Dale R.

Labitzke, PE
Professional Chemical Engineering
http://www.born2process.com

ORGANIZING FOR PROJECT MANAGEMENT

THE PROJECT MANAGER'S RESPONSIBILITY

Every Project Manager has three basic and equally important responsibilities:

1. Operations. Control of project operations, i.e., the engineering, fabrication

and construction needed to meet the project objective.
2. Logistics. Control of the supply of materials, equipment and
accommodation needed to design, construct, administer and manage the
operational work. This includes transportation and may involve housing
plus feeding.
3. Administration: Meeting the needs and expectations of people involved in
the project, from the standpoint of welfare, training, and morale.

The Project Manager must pay constant attention to all three responsibilities,
avoiding a tendency to concentrate on operational problems at the expense of
supply and administration. No task force can long survive as an effective
operational unit if it is poorly supplied or poorly administered, and if the Project
Manager is to be successful he must under no circumstances neglect any portion
of these basic responsibilities.

PROMULGATION OF AUTHORITY
Many larger corporations operate under a system of management in which
formal authority stems from the Board of Directors and is delegated, in whole or
in part, through the President to subordinate levels of management. Usually, by
resolution of the Board of Directors, the delegation of authority is required to be
in writing at all levels of organization. Two principal documents are commonly
utilized for this purpose, the Delegation of Authority and the Grant of Operating
Authority.

Delegations or Grants of Authority in no way permit the recipient to exceed

limitations specified in plans, programs or budgets that have been approved by
higher levels of management. Unless exceptions are specifically stated, the
authority conferred by Delegation or Grant is limited to the usual course of
business.

1. Delegations of Authority. A Delegation of Authority is essentially a blanket

delegation, which applies to key executives having overall profit and loss
responsibility.
 2. Grants of Operating Authority. For positions that do not involve broad
profit and loss responsibility, a Grant of Operating Authority is issued
specifying the approval and commitment authority that may be exercised
by the recipient.

Grants of Operating Authority

Generally for a project, all positions of responsibility derive their authority from
Grants of Operating Authority. Grants specifying the powers and limits of
authority at each level are usually issued as a chain of delegations. A typical
chain could be as follows:

1. From the Board of Directors to the President.

2. From the President to the Executive Vice President and Chief Operating
Officer.
3. From the Executive Vice President and Chief Operating Officer to the
appropriate vice president.
4. From the Vice President to the Project Manager,
5. From the Project Manager to the Task Force members as appropriate.

Individual Grants of Operating Authority at each level will contain limitations

based on project need, the amount of responsibility delegated to the recipient
considering his experience, geographic location, communications situation, past
performance, understanding of the Owner’s company methods, etc.

Limits of Authority
The limits of authority granted to a Project Manager might be as follows:

"The Project Manager's authority for Project XXXXX is limited as follows:

1. Approval Authority is not granted for the following:

a. Travel advances for subordinate employees over $1000.00 each

transaction.
b. Travel expenditures and expense reports for subordinate
employees over $1000.00 each transaction.
c. Vendor's List.
d. Early Placement List.
e. Receipt of any equipment or materials.
f. Original and projected time schedules.
g. Control Estimate or any part thereof.
h. Design Transmittals.
i. Hiring of permanent employees.
j. Salary adjustments.
 k. Transfer of personnel.
l. Promotions of personnel.
m. Travel expense reports of the grantee.
n. Use of contingency funds.
o. Delegations to third parties.
p. Changes in project scope.
q. Changes to Owner Operating Procedures and/or Documents.

2. Requisitioning Authority is unlimited.

3. Commitment Authority is limited to the following:

a. Execution of bonds, claims, contracts, agreements, and other

instruments necessary or advisable in connection with the project in
the usual course of business, utilities or construction (except
architect engineer services) up to and including $500, 000. 00,
each transaction.
b. Purchase or lease of capital assets, materials, equipment, supplies,
services, utilities or construction (except architect-engineer
services) within the scope of the approved funding up to and
including $500,000.00, each transaction.
c. Extraordinary engineering expenditures against an existing
Engineering Services Contract for the preparation of estimates of
the effect of proposed changes on schedules, quality and cost, up
to and including $25,000.00, each transaction.
d. Purchasing commitment authority and requisitioning authority for a
particular type of item or service will not both be delegated to a
particular position without the specific Owner approval

4. Authorities, which are not specifically delegated, are reserved.

TASK FORCE ORGANIZATION

Task Force Duties and Functions
The mission of a Task Force organized for execution of a project is to complete a
quality project on time and within the cost estimates. To accomplish this mission
individual members of the Task Force should be granted the responsibility and
authority to act within individual Grants of Operating Authority. The Grant of
Operating Authority to the Project Manager gives him overall responsibility and
accountability. Subordinate positions to the Project Manager carry Grants, the
limits of which are set by the Project Manager. The responsibilities of various
Task Force members are outlined in succeeding paragraphs.
Project Manager

The Project Manager assumes line responsibility and accountability for

successful execution of a project. Limitations, if any, imposed upon his
responsibility are contained in his Grant of Operating Authority. He normally
assumes control of design, procurement, construction, funds, scheduling and
administration. He manages and administers assigned personnel in the
disciplines of design engineering, procurement, accounting, cost engineering,
scheduling and project control, expediting, inspection, safety, labor relations and
construction. He directs the activities of outside architect-engineers, vendors and
contractors. He is directly responsible for correctness of design, suitability of
equipment, quality of construction and earliest practicable plant completion. The
Project Manager reports to the Owner.

The Project Engineer

The Project Engineer is the Project Manager's technical specialist and within the
limits delegated to him by the Project Manager. He is responsible that all
process, technical and esthetic aspects of a project meet the Owners
requirements and conform with the Appropriation, Project Definition and Design
Criteria and that the resulting plant is neither over or under-designed. He assists
in evaluation of architect-engineers, vendors and contractors and in setting up
the architect-engineer's task force. He controls, coordinates and adjusts physical
progress of task force engineering according to established priorities and
schedules, working through the architect-engineer's project manager. He guides
preparation of design transmittals, specifications and drawings and coordinates
approvals.

He controls issue of requests for inquiry and purchase requisitions and provides
technical evaluation of resulting quotations and bids. He supervises engineering
in vendors' shops and coordinates checking and approval of vendor drawings
and specifications. He assists estimators, cost engineers, purchasing agents and
project control engineers in matters relating to engineering and design.

Normally the Project Engineer is one of the Owner’s senior engineering

personnel. The Project Engineer reports to the Project Manager.

Project Engineering Coordinator

The Engineering Coordinator assumes responsibility for coordination and

timeliness of the architect-engineer's work. He expedites all engineering work,
including that of vendors, he enforces terms and conditions of Engineering
Services Contracts; he supervises maintenance of all project records relating to
design and drafting; he reviews drawings and specifications for conformance with
project requirements; he makes recommendations leading to more efficient
control of engineering, and participates in the scheduling of engineering. He
makes no technical decisions. He coordinates the needs of the on-site
construction group with the engineering work. The Project Engineering
Coordinator reports to the Project Manager.

Project Construction Manager

Within limits imposed upon him by the Project Manager in his Grant of Operating
Authority, the Project Construction Manager assumes responsibility and
accountability for execution and successful completion of the construction and
installation work of the project. He manages the activity of personnel assigned in
the disciplines of area superintendent, inspection, safety, warehousing, site
engineering and other disciplines as assigned, interprets drawings and
specifications to contractors.

He assists and provides guidance in the preparation of estimates of cost and

time, the evaluation of vendors' and contractors' capabilities, the evaluation of
quotations and bids. We have suggested that the services of a construction
management firm be retained to oversee construction. Typically, reporting to the
Project Construction Manager are:

Area Superintendents

Within the limits imposed by the Project Construction Manager, an Area

Superintendent assumes responsibility and accountability for execution and
successful completion of the construction and installation work of a functional
portion of a project. He provides interpretation of drawings and specifications to
contractors.

He assists in the preparation of estimates of cost and time, evaluation of vendors'

and contractors' capabilities, and evaluation of quotes and bids. Area
Superintendents report to the Project Construction Manager.

Project Controller

Within the limits delegated to him by the Project Manager, the Project Controller
performs all aspects of project planning, scheduling and project control including
coordination of time, cost, quality and control aspects of the project. He
organizes and supervises drafting and reproduction office and data processing
programs. He trains architect-engineers, vendors and contractors in use of
project methods and assists in expediting and inspection programs.

He briefs the Owner’s personnel in project procedures and he may act as

understudy and deputy to the Project Manager. He prepares project planning
plan and budget and accepts full responsibility for correct application of project
procedures and for accuracy, thoroughness and timeliness of planning and
scheduling data, analyses and recommendations. The Project Controller reports
to the Project Manager.

Project Purchasing Agent

The Project Purchasing Agent, within the limits delegated to him by the Project
Manager, carries out the procurement activities of the project in accordance with
the Owner’s procedures. This includes establishing and evaluating source of
materials, services and equipment, soliciting bids, evaluation of bids, negotiating
with vendors and contractors, making commitments, administration of contracts
and disposal of surplus materials.

He establishes the facilities and staff necessary to perform the above. He

maintains adequate, orderly records that can be audited against the Owner’s
procedures. He accepts full responsibility for correct application of procurement
procedures and for: accuracy, thoroughness, timeliness and coordination of
purchasing actions under his jurisdiction. The Project Purchasing Agent reports
to the Project Manager.

Project Cost Estimator

The Project Cost Estimator, under direction of the Project Manager, prepares
estimates-to-complete; prepares control estimates and revisions caused by
scope changes; provides the quantity measurement of materials, labor,
equipment, rentals, supplies, or other items furnished in cost-plus construction
work and as a basis for validation of the contractors' invoices for payment;
substantiates by physical verification the quantities of work put in place as a
verification of contractors' invoices for lump-sum construction work; provides
break-down and analysis of bids and provides comparisons with estimates for bid
evaluation purposes.

He measures and reports the impact of deviations from the project estimate and,
if necessary, makes recommendations for suitable alternative means of
execution; assists in providing the cash requirements against time for all items
not already committed or expended. The Project Cost Estimator reports to the
Project Manager.

Project Accountant

The Project Accountant, under direction of the Project Manager, is responsible

for the accuracy and timeliness of all project financial data. The Project
Accountant will be responsible for insuring that the following accounting duties
are performed: maintenance of the project ledgers, detailed construction ledgers
and other project ledgers, preparation of cost reports, special analyses and
forecasts of cash requirements for those whose responsibility requires them;
verifying all commitments and invoices; preparation for signature of invoices and
vouchers for payment; maintenance and reporting of the Task Force bank
account and the Construction Bank Account; and assistance in allocation of
construction costs to the permanent property accounting records upon close-out
of project.

The Project Accountant will perform financial investigations of proposed

contractors and vendors as required by the Project Manager.

TASK FORCE LOCATIONS

Location of task forces is normally as follows:

a. During engineering phase and prior to onset of major field

construction work: The Project Manager and his task force are resident in
the architect-engineer's office.

b. Following onset of major construction: The Project Manager,

Project Controller, Project Purchasing Agent and Project Accountant move
to the jobsite as emphasis moves to construction. The Project Engineer
may remain with the architect engineer until engineering is essentially
complete.

RELATIONS WITH SPONSOR

The Task Force’s relationship to the Owner is that of supplier to customer, and
the Owner's requirements are the prime consideration.

The Owner is ultimately responsible for decisions affecting return on investment,

for defining the project objective and scope, for establishing standards of quality
and reliability, and for establishing urgency. The Task Force is responsible for
providing specialist advice in these matters, for all design decisions except
process and esthetics, and for managing engineering, purchasing and
construction. In certain cases, the Task force is responsible for managing start-
up operations. The Sponsor is responsible for providing and training operating
personnel.

Upon approval of Funding for an assigned project, the Task Force takes
complete responsibility for:
1. Funds
2. Timing.
3. Determination of method of execution.
4. Actual execution, including:
a. Quality of construction.
b. Reliability of operation of the finished plant.
c. Selection of architect-engineer (in consultation with the Owner).
 d. Selection of vendors.
e. Selection of contractors.
f. Development of control-grade cost and time estimates.
g. Measurement of progress against these estimates.
h. Project Accounting.
i. Cost Control.
j. Planning & Scheduling.
k. Purchasing.
l. Reliability Control.
m. Regular reports to the Owner.

The Owner will usually appoint a Liaison Officer to coordinate its activities, which
include decisions affecting return on investment, definition of the project,
establishment of urgency, establishment of quality and reliability standards, and
review and approval of progress.

INFORMATION RELEASE
Project Information
A Task Force operates generally on the basis of "all facts on the table at all
levels". However, because of the far-reaching consequences of
misunderstandings and misinterpretations, which may result from indiscriminate
release of information, the formal and official release of information to the Owner
should be reserved for the Project Manager.

No member of a task force should be permitted to release official information to

anyone outside the Task force unless specifically authorized to do so in writing.
This applies particularly to information concerning:

1. Project completion date.

2. Control grade estimates.
3. Pre-funding estimates
4. Estimates relating to change of scope or funding riders.
5. Forecasts of final cost.
6. Estimates to complete.
7. Contracts and purchase orders of all types, including engineering,
equipment and field construction.
8. Inquiries, bids and quotations.
9. Unit prices.
10. Bid evaluations,
11. Cost-plus percentages.

Press Releases
The Owner and only the Owner is authorized to make releases to the Media.
REPORTING
Weekly Reports
A Task Force’s reporting philosophy must be aimed at providing weekly reports
of physical progress against schedule for engineering, purchasing, construction
and overall project. Weekly reports are to be frank, factual and objective, and are
distributed in identical form to the Project Manager; Project Accountant;
Purchasing Agent; Construction Manager, and Owner. It is an inherent principle
that NO information vital to the conduct of the project is withheld at any level.
Reports are not merely a listing of accomplishments, but report factually the
weekly measurements of physical progress against the original "yardstick"
schedule. They should concentrate more on the problems that face the Project
Manager and how he plans to overcome them than on the successes.

Where a deviation from schedule has worsened, the weekly report gives the
underlying reason, the action being taken or contemplated to offset the situation,
and the effect, if any. For very large projects, a weekly synopsis of backlog
should be included.

Project Managers must ensure that weekly reports are distributed to those
affected, which may include contractors, architect- engineer, vendor, Project
Engineer, and Area Superintendents.

Monthly Reports

Typically Owners request a monthly report summarizing physical progress and

spending.

CHANGES
Project Changes
Changes which occur in execution of the project and which represent deviations
from courses of action which have already taken place or are planned must be
formally recorded and, in most instances, require approval of the Owner. It is to
be recalled that in general no Grant of Authority and no Appropriation in any way
permits the Task force to exceed the limits specified in plans, programs or
budgets which have been approved and authorized by the Owner.

The formal documents used to record and obtain approval of such changes are:

1. Engineering Change order. Prepared for any change requested which

would reflect a deviation from work already done, deviation from a course
of action previously agreed upon, or deviation from criteria already
established by the Appropriation. Such changes should bear the
classification "mandatory" or "desirable", as determined by the Owner or
by the Project Manager. Engineering Change Orders require the written
 approval of the Owner and the Project Manager. Changes in engineering
work taking place under authorization of an Engineering Change Order
and which may or may not result in a Scope Change, may nevertheless
result in a change in the Engineering Budget, Project Definition and in the
Design Transmittals. Project personnel are cautioned to be alert to the
need for revision of these documents.

2. Scope changes. A Scope Change should be prepared for any change

that becomes necessary because of change in the scope of the project as
measured against the original Appropriation. The Task Force should
prepare a supplementary estimate showing additional costs including
contingency and escalation that will be incurred if the scope change is
approved. The determination of classification of a change as being a
Scope Change is by the Sponsor and Project Manager.

The Task Force should take no action to execute a Scope Change until the
Owner has authorized the corresponding increase in project funds in writing.

The foregoing provisions should apply regardless of any under-run or over-run

that may appear at the time a Scope Change is proposed.

When an under-run results, the Task Force will return the unexpended funds to
the Owner and should not undertake additional work beyond the original scope of
the project simply because unexpended funds still remain available.

Purchase Order/Contract Changes

Changes authorized by Engineering Change Orders and by Scope Changes will

result in individual Change Orders being written for any or all of the following:

Engineering Services' Contract

The Task Force normally writes the Engineering Services Contract, but because
the amount will probably exceed the Grant of Authority given to the Project
Manager, it will be signed by the Owner. Expenditure of funds is normally on a
cost-plus basis. Revisions or change orders to the Engineering Services Contract
will be written by the Task force and signed by the Owner

Purchase Orders

Service Orders for Equipment Supply and Installation, Construction Contracts,

and Purchase Orders, and other contract provisions may be altered upon receipt
by the Purchasing Agent of an approved requisition within the limits of the
requisitioner's Grant of Authority.
HANDOVER OF CONSTRUCTED FACILITIES
As far as possible, newly constructed facilities will be handled over as soon as
construction is complete. Completed areas or portions should be handed over
when ready and should not be held awaiting completion of the entire project,
unless absolutely necessary.

Handover sequence

Final Inspections. Normally the following final inspections will take place:

Project Engineer’s Inspection. When all construction work has been completed,
the Project Engineer will personally inspect the facility and will satisfy himself that
the work has been carried out in a professional, workmanlike manner in
accordance with approved design, and that it is indeed ready for handover.

Project Manager’s Inspection. This will normally take place before inspection by
the Owner, but after all construction work has been completed, the area has
been thoroughly cleaned, and all construction gear has been removed.

Acceptance Inspection. The Project Manager and the Owner will attend this.
They will together inspect the facility in detail, step-by-step, witnessing test runs
of all operating equipment.

Certificate of Acceptance Following the acceptance inspection, the Project

Manager and the Owner should will complete a Certificate of Acceptance
documenting the satisfactory completion of the Project.

List of Deficiencies, Discrepancies and Faults This should be completed and in

detail as part of the Certificate of Acceptance and should show responsibility for
corrective action, target date for completion for each item, and an agreed date for
re-inspection.

Re-inspection Re-inspection should be handled in the same way as the initial

inspection, and a new Certificate of Inspection prepared and signed.