, 805 N. Camino Miramonte -Tucson, AZ 85716

MANAGING COST, CONTRACTS, COMMUNICATION AND CLAIMS:A QUANTITY SURVEYING PERSPECTIVE ON FUTURE OPPORTUNITIES
JIP (Basie) Verster – University of the free state, Bloemfontein, South Africa

BSI Business Information (http://www.bsigroup.com/en/)
PD 7503 – 30th September 2003

PMBOK @ Guide 4th Edition - Chapter 10 - Project communication management. Total Cost Management Framework - An Integrated Approach to Portfolio, Program, and Project Management
First Edition - Edited by John K. Hollmann, PE CCE – 2006

COST ENGINEERING -The AACE International Journal AUG 2010 http://en.wikipedia.org

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