Recently I attended a Project Controls Expo in London. I attended various presentations throughout the day. In this article, I would like to discuss a very interesting presentation I attended on a hot topic in Project Controls called Change Management presented by Driver Trett.
The agenda was as I expected definition of change, how we identify it, overview of change management procedure and how various contracts manage change etc. It was the next parts which I found most interesting where the presenter compared methods of assessing changes based on quantity and value, common pitfalls of mitigation measures and the importance of following a contract to the letter even if logic tells you otherwise.
To compare methods of assessing changes based on quantity and value the presenter referred to 2 issues. Issue 1 – Low Volume / High Value change. Issue 2 – High Volume / Low Value Change. He asked the audience should the same methodology be used to assess the impact of both changes there was a split answer of 50/50 in those that replied.
Issue 1 for example might be found on a large roads project and a change may be an additional bridge or design change resulting in the road being 300mm wider than originally priced for. Here the contractor will be asked to provide a quotation detailing the cost and schedule impacts of the change. The contractor will be given significant time to prepare his quotation and the impacts of such a change will be relatively straight forward to assess. For example, in the case of an NEC contract he would be given 3 weeks to prepare his quotation.
Issue 2 may be found on complex building projects, such as refurbishment of listed structures or change of use. For example, you might have 5,000 minor changes, each under £1,000. The presenter used an example of change such as changing a radiator from one wall to another. Here the person instructing the change may or may not request a quotation and even if he did the contractor is unlikely to take 3 weeks to prepare his quotation or else nothing would get done. One would probably think the works is only a few hours work so there will be a cost impact but no impact on the schedule. Therefore, it is a low risk change, however when it is changed 5 or 10 times (most likely because the designer or architect cannot make up their minds) its then that it becomes an issue there are now 5 or 10 changes which when measured together the cumulative impact can be significant. Change on change can be the issue here. Not to mention the disruption to other contract works.
The lesson here is that before entering contract it is very important to understand the types of changes that may arise and the potential impacts they have either singularly or more importantly in this case collectively and the method(s) to be used to assess the impacts.
The presenter gave an example of a project he was involved on which was like issue 2 above.
On this project, they used a method of categorising the changes and rolling them up into a specific period. The changes were categorised by area (area of site), discipline (mechanical/electrical etc.), and rolled up into monthly periods.
Using this methodology, they could assess the cumulative impact (Time and Cost) of the changes every month. This ensured the schedule was updated and agreed every month based on the cumulative schedule impact of the changes and would reduce the likely of a dispute at the end of the project. It also gave greater visibility and realisation of the impact of the changes. This also helped the Client and Project Manager control the changes.
Whilst he concluded that the method used above was successful on that project he suggested prior to engaging on any project you should consider are you using the right form of contract for the volume of change anticipated. He also could not stress enough that before implementing any methodology of assessing change on a project it should be agreed in writing by:
- All parties
- Persons with sufficient authority
- Any affected members of the supply chain
The presenter then proceeded to discuss some of the common pitfalls we as contractors fall into. He discussed some of the change mitigation measures contractors would typically suggest such as increasing working hours from 40hrs to 50hrs or working weeks from 5 day to 6 day weeks. Whilst the contractor will be reimbursed for the extra costs of the change should it be implemented statistics have shown a decrease in overall productivity which the contractor will be not be compensated for the loss in production of those employees working on both changes and his original contracted works.
Lastly he gave a good account of the importance of following a contract to the letter even if logic tells you otherwise. He said I want you to put yourself in this situation. You are a contractor working on a building project. You are about to pour a foundation. The designer has called a design meeting. In the design meeting changes are discussed, at the beginning the changes seem quite insignificant however by the end of the meeting there are many changes resulting in the proposed drawing looking nothing like the original at the start of the meeting. As a contractor, what do you do. Well the first one would be to notify the Project Manager who was not at the meeting and may not be aware of the proposed changes. The Project Manager has instructed you prepare a quotation which under this contract you are entitled to 3 weeks to do so and given the number and nature of the proposed changes it will take the full 3 weeks to prepare the quotation. The presenter then asked the question to the audience what would you do next? Do you proceed knowing that the work you about to do may have to be demolished and rebuilt later or do you wait until the Project Manager decides upon receiving your quotation?
Interesting of the people that replied 50% of people said they would proceed and 50% said they would do nothing until the Project Manager made a decision.
The right decision here is to proceed as per the contract, although we as contractors don’t like to complete works demolish them again however it is a risk for the client and not one the contractor should be taking. If you did not proceed and the Project Manager decided not to proceed with the changes you would be 3 wks behind schedule plus the time taken by the Project Manager to reply and would have no entitlement to adjustment of costs and the agreed schedule.
In my experience the contractor has his fair share (or more) of risks on any contract and should not be taking any additional risks that he doesn’t have to.
At the end of the presentation the main things I took away from it were:
The realisation that changes however small they are when combined can have a significant effect on time and cost. The importance of selecting the correct form of contract for the volume of change anticipated agreeing and setting up a method of assessing change which considers the quantity and type of changes.
Whilst mitigation measures such as increasing working hours or working weeks are often implemented the cost of the overall loss of productivity is often something that is over looked and the contractor is not compensated for this.
And finally, the importance of following a contract to the letter even if logic tells you otherwise.