PEER-REVIEWED PAPER

8
BENCHMARKING PREPROJECT PLANNING EFFORT

By M. R. Hamilton' and G. E. Gibson Jr.,2 Members, ASCE

Downloaded from ascelibrary.org by NATIONAL PINGTUNG UNIVERSITY on 12/18/14. Copyright ASCE. For personal use only; all rights reserved.

ABSTRACT: Benchmarking key performance areas is key to continual improvement of pro-

cesses. This paper focuses on measurement and benchmarking of the preproject-planning
process for capital construction. While experienced members of the construction industry
recognize that more effort put into early project planning results in a more successful project,
there are few published studies that quantitatively verify this fact. This paper reviews a meth-
odology developed to benchmark the preproject-planning phase to provide a basis for action,
follow-up studies, and recalibration of measures and benchmarks. The project that was the
object of this study measured the level of preproject-planning effort performed. This level
was then related to the ultimate success of the project using data gathered on 62.projects and
totaling more than $3.4 billion in authorized cost. Through formal preproject-planning effort,
risk is reduced, cost performance can increase by as much as 20%, and schedule performance
by as much as 40%.

INTRODUCTION cesses to benchmark, selecting benchmarking part-

The concept of benchmarking is embedded as an in-
tegral part of a comprehensive total-quality-management
(TQM) effort. Benchmarking is a process that targets key
improvement areas, and identifies and studies best prac-
tices for continuous improvement and increased com-
petitive advantage. To study best practices, operations
can be compared with: (I) other internal operations (the
best performing units in the company); (2) the given
company's top competitors; and (3) companies in any
industry that engage in functions or processes analogous
to the given company and that are among the best at
what they do (Spendolini 1992).
Benchmarking is not a quick process; it is a formal,
systematic, and continuous process. Benchmarking fa-
cilitates process understanding and motivates action to
continually improve the way to do business. There are
many steps to the benchmarking process. However, the
four main areas of performance are (Competitive 1988;
Mittelstaedt 1992):
• Planning. This area includes identifying target pro-
"Presented at the October 23, 1995, Construction Congress IV, held
at San Diego, Calif.
'Asst. Prof., Del E. Webb School of Constr., Arizona State Univ.,
Box 870204, Tempe, A2 85287-0204.
2Asst. Prof., Dept. of Civ. Engrg., Univ. of Texas, Austin, TX
78712-1076.
Note. Discussion open until September I, 1996. To extend the
closing date one month, a written request must be filed with the ASCE
Manager of Journals. The manuscript for this paper was submitted for
review and possible publication on September 21, 1995. This paper
is part of the JourllQl of MallQgement in Engineering, Vol. 12, No.
2, March/April. 1996. ©ASCE, ISSN 0742-597X19610002-oo25-
0033/$4.00 + $.50 per page. Paper No. 11651.
JOURNAL OF MANAGEMENT IN ENGINEERING / MARCH/APRIL 1996/26
ners, and collecting data.
• Analysis. Data analysis can take many forms and
will depend on the type of data collected. The im-
portant consideration in analysis is the develop-
ment of meaningfUl process measures.
• Integration. Integration of benchmarking data in-
cludes communication findings, identifying spe-
cific needs, and establishing realistic goals.
• Action. This last performance area includes devel-
oping action plans, implementing the plans, and
monitoring progress. It also includes the recalibra-
tion of the benchmarking effort to make the pro-
cess continuous in nature and to provide the max-
imum potential benefit.
This paper presents the results of a recently completed
benchmarking study from an industrywide investigation
of preproject-planning practices among owners of capital
facility projects. The methodology developed to bench-
mark the preproject-planning phase followed the afore-
mentioned steps of planning and analysis. Through qual-
itative and quantitative analysis, industry best practices
are revealed and integration of the research findings is
recommended. This methodology provides a basis for
action, follow-up studies, and recalibration of measures
and benchmarks.
PLANNING
Identification of Target Area
Fig. 1 depicts the four major processes of the construc-
tion life cycle: business planning, preproject planning,
project execution, and facility operations (Gibson et al.
1995). The curve labeled "influence" conceptually de-

J. Manage. Eng. 1996.12:25-33.

 picts the level of influence that each phase has on the
overall outcome of the project. The second curve, "ex-
penditures," portrays the cumulative cost growth of a
project throughout its life cycle. The graph shows that
one process, preproject planning, has a significant influ-
ence on the outcome of a construction project. In fact,
preproject planning is critical to achieving project goals,
and it provides important outputs to downstream pro-
cesses such as engineering and construction.
Preproject planning is the process of developing suf-
Downloaded from ascelibrary.org by NATIONAL PINGTUNG UNIVERSITY on 12/18/14. Copyright ASCE. For personal use only; all rights reserved.
information was selected. The result of this effort is
shown in Table 2. The variables are shown in column 1.
The four data sources selected were business manager,
project manager, operations manager, and project histor-
ical data.
The writers used dual data-collection methods. His-
torical data were collected by means of an I8-page pro-
ject questionnaire with questions directed at the mea-
sures indicated in Table 2. Additional subjective data
from the project's business manager, project manager,

ficient strategic information with which owners can ad- and operations manager were collected through tele-
dress risk and decide to commit resources to maximize phone interviews.
the chance for a successful project. It occurs after busi-
ness planning, where the project idea is initiated, and Project Sample
prior to project execution, where detailed plans, speci- After identification of the data sources and data-col-
fications, and other project specific data are outputs lection method, the data-collection effort began. Com-
(Gibson et al. 1995). panies participating in the study nominated projects that
The initial phase of the study required modeling the met the following requirements:
process. This step was accomplished by a research team
under the guidance of the Construction Industry Institute • Industrial construction projects in North America
(CII), Austin, Tex. The specific research team charged • Projects that exceeded $5,000,000 in final cost
with modeling the preproject-planning process consisted • Projects that had been completed for at least 2
of approximately 16 industry personnel, split among years
owner and contractor personnel, along with an academic
researcher.
Major Low
The resulting model is composed of four major sub- Influence Influence
processes (see Fig. 2). Each subprocess is further defined
by the functions that occur during the subprocess (' 'Pre- High Large E
x
project" 1995): n p
f e
I n
u d
1. Organize for preproject planning. The functions e
include selecting the project team, drafting the charter, n
c u
and preparing the preproject planning plan. e Low Small r
2. Select project alternatives. The functions include lier(orm Perform Execute Operate e
usmess Pre-project Project Facility 5
analyzing the technology, evaluating sites, preparing Planning Planning
scopes and estimates, and evaluating alternative(s). FIG. 1. Influence and Expenditures Curve for Project Life
3. Develop a project definition package. The func- Cycle
tions include analyzing the risks associated with the
project, documenting the project scope and its design,
defining the project's execution approach, establishing
project-control guidelines, and compiling the project
definition package.
4. Decide whether to proceed with the project.

Selection of Benchmarking Partners

To identify potential benchmarking partners, the re-
search team contacted all CII owner-members for pos-
FIG. 2. Preproject·Plannlng Major SUbprocesses
sible participation. Twenty-two CII owner-member
companies responded. Table 1 shows frequency of each TABLE 1. Number of lYpes of Companies that Responded
type of company, by industry, responding to the survey.
Even though they represent different market sectors, all Company type Number
(1) (2)
companies have a common need to build capital im-
provement projects to meet product and regulatory Petro-chemicallpetroleum 6
Chemical 5
needs. Pulp and paper 2
Power 2
Data Collection Petroleum 2
In preparation for data collection, the research team Consumer products 2
defined the preproject-planning process to the degree Pharmaceutical 1
Communications 1
necessary to provide measurable variables. Project data 1
Government
sources with the highest probability of providing the best
26/ JOURNAL OF MANAGEMENT IN ENGINEERING / MARCH/APRIL 1996

J. Manage. Eng. 1996.12:25-33.

 The writers randomly selected 62 of 105 nominated ANALYSIS
projects for study. These projects included several types
Once the planning portion of the benchmarking pro-
of facilities (see Fig. 3). The authorized capital cost of
cess was completed, the research team pursued the sec-
the sample projects ranged from $4 million to $350 mil-
ond performance area for benchmarking: analysis. Var-
lion, as shown in Fig. 4. Approximately 50% of projects
iable measures were developed through conversion of
were under $25 million, with a median authorized cost
the raw data. Subsequently, data reclassification and in-
of $26 million. The total authorized cost of all 62 proj-
dex construction were used to develop the overall pre-
ects was approximately $3.4 billion (Gibson and Ham-
project-planning benchmarks. The sequence of steps fol-
ilton 1994).
lowed for the analysis is detailed in the following sec-
tion.
Downloaded from ascelibrary.org by NATIONAL PINGTUNG UNIVERSITY on 12/18/14. Copyright ASCE. For personal use only; all rights reserved.

TABLE 2. Data Variables and Sources

Data Conversion
Busi- Project Project
ness man· Operations hlstorl-
Raw data from the questionnaire were entered into
Variables manager ager manager cal data Statistical Package for Social Science (SPSS), a Win-
(1 ) (2) (3) (4) (5) dows-based statistics program from Microsoft, Red-
(a) Organization mond, Wash. The raw data were then examined and,
What organizations were when necessary, converted into measures that allowed
represented Not used Not used Not used Used for meaningful interpretation and analysis. For instance,
How many organizations Not used Not used Not used Used historical data were provided on the amount of money
How did individuals work spent on preproject planning and the authorized capital
together Used Used Used Not used cost of the project. These items in themselves do not
What was the duration of
the effort Not used Not used Not used Used
provide a measure of performance but can be converted
Was there team continuity Used Used Used Used into the percentage of authorization budget spent on pre-
Were there team skills Used Used Not used Not used project planning.
Was there team building Used Used Used Not used The measures provided the data input that eventually
How much time and lead to development of benchmarks. The goal was to
money was spent Not used Not used Not used Used
Did the team have a develop measures that would be meaningful to both the
charter Not used Not used Not used Used participating companies and to the industry as a whole.
Was a plan developed Not used Not used Not used Used Also, the writers developed measures that are repeatable
Were corporate guidelines to simplify the process of recalibration. Table 3 sum-
communicated Not used Used Not used Not used marizes the variable measures in column 1. Each varia-
(b) Alternative Selection bles is classified as subjective or objective in columns 2
Were alternative technolo- and 3, respectively. Historical data were considered ob-
gies analyzed Used Used Used Used jective, whereas the data obtained from the project rep-
How many technologies resentatives were perceptions and therefore considered
were considered Not used Not used Not used Used
Were alternative sites subjective in nature.
analyzed Used Used Used Used
How many sites were Collapsing Data
considered Not used Not used Not used Used
Since much of the data were continuous with large
Were appropriate pefSon-
nel assigned to teams Used Used Used Not used ranges, the data were grouped by percentiles and recoded
Were conceptual scopes into nominal values ranging from 1 to 5. First, variable
and estimates prepared Used Used Not used Not used descriptives were examined. Descriptive data included a
Was the evaluation formal Used Used Not used Used frequency table, mean and median values, and 20 per-
Were corporate technol-
ogy and site goals
centile values. The tables were then examined, and the
given Used Used Used Not used 20 percentiles ranges were used to establish value
(c) Project-Definition Package
ranges. Whenever possible, recoding was established in
such a manner that the mean and/or median value was
Were risks identified and
assessed Used Used Not used Used
included in the middle range and therefore had a recoded
How complete was design values of three.
at authorization Not used Not used Not used Used Table 4 presents an example of the frequency table.
Was an execution ap- This example is for the variable "number of corporate
proach defined Used Used Used Used groups represented on the preproject-planning team."
Were control guidelines
established Used Not used Used
The term corporate group refers to a functional depart-
Used
Was a definition package ment such as engineering, operations, marketing, and re-
compiled Not used Not used Not used Used search and development. Each row describes a specific
Was scope definition number or value that was obtained from the project's
appropriate Used Used Not used Not used historical data.
Was there an emphasis on
quality Used Used
The value obtained during data collection is shown in
Used Not used
column 1. The frequency of occurrence of that value
JOURNAL OF MANAGEMENT IN ENGINEERING / MARCH/APRIL 1996/27

J. Manage. Eng. 1996.12:25-33.

 appears in column 2. For example, in the third row of
Table 4, four corporate groups (column 1) were repre-
sented on three sample projects (column 2), resulting in
a frequency of 4.8%. The cumulative percentage, which
was used for the value range (Table 5, column 2), ap-
pears in column 5.
Table 5 provides the 20-percentile ranges (derived
from the frequency table, Table 4) in column 2 and the
recoded nominal value in column 3. As an example, if
a project had 10 groups represented during the preproject
Downloaded from ascelibrary.org by NATIONAL PINGTUNG UNIVERSITY on 12/18/14. Copyright ASCE. For personal use only; all rights reserved.
planning phase, the recoded value, based on the 66.1 %
column 4, would be 4. Ordinal data provided with a
"yes" or "no" answer were given the recoded values
of 5 and 1, respectively.
Index Development
A single composite index was created for preproject-
planning effort. This method was chosen because a com-
posite index provides a powerful and reliable summary
of measured data. It can also improve the reliability of
data by the random variation associated with each term.
Random variation tends to average to zero when
summed across all terms in the index. As a practical
matter, a summary index is more functional and of
greater value to the customer (Babbie 1973).
When selecting variables from Table 2 for possible
inclusion in the index, many issues were considered. The
first was the logical validity of each variable. For logical
validity to be satisfied, each variable must appear, on its
face, to measure the target composite variable. In other
words, each preproject-planning variable considered for
inclusion in the index did measure some aspect of pre-
project-planning effort.
The variables selected had a rating of importance. All
Chemical
Petro-Chemical
Power
Consumer Products
Petroleum Refinery
Other
o 5 10 15
Number of Projects
FIG. 3. Sample Project Type
$100-350 million
$50-100 million
$25-50 million
$10-25 million
$4-10 million
10 15 20
Number of Projects
FIG. 4. Sample Project Authorization Cost
28/ JOURNAL OF MANAGEMENT IN ENGINEERING / MARCH/APRIL 1996
J. Manage. Eng. 1996.12:25-33.
were identified in the preproject-planning process model
and are therefore considered important to the process by
professionals within the industry. .
INTEGRATION
Communication of the research findings is necessary
for integration, the third performance area of bench-
marking, to take place. This section will present the re-
sults of the data analysis. Results include determination
of the measures that comprise preproject-planning best
practices. These measures are combined to form the
benchmark index. Subsequently, index values are cal-
culated for each project and are evenly divided into three
groups. Descriptives of each group's performance with
project success measures of cost performance, schedule
performance, design capacity attained, plant use, and
scope changes are depicted through the use of box plots.
Preproject.Planning Best Practices
All variables obtained through the questionnaire were
initially considered for inclusion in the index. The var-
iables were reduced in number through tests of logical
validity, statistical correlation analysis, and index relia-
bility testing using Cronback's alpha. The resultant anal-
ysis revealed that six variables form a logical, statisti-
cally valid and reliable index for measurement of
preproject planning effort. Statistically combined, they
produce the best indicator of preproject planning effort.
These variables are considered to be best practices for
the sample. The preproject-planning-effort index vari-
ables as well as their measures and definitions are as
follows.
• Groups represented on the preproject-planning
team: the number of corporate groups that had in-
put during the preproject-planning phase of the
project. Examples of corporate groups would be
business unit, project management, research and
development, marketing, operations, and so on.
Each has a vested interest in the project. This var-
iable was measured in ordinal numbers.
• Preproject-planning plan: development of a docu-
ment providing the methods and time schedule for
completing the preproject-planning activities. The
20 measurement was nomimal: yes or no.
• Written charter: development of a document, based
on corporate guidance, that defines the mission and
responsibilities of the preproject-planning team.
The measurement was nominal: yes or no.
• Percentage design complete at authorization: the
percentage of detailed design effort performed
prior to authorization that forms the basis for the
authorization decision. This variable was measured
in percentage of design man-hours completed be-
fore project authorization.
• Project-control guidelines developed: the develop-
25 ment of detailed procedures to manage execution
of the project-including control guidelines such
as milestone critical-path-method schedules, pro-
 curement schedules, and safety guidelines and a
control plan that addresses such issues as planning,
scheduling, change management, and management
information systems. The measurement was nom-
inal: yes or no.
• Execution approach developed: the development
and documentation of the methods used to perform
the detailed design, procurement, construction, and
start-up of the project. The measurement was nom-
inal: yes or no.
Downloaded from ascelibrary.org by NATIONAL PINGTUNG UNIVERSITY on 12/18/14. Copyright ASCE. For personal use only; all rights reserved.
82% of the sample projects that feIl in the upper third
of preproject-planning effort indices exceeded or met
their financial goals whereas only 66% (a difference of
16%) in the lower-third group did. Therefore, through
an increase in preproject-planning effort in the critical
six areas comprising the index, one can increase the
probability of achieving their business goals.
Project control and operational performance by the
preproject-planning group are depicted in Table 7 and
further explored through the use of box plots. Table 7
confirms that, as the level of preproject planning in-

Variable Weights
To refine the index further and take into consideration TABLE 3. Variable Measures
the responses by the project representatives, weights
were established for the index variables. The weights Measure
were derived from one open-ended question proposed to Source Historical data- Interviews-
variables objective subjective
the interviewees to identify important catagories of
(1 ) (2) (3)
preproject-planning effort. The question was: "What are
(a) Organization
your main reasons for your assessment of the level of
effort expended on preproject planning?" (Gibson et al. What organizations Corporate group
1994). Through qualitative analysis of individual re- were represented
How many Number
sponses, variable weights were established and the pre- organizations
project planning index was derived. Applying the How did individuals Team cooperation
weights to the corresponding variables resulted in the work together
following formula for a preproject-planning index value Duration of the plan- Months per million
(Gibson and Hamilton 1994): ning effort
Was there team Turnover ratio Change of personnel
Preproject Planning Index Value = 0.45 continuity
Were there team skills Skills present
. [(groups represented on preproject-planning team Was there team building Techniques used
How money was spent Percent of budget
+ preproject-planning plan)n] + 0.10 Did the team have a Yes/no
charter
. (written charter) + 0.45· [(percent design complete Was a plan developed Yes/no
+ control guidelines developed + execution plan developed)/3] (1) Corporate guidelines Quality
clearly given
The writers calculated index values for all projects. (b) Alternative Selection
Subsequently, the values were divided into equal ranges Alternative technologies Yes/no Thorough evaluation
that established preproject-planning groups: upper third, analyzed
middle third, and lower third. Analysis of the three Technologies considered Number considered
groups and their final performance in terms of project Were alternative sites Yes/no Thorough evaluation
control (cost, schedule, and scope changes) and project analyzed
How many sites were Number considered
operational characteristics (plant use and design capac- considered
ity) was conducted. These areas were examined because Conceptual scopes and Prepared sufficiently
they are significant measures of project success. The re- estimates
sults revealed that the level of preproject planning per- Was the evaluation Formal method used
formed has a statistically significant effect on the ulti- formal
Corporate goals Clear communication
mate success of the project. Additionally, the overall communicated
business success (e.g., return on investment and return
(c) Project-Definition Package
on equality) of the three groups was examined.
Risks identified and Yes/no Adequate
assessed identification
Preproject-Planning Groups' Business Success Design complete at Percent design effort
Table 6 provides a summary of the overall business authorization at authorization
success of the project by preproject-planning groups. Execution approach Yes/no Well defined
The table provides information for each group according defined
to whether the percentage of projects within that group Control guidelines Yes/no Well defined
established
exceeded, met, or fell short of its financial goals. Mea- Was a definition pack- Yes/no
sures of financial goals include internal rate of return, age compiled
return on investment, return on equity, and cash flow rate Scope definition Well defined
of return. As indicated, when the level of preproject appropriate
planning increases, so does the likelihood that the project Was there an emphasis Emphasized
on quality
will meet or exceed its financial goals. For example,
JOURNAL OF MANAGEMENT IN ENGINEERING / MARCH/APRIL 1996/28

J. Manage. Eng. 1996.12:25-33.

 creased in the sample, cost and schedule performance
improved and the standard deviation decreased; thus,
project outcomes became more predictable. Additionally,
higher percentages of the plant operational characteris-
tics such as percentage design capacity attainment and
plant use are found as the level of preproject-planning
effort increases.
Box Plot Analysis
Box plots present a visual display of summary infor-
Downloaded from ascelibrary.org by NATIONAL PINGTUNG UNIVERSITY on 12/18/14. Copyright ASCE. For personal use only; all rights reserved.
of the box is the 25th percentile, and the upper boundary
is the 75th percentile. The horizontal line inside the box
represents the median. Thus, 50% of the cases have val-
ues within the box.
Cost Performance
Project cost performance was examined and measured
in percentage deviation from the authorization budget.
The results are depicted in the box plot shown by Fig.
5 and the summary statistics in Table 8. Effort expended

mation about the distribution of values. Used in this sec- during preproject planning had a definite effect on the
tion, they will display summary information comparing cost performance. In a comparison of the group average,
the three preproject-planning index groups with the proj- projects within the lower third group had significantly
ect success measures of cost performance, schedule per- higher overruns than those in the middle and upper-third
formance, design capacity attained, plant use, and scope
changes. TABLE 7. Performance by Preproject Planning Groups
The box plot displays summary statistics for the dis- Standard
tribution of the actual values obtained from the project Average deviation Median
questionnaire. It plots the median, the 25th percentile, Preproject planning group (%) (%) (%)
the 75th percentile, and the range. The lower boundary (1) (2) (3) (4)
(a) Cost Performance
TABLE 4. Frequency Distribution: Groups Represented on Upper third -4 7 -3
Preproject-Planning Team" Middle third -2 10 I
Value Frequency Percent Cumulative percent Lower third 16 45 2
(1 ) (2) (3) (4) (b) Schedule Performance
2.00 2 3.2 3.2 Upper third -13 17 -11
3.00 4 6.5 9.7 Middle third 8 24 8
4.00 3 4.8 14.5 Lower third 26 44 23
5.00 I 1.6 16.1
(c) Percent Design Capacity Attainment
6.00 12 19.4 35.5
7.00 6 9.7 45.2 Upper third 102 20 100
8.00 7 11.3 56.6 Middle third 93 16 100
9.00 4 6.5 62.9 Lower third 87 20 95
10.00 2 3.2 66.1 (d) Percent Use
11.00 6 9.7 75.8
12.00 4 6.5 82.3 Upper third 103 19 100
13.00 3 4.8 87.1 Middle third 94 15 100
14.00 I 1.6 88.7 Lower third 85 20 95
15.00 2 3.2 91.9
16.00 2 3.2 95.2
17.00 I 1.6 96.8 lOa
19.00 I 1.6 98.4 c
o
26.00 1 1.6 100.0 s
t
"Median = 8.00; mean = 9.00. 50
p
e
r
TABLE 5. Reclassification of Data f
o
r
Percentile Value range Recoded value m a
(1) (2) (3) a
n
80-100 12-26 5 c
e
60-80
40-60
9-11
7-8
4
3
-50 L-_ _---......- ----_-----J
Lower Third Middle Third Upper Third
20-40 6 2
0-20 2-5 1 Pre-Project Planning Group
FIG. 5. Cost Performance by Preproject-Planning Groups
TABLE 6. Financial Performance versus Authorization
Goals by Groups TABLE 8. Summary Statistics for Cost Performance
Percent Deviation from Authorization
Exceeded or met Fell short
Group (%) (%) Group 25th percentile Mean 75th percentile
(1 ) (2) (3) (1) (2) (3) (4)
Upper third 82 18 Lower third -5.00 15.80 21.25
Middle third 72 28 Middle third -9.50 1.50 5.75
Lower third 66 34 Upper third -9.00 -3.00 -0.50

30/ JOURNAL OF MANAGEMENT IN ENGINEERING / MARCH/APRIL 1996

J. Manage. Eng. 1996.12:25-33.

 200...-----------------..., TABLE 10. Summary Statistics for Design Capacity
S
c Percent Attainment at Six Months
h
Group 25th percentile Mean 75th percentile
~ 100 (1 ) (2) (3) (4)
11
1 Lower third 80.00 87.16 100.00
e Wl%tiWdWi1r& Middle third 89.00 93.33 100.00
mWfMWht09W
P 0 Upper third 100.00 103.00 118.00
e
r
f. 160r---------------------,
- 1 0 0 4 - - - - - _ - - - _ - - - - _ - - -.....
Lower Third Middle Third Upper Third
Downloaded from ascelibrary.org by NATIONAL PINGTUNG UNIVERSITY on 12/18/14. Copyright ASCE. For personal use only; all rights reserved.

140
Pre-Project Planning Group U
~ 120
1
FIG. 6. Schedule Performance by Groups I
i 100
z
TABLE 9. Summary Statistics for Schedule Performance a 80
t
Percent Deviation from Authorization i
o 60
Group 25th percentile Mean 75th percentile n
40
(1 ) (2) (3) (4)
Lower third 3.00 26.00 42.50 2()1----_-----_-----t-------'
Lower Third Middle Third Upper Third
Middle third 0.00 16.66 29.00
Pre-Project Planning Group
Upper third -21.00 -21.00 0.00
FIG. 8. Plant Utilization by Preproject-Planning Group

200r----------------------,
D equipment and mechanical and electrical systems. De-
e scriptives of the relationship with preproject-planning
s
i group are given in Fig. 7 and Table lO. The highest value
g
n attained in the lower-third group was lOO%. All other
C 100
values were below their planned design capacity. Con-
a versely, most values in the middle group appear to be at
p
a lOO%. For the upper-third group, 50% of the projects
c were operating between lOO% and 118% at 6 months of
i
t operation.
Y
OL-----t--------I-----oof------'
Upper Third Middle Third Upper Third Plant Utilization
Pre-Project Planning Groups Results of plant utilization were similar to those of
FIG. 7. Design Capacity by Preproject·Pianning Groups design capacity attained and are shown in Fig. 8. Plant
utilization is defined as the percentage of days in a year
groups. Fifty percent of the projects in the upper-third the plant actually produces product. Fifty percent of the
level of efforts had final costs under their authorization projects in the lower-third group were operating at or
budget. The middle-third group also shows better cost below their planned use after 6 months of operation. As
performance than the lower-third group. the level of preproject planning increased, so did the
plant-utilization rate. As with design capacity, the mid-
Schedule Performance dle-third group had values clustered around lOO% and
Schedule performance, as measured in percentage de- those in the upper-third group were operating at 100%
viation from the authorization schedule, was also signif- or above. Table 11 presents the summary statistics.
icantly affected by levels of preproject planning. Fig. 6
and Table 9 reveal this relationship. Once again, 50% of Scope Changes
the projects in the upper-third group came in at or below Good preproject-planning practices should result in a
the authorization schedule. The results change acutely as well-defined project scope and therefore should mini-
the level of planning dropped. The 50-percentile range mize the number of unanticipated scope changes a proj-
for the lower-third group ranged from 3.0% to 42.5% ect experiences. While this is true in theory, the sample
over schedule. Half of the values in the middle-third projects were studied to see if case studies proved it to
group were at or over their timetable for completion. be true in reality. Scope changes, measured in percentage
of actual final project cost, were explored to determine
Design Capacity Attained whether projects scoping lower on the preproject-plan-
One plant operating characteristic measured was the ning effort index had more scope changes than projects
design capacity attained after 6 months of operation. De- with higher index values.
sign capacity refers to the nominal output rate of the The analysis revealed that while the middle third and
facility that is used during engineering and design to size upper third groups had similar results of scope changes
JOURNAL OF MANAGEMENT IN ENGINEERING / MARCH/APRIL 1996 / 31

J. Manage. Eng. 1996.12:25-33.

 between 0 and 4% of actual costs, the lower-third group,
or the group performing the least amount of preproject
planning, deviated considerably. Fifty percent of the pro-
jects in this group spent between 1.6% and 15.7% of the
actual final project cost on scope. The results are depicted
in Fig. 9, with summary statistics shown in Table 12.
Design Completed at Project Authorization
To help assess the optimum level of design complete
at authorization, cost performance was compared with
Downloaded from ascelibrary.org by NATIONAL PINGTUNG UNIVERSITY on 12/18/14. Copyright ASCE. For personal use only; all rights reserved.
reduce risk in the area of cost performance. Many sam-
ple projects reported performing 5% or 10% of the de-
sign before authorization. For some companies this is a
standard amount to perform. However, the data showed
that more predictable cost performance resulted when
the amount of design done prior to authorization ex-
ceeded 10%.
SUMMARY
The preproject-planning process must be recognized

percentage design complete at authorization. As Fig. 10 as a formal, well-organized business process with spe-
shows, cost performance variation decreases as the per- cific deliverables. It can be benchmarked by combining
centage design complete increases. In other words, by specific variables measures to form a preproject-planning
doing more design before project authorization, one can index.
Analysis of the sample in this research investigation
TABLE 11. Summary Statistics for Plant Use
leads to some broad conclusions. The preproject-plan-
Percent Attainment at Six Months ning-effort level directly affects the cost and schedule
Group 25th percentile Mean 75th percentile performance of a project. Cost performance versus au-
(1 ) (2) (3) (4) thorization estimate increased by 20% on average and
Lower third 65.25 85.57 100.00 schedule performance versus authorization estimate in-
Middle third 94.60 98.00 100.00 creased by 39% on average for the more highly planned
Upper third 100.00 103.03 109.44
projects versus lower planned ones. Comparing the same
groups, design capacity attainment and use improved by
P 50 about 15% on average versus authorization estimate.
e Stated another way, the sample projects were much more
r
c 40 predictable in terms of cost, schedule, utilization, and
e attainment with a higher level of preproject-planning
n 30
t effort.
0 20 The likelihood that a project will meet or exceed its
f financial goals increases as the level of effort preproject
A 10 planning increases. Finally, on average, project scope
c changes after authorization tend to decrease as the level
t 0
u of preproject-planning effort increases. Although these
a results are specific to this sample, the authors believe
I Lower Third Middle Third Upper Third them to be true for the rest of the industry as well.
Pre-Project Planning Group
FIG. 9. Scope Changes by PreproJect-Plannlng Groups
RECOMMENDATIONS
The challenge to the construction industry is to inte-
TABLE 12. Summary Statistics for Scope Changes grate this benchmarking effort into practice by recogniz-
Percent of Final Cost ing the best practices that have been identified. Realistic
Group 25th percentile Mean 75th percentile goals must be established to make sure that these prac-
(1 ) (2) (3) (4) tices are integrated into company procedures. Once in-
Lower third 1.62 11.07 15.73 tegration is complete, the final benchmarking perfor-
Middle third 0.00 2.16 3.79 mance area-action-can begin. Progress must be
Upper third 0.42 2.87 3.99 monitored and operations recalibrated to pursue contin-
ual improvement.
In specific, recommendations that can be made from
C
o 45 the findings of this study fall into two basic areas: or-
~ 40 • • ganizing for preproject planning and having a well-de-
35
fined project scope.
~ 30
r 25 To organize for preproject planning
g 20
•
I I
I

-•...
r 15
r;; I The preproject-planning team should be working
10 ". I
n
~
5
0
•I .1 ". I
• I
with a written charter.
The preproject-planning process should have a pre-
o 5 10 15 20 25 30 35 40 45 project-planning plan.
Percent Design Complete I The more corporate groups with varied interests
FIG. 10. Cost Performance Ratio to Amount of Design providing input during the preproject-planning
Done Prior to Authorization phase the better.
32/ JOURNAL OF MANAGEMENT IN ENGINEERING / MARCH/APRIL 1996

J. Manage. Eng. 1996.12:25-33.

 For a well-defined project scope
• During the preproject-planning process, control
guidelines for the project should be developed.
• An execution approach for engineering, procure-
ment, construction, and start-up should be devel-
oped during preproject planning.
• The recommended percentage design complete be-
fore project authorization is from 10% to 25%, de-
pending on the complexity of the project.
Downloaded from ascelibrary.org by NATIONAL PINGTUNG UNIVERSITY on 12/18/14. Copyright ASCE. For personal use only; all rights reserved.
To reiterate, implementing these practices will lead to
more predictable project outcomes. This in turn, can pro-
vide a company with a competitive advantage in the
marketplace.
ACKNOWLEDGMENTS
The writers would like to acknowledge the support of
the Construction Industry Institute and the preproject-
JOURNAL OF MANAGEMENT IN ENGINEERING / MARCH/APRIL 1996/33
J. Manage. Eng. 1996.12:25-33.
planning research team. Without their assistance, this
work would not have been possible.
APPENrn~ REFERENCES
Babbie, E. R. (1973). Survey research methods. Wadsworth Publishing
Co., Inc., Belmont, Calif.
Competitive benchmarking: the path to a leadership position. (1988).
Xerox Corp., Stanford, Conn.
Gibson, G. E., and Hamilton, M. R. (1994). "Analysis of preproject-
planning effort and success variables for capital facility projects."
Source Document 105, Constr. Industry Inst., Univ. of Texas, Aus-
tin, Tex., Nov.
Gibson, G. E., Kaczmarowski, J. H., and Lore, H. E. (1995). "Pre-
project-planning process for capital facilities." J. Constr. Engrg.
and Mgmt., ASCE, 121(3),312-318.
Gibson, G. E., Tortora, A. N., and Wilson, C. T. (1994). "Perceptions
of project participants concerning pre-project planning and project
success." Source Document 102, Constr. Industry Inst., Univ. of
Texas, Austin, Tex., Nov.
Mittelstaedt, R. E. (1992). "Benchmarking: How to learn from best-
in-class practices." Nat. Productivity Rev., Summer, 301-315.
"Pre-project planning handbook." (1995). Special Publication 39-2,
Univ. of Texas, Austin, Tex., Apr.
Spendolini, M. J. (1992). The benchmarking book. Am. Mgmt. Assoc.,
New York, N.Y.