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Project Gating for Success and Project Reviews

Project Gating for Success and Project Reviews:

 

As stated in the previous section, the implementation of POME methodology requires active management-level involvement and oversight. To further address this requirement Project Gating and Project Reviews are required as part of the methodology.

Regular reviews should be scheduled by management to insure proper performance and management in the areas identified in the implementation phase of the methodology. Large complex projects require more in depth reviews vs. small non-complex projects which may only require basic performance indicator reviews.

For projects that are small in size and not complex, reviews may be conducted by the Program or Regional Project Leader directly with the Project Manager in one on one session or as part of staff/group review sessions. In either of these cases formal meeting agendas/minutes may not be required, or summary review notations and actions may be used to record the review activities. Summary notations may include project performance indicators, progress indicators, and financial indicators, a brief summary paragraph of the project scope, a summary of the current issues and projected completion schedule. Actions will be recorded and tracked as part of the specific project records.

For projects that are large by dollar volume and/or technically complex or high risk in nature more formal reviews shall be conducted. These reviews will at minimum be conducted by management periodically during the project life cycle, and may include more extensive gating reviews and/or executive management reviews as described below. These reviews or gating sessions will be documented using the standard gating or review tools or regional review documentation, rather than standard meeting agendas/minutes. Actions will be recorded and tracked as part of the specific project records.

Project reviews will be conducted, attended, and acknowledged/signed off per the following matrix:

Acknowledgement of the project reviews may be accomplished by distribution of the review notations via e-mail.. Acknowledgement of the review notations is complete with the distribution of the review notations unless corrections or objections are raised.

Executive Project Reviews:

An Executive Review is a review where members of Project Operations and Regional management teams scrutinize business and Projects risks associated with a selected project. Business risks for example can come from financial issues, deviation from our prescribed methodologies, the type of contract (T&M, target price, fixed fee), resource constraints, leadership issues, quality/client satisfaction issues or safety issues. The goal is to sample a minimum of 25% of the backlog contract value as reflected by current PoC Revenue. Executive reviews may be conducted in place of quarterly reviews

The criteria for selecting a project or program that will be placed on the list for Executive Review during a fiscal quarter is described below. The following selection criteria are in order of precedent for selection of projects to be reviewed.

1. Projects that have any Cost, Schedule or Technically not possible setup, in the Project Balanced Score Card (PBS).
2. Projects that have greater order values.
3. Projects that were reviewed in the previous quarter with follow up actions assigned.
4. Projects that have had an PoC adjustment in the last two quarters.
5. Projects that in the view of management have inherent risk issues.
6. Minimum of one project from each business area or program
7. Project being managed by a project manager who has not been involved in an Executive Review in the prior 2 quarters.

Attendees shall include:

• • • PMC Director – Mandatory
    • PCO Regional Manager (if applicable) – Mandatory
    • Program or Regional PMC Manager – Mandatory
    • Regional Finance Manager – Mandatory
    • Local Finance Manager – Mandatory
    • Project Manager – Mandatory
    • Project PCO Lead (if applicable) – Mandatory
    • Global Finance Manager – Optional
    • Regional Representative – Optional
    • GPO V.P. – Optional
    • Regional Contract Manager – Optional

In addition, the following Statements of Representation should be acknowledged (signed off) by the Functional Groups as follows:

• Project Management

Concurrence with the project Revenue, Margin and Percentage of Complete (PoC) confidence of +/- X% and that the business strategy and project management methodology being employed on the project ensure effective project management.

• Project Controls

Concurrence with the project POC confidence of +/- X% and that the project control processes and tools being employed on the project effectively track project performance, facilitate project control and accurately forecast the project estimate to complete.

• Finance

Concurrence with the project Revenue, Margin and PoC confidence of +/- X% and that the financial processes and tools being employed by the business effectively track project financial performance, facilitate project financial control and accurately forecast the project revenue and gross margin.

Manage Project Variance:

Managing the costs, schedule, and resources is one of the most important functions that the project manager performs. These three key performance measurements are critical elements in keeping the project under control. The key facets of performance measurement are the requirements to integrate the management of cost, schedule, and resource use, with the technical aspects of a project and to provide information relating these data in a coherent, systematic fashion, using a recognized management approach.

Using PMIS information and applying the “earned value” concept, the project manager is able to determine cost and schedule variances and take corrective action to ensure that the project stays on track. The “earned value” concept, which is based on the central theory of performance measurement, embodies the principle that obtaining an accurate measure of how a project is progressing requires an objective assessment of work performed. When compared with project expenditures, this assessment of work performed provides a true variance against cost and replaces the more traditional technique that compares expenditures with spend plans. In essence, it recognizes the basic premise that funds can be spent and hours of work can be logged that is disproportionate to the work being done.

Resource use is also a key indicator of project performance. The project manager must periodically evaluate resource use and determine where and when to apply corrective actions such as resource reallocation.

This process is carried out primarily during the Implementation Phase but also in the project Closeout Phase.

Project Status Reporting and Project Review:

A key component of effective project control is the review of project status and the timely communication of such to the project team, management, and the customer. At the start of the project, the project manager establishes the frequency and content of status reports, as well as the project review process, which is meant not only to track project progress, but also to solicit management and customer support in resolving problems. These processes must be well defined in the communication and documentation plans. A tool must be provided to assist the project manager with his or her reporting duties to management in conjunction with effective tracking and control of projects in PMIS..

The project manager must also establish a routine for collecting project report information, which is necessary for tracking, controlling, and managing project performance. Such recurring events may take place weekly or monthly and are as defined in the communication plan.

Measuring Work Effort:
The project work effort is the expenditure of human resources’ time on project tasks. The level of effort refers to how many people are working on the project (also referred to as project head count). Because some resources may be working on more than one project at a time, it is necessary to track their individual effort as it relates to the project at hand. The process of measuring project work effort includes the following activities:

 Project resources report actual hours worked on a specific work package. This information is reported weekly on the time sheet and entered into the labor system by the project administrator or the individual contributor. It is recommended that project administration staff (project manager, project administrator, and others working on the project but not on specific work packages) also submit weekly time sheets charging their time to project administration, so that all costs associated with the project are captured.

 The project manager receives a weekly labor tracking report containing numerous data fields. This report provides the information necessary to evaluate, at the work package level, the hours expended to date, PoC, efficiency factor, and other important elements that will help the project manager to assess work progress on the project.

 Contracted professionals or vendors performing specific time-constrained project work also provide accurate reporting of hours worked so that their time can be included in the calculation.

Earned Value Analysis Method:
Earned value analysis was introduced by the Department of Defense in 1960 as a methodology for project managers to evaluate project progress. It is now used in some form by every agency as a performance measurement tool. Simply stated earned value is defined as the amount of planned work that has been accomplished to date or the value that has been earned by the project so far.

The key aspect of performance measurement is to integrate the management of cost, schedule, and technical performance of a project and to provide information relating these data in a coherent and systematic fashion, using a management-recognized base. It assumes that early warning is the key to averting disastrous consequences.

The theory behind performance measurement is that to obtain an accurate measure of how a project is progressing, an objective assessment of work performed must be developed. When compared with project expenditures, this assessment of work performed provides a true variance against cost and replaces the more traditional technique that compares expenditures with spend plans.

The key elements of earned value analysis are the BCWP, BCWS, and ACWP. These terms are described in the following table:

Budgeted Cost of Work Performed (BCWP)

BCWP is the term used for work accomplished. It is a numerical representation of the value, in dollars, of the work completed. BCWP is also known as earned value because the value associated with a particular work package is earned when the task is completed. It is important that the BCWP be an accurate and timely measure of the completion status of a particular effort. If a work package is 50 percent completed, then the BCWP should be 50 percent of the total budget for that work package.

Budgeted Cost of Work Scheduled (BCWS)

BCWS is a numerical representation of scheduled work. Although similar to a time-phased budget or spend plan, BCWS has two significant differences: it is directly related to a period of time when a specific segment of work is scheduled, rather than when expenditures are booked, and it always relates to the overall planned budget for a given scope of work, as opposed to functional or corporate budgets. Because BCWS should be based on the schedule for when the work is to be performed, it is not only time phased but also work phased.

Actual Cost of Work Performed (ACWP)

ACWP represents the actual costs incurred (direct and indirect) related to a specific work package or the sum of all of the work packages performed during a specific period (usually from project start to date). These costs should reconcile with the supplier’s incurred cost ledgers, which are regularly audited by the customer in the case of cost-plus contracts.

The most important variances that can occur on a project are schedule and cost variances. The following table describes these variances and the process for calculating them using the earned value analysis method:

Schedule Variance (SV)

SV is calculated by subtracting the budgeted cost of work scheduled from the budgeted cost of work performed:

SV = BCWP – BCWS

SV provides an indication of whether work is being accomplished on schedule. Although an excellent indicator of the status of work in progress, SV is not a time measurement tool. It provides a measurement of the degree of variance from the original plan, in terms of monetary units. It is the difference between the value of the work actually performed and the value of the work scheduled to be performed.

Cost Variance (CV)

CV is calculated by subtracting the actual cost of work performed from the budgeted cost of work performed:

CV = BCWP – ACWP

CV represents the difference between what was expected to be spent for the work that was performed (cost estimate) and what was actually spent. It is a clear indication of past cost performance. CV is not based on a spending plan, thus avoiding the common problem of assuming that the project is on target simply because the resources consumed during a given time period match the resources planned for that period. Because it is not tied directly to schedule performance, it does not suffer the same shortcomings as cumulative cost curves. Those curves do not reflect the value of the work being accomplished.

The project manager can use earned value analysis data to determine the level of effort and cost needed to restore any project variances. Earned value analysis provides several additional mathematical formulas that the project manager can use to track and control project schedule and budget. This information is presented in the following table:

Budget at Completion (BAC)

BAC is the estimated total cost of the project, or a work package, when completed. When combined with project contingency or management reserve funds, BAC equals the total project budget.

Estimate to Complete (ETC)

ETC is an estimate of how much more money this project will require.

Estimate at Completion (EAC); Latest Revised Estimate (LRE)

EAC or LRE, consists of the current measured cost plus the estimated remaining cost. EAC should be calculated consistently from period to period with consideration given to factors such as performance to date, anticipated risks, and work volume. Because of the importance of this estimate, it is recommended that it be calculated and reported monthly. The formulas for EAC are as follows:

EAC = ACWP + ETC

or

EAC = BAC/CPI

Cost Performance Index (CPI)

The cost performance index is a numeric representation of how effective the project has been to date in terms of cost. CPI is calculated as follows:

CPI = BCWP/ACWP

The cost performance index is often used to predict the magnitude of possible cost overrun using the following formula:

Original Cost Estimate/CPI = Projected Cost at Completion

Schedule Performance Index (SPI)

SPI has the same functionality as CPI, except that SPI measures schedule instead of cost. SPI provides information on schedule performance at any given point during the project. SPI is calculated as follows:

SPI = BCWP/BCWS

Percent Complete

Percent complete is an estimate, expressed as a percent, of the amount of work that has been completed on an activity, a group of activities, or on the project as a whole, regardless of the amount expended to achieve that much work. It can be calculated as follows:

Percent Complete = BCWP/BAC

Percent Spent

Percent spent is an important tool to the project manager seeking information on the percent of budget expended to date or on the difference between percent complete and percent spent. If the project is running on time and within budget, percent spent and percent complete should be identical. If percent spent is significantly more than the percent complete, the project manager will need to identify the cause and take corrective action, if necessary, to prevent a project overrun on cost. Percent spent is calculated as follows:

Percent Spent = ACWP/BAC

Variance at Completion (VAC)

VAC is the difference between BAC and EAC. VAC is an early flag indicating how far off the project will be. It represents the predicted cost position (over or under budget) when all work is completed. Comparing VAC to CV is an easy way to determine whether things are expected to get better or worse. VAC is calculated as follows:

VAC = BAC – EAC

Earned value analysis provides a valuable tool for the project manager to use in evaluating project performance. Awareness of the earned value, SV, and CV is important throughout the project life cycle. CPI, SPI, and VAC are more accurate and, thus, useful in the later stages of the project. EAC or LRE should be calculated and reported monthly, although they too become more meaningful as the project matures. Percent complete and percent spent information is valid and useful throughout the project.

Taking Cost Control Actions:
Earned value analysis of cost variances can be performed by the project manager concurrently with the weekly project review. This review will enable the project manager to identify variances from the initial estimates; classify them as routine, minor, or major (according to the established threshold); and take necessary corrective action. The following table describes possible corrective actions for cost variances:

Labor Cost Higher Than Planned

 Look for incorrect reporting on time sheets or incorrect charges through PMIS. Make corrections, if necessary.

 Look at resource use. Are resources being fully used? Are all of the resources needed? Make adjustments in use of resources, if appropriate.

 Look at the scope of work. Has the scope of work changed? If so, was the cost baseline updated? Was the estimate a poor one? Make appropriate adjustments, re-estimate, and submit information to management for review and possible resolution.

Material Cost Higher Than Planned

 Is more material being used than initially estimated? If so, did this situation occur as a result of approved changes? If so, was the baseline updated? Update the baseline, if appropriate.

 Is the cost/unit higher than planned? If so, why? Can another source or supplier be used? Get Procurement involved.

 Look at the material consumption versus the schedule. Is it possible that the material requirements are as planned but are being consumed ahead of schedule? Re-estimate total material requirements.

Subcontractor/ Vendor Cost to Date Higher Than Planned

 Review contractor’s invoices and compare to milestones and invoice schedule. Is the subcontractor ahead of schedule? Are there incorrect invoices? If so, correct them.

 Has the subcontractor/vendor scope of work changed? If so, was the cost baseline updated? Update the baseline, if appropriate.

Miscellaneous Cost Higher Than Planned

 Pre approve travel; review and approve all travel expenses.

 Review and approve invoices.

 Review and approve supplier requisitions.

Expected Overall Project Cost Overrun, with Inability to Correct

 Is the overrun a result of poor estimates? Or is it a result of uncontrollable events? Can cost overrun be passed to the customer? Escalate the issue to senior management.

 Make necessary adjustments to the baseline, if required, as approved by management.

Project review meetings are necessary to show that progress is being made on a project. There are three types of review meetings:

• Project team review meetings
• Executive management review meetings
• Customer project review meetings

Most projects have weekly, bimonthly, or monthly meetings in order to keep the project manager and his team informed about the project’s status. These meetings are flexible and should be called only if they will benefit the team.

Executive management has the right to require monthly status review meetings. However, if the project manager believes that other meeting dates are better (because they occur at a point where progress can be identified), then he should request them.

Customer review meetings are often the most critical and most inflexibly scheduled. Project managers must allow time to prepare handouts and literature well in advance of the meeting.

 

POME Prescribe:

About Communication:

ü  Clear, open communication is a prerequisite for a healthy, result-oriented work environment.

ü  Keep them posted: A lack of information is a fertile ground for rumor, gossip and insecurity. Keep the team in the loop about information concerning and affecting them.

ü  When in doubt, ask: Don’t refrain from asking “stupid” questions – they may save miscommunication and misunderstandings, resulting in saved time and money!

ü  It is bad policy to wait till your team members find out important information concerning them from other sources. That information should come from you.

ü  Ask questions and listen to suggestions.

ü  Feedback: Provide it often and ask for it. Keep an open mind. (Tip: Don’t expect all feedback to be pleasant and positive.)

ü  Listen: It’s always important to listen, but even more so in tough times. Listen for undertones.

ü  Be Open: While you should not be a dumping ground for grievances, you SHOULD be accessible enough for team members to openly discuss concerns or delays. (Tip: If you are not open, you’ll find out about the concern or delay later in the game when there is less time to fix it.)

ü  Touch Base: One-on-one and in meetings, meet up with your team members (or family members). (Sitting in front of the television with the family does not count as touching base!)

 

About the Author

GAUTAM KOPPALA, With over   a decade, track record of successful leadership, excellent results through strategic skills in driving revenue and profit growth. Demonstrated ability to identify and trouble shoot critical issues impacting productivity, cost, distribution, marketing, Strategic positioning, sales and financial operations, with innate ability to build and maintain strong client relationships in operations. Expert in distilling and managing processes, enhancing internal structures, and promoting multi-skilled team competencies via nurturing mentorship and inspirational leadership. Engagements have spanned operational, strategic, technological and change management roles. Academically, I am a cum laude graduate with a Bachelor of Technology degree in Electrical and Electronics Engineering (B-Tech E.E.E.) and a post graduate in Masters in Human Resources Management (M.H.R.M.) and Masters of Foreign Trade (M.F.T.). As you will see my Post Graduation’s were been studied part-time, as well as working full-time as an Engineer. I feel that this demonstrates my ability to maintain dedication, motivation and enthusiasm for a project management over a long period of time. In addition, balancing full-time work with study has perfected my time-management and organizational skills. I believe that my college degrees and gamut certifications in combination with my extensive broad-based work experience along with my drive, resourcefulness and determination, would make me an excellent candidate for a senior management position with any company. Highlights of my background include Operations related Commercial, Supply chain, Sales with a magnificent experience in Project management, technically oriented towards Automation and Security Systems in Industrial and Building sectors. Presently, writing a book on Projects and Operations Management (comprise of 12 volumes, 6K pages), and awaited for the reputed publications. These books can be checked in Google books and other search engines too.

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