Project management Flashcards
what is procurement
the framework within which construction is brought about,
acquired, or obtained.” (To procure ~ to obtain)
*what is Contract Administration:
“handling of the business relations between the
parties to the contract.”
what is the 2004 building act entail
people who use buildings can do so safely
buildings have attributes that contribute appropriately to the health, physical
independence, and well-being of the people who use them;
people who use a building can escape from the building if it is on fire; a
sustanible devlopment
what is the CHARTERED PROFESSIONAL
ENGINEERS OF NEW ZEALAND ACT
2002
regesters nz engineers as quality
establishes a registration system
requires a code of ethics and a complaints and a disciplinary process
CONSTRUCTION CONTRACTS
ACT 2002
protection of retention money withheld under construction contracts
* a fair, balanced and appropriate payment regime
* access to fast and cost-effective dispute resolution
* cost-effective and timely enforcement of rights and obligations.
WHAT IS A CONTRACT?
A contract is a promise
* between capable parties
* that creates an obligation
* which is enforceable by law
what is a Covenant
A covenant is a type of contract in which the covenantor makes a
promise to a covenantee
what are the elements of a contract
offer, acceptance, capacity, Legality, Intention to be bound, Reality of consent
what is capacity in law
a person’s
ability to satisfy the elements required to enter binding contracts.
what is degin bid build advatenges for the owner
Historically accepted
* Price fixed before construction
* Owner involvement is low
* Contractor takes risk for construction
what is degin bid build advatenges for the contractors
- Contractor sets price
- Owner involvement is low
- Innovation = Opportunity
what are desgin bid build disadvanteges for the owner
- Long delivery time
- No constructability advice during design
- Can be adversarial
- Leads to change orders (design and scope)
what are desgin bid build disadvanteges for the contractor
Low margins
* High risk for unforeseen conditions
PROJECT MANAGER AGENT
ADVANTAGES for owner
Increased representation
* Independent evaluation
* Increased constructability
* Increased value engineering
PROJECT MANAGER AGENT
ADVANTAGES for contractor
- Contractor sets price
- Owner involvement is low
- Innovation = Opportunity
PROJECT MANAGER AGENT
DISADVANTAGES for owner
PM assumes no risk/Owner holds contracts
* PM-Agency does not guarantee cost
* PM licensing is not available
* High owner/PM involvement
PROJECT MANAGER AGENT
DISADVANTAGES for contractor
- Low margins
- High risk for unforeseen conditions
DESIGN-BUILD
ADVANTAGES owner
- Sole source of responsibility
- Reduction of project duration
- High constructability
- Claims reduction
DESIGN-BUILD
ADVANTAGES contractor
Receive both design & construction fees
* Non-adversarial A/E-GC Relationship
* React rapidly to scope changes
DESIGN-BUILD
DISADVANTAGES owner
Fewer checks and balances
* Reduced owner involvement
* Difficulty of selection
DESIGN-BUILD
DISADVANTAGES owner
- Fewer checks and balances
- Reduced owner involvement
- Difficulty of selection
DESIGN-BUILD
DISADVANTAGES contractor
Large staff
* Additional Risk
* Scope changes are difficult to track
what is prime cost amount
the amount you think something will cost
and you can adjust it later
what is a Provisional sum:
sum that you may use or can be taken out
What is a Construction Cost Estimate
The determination of probable costs of any given project
what is parametric estimating
first divide a project into units of
work. Then, you must determine the cost per unit, and then
multiply the number of units by the cost per unit to estimate the
total cost.
– A.k.a. Top-Down Estimate
what is first principles pricing
is the
process of ‘building-up prices, or rates, for an item or piece of
work considering all the parts and activities needed to put it
together.
– A.k.a. Bottom-up Estimate or First Principles Estimate
what are contenginces
Contingency is that amount of money added to an estimate to cover the unforeseen
needs of the project, construction difficulties, or estimating accuracy
what is Disaggregation
Breakdown to finite components of work
what is project charter
High level statement of what is to be done and
the boundaries to a project
Some short comings of PDM
All goals are based on estimates, which contain uncertainties
* Estimates of activity times generally include a large safety margin
* ‘Student syndrome’ may operate: human nature for many of us means
activities are left to the last possible minute
* ‘Parkinson’s Law’ may prevail: an activity will expand to fill the time
available
* The way that progress is measured is in error – by the time the PM is
notified of a problem it is already too late to prevent it!
what is the time value of money mean
the concept that money avalible at the present time is more valuble than the identical sum in the future due ti its potential earning capacity
what is equity
Total Equity is the sum of Capital, Stock, Retained Earnings aka net worth
what is working capital
= Current Assets – Current Liabilities
Working capital is a measure of the short-term financial strength of a company.
how would u increase working capital
Making profit, selling equipment or other assets, or switch from short to long term loans (bank). A long-term
loan increases current (short term) assets, but at the same time increases long term liabilities.
what is current ratio
Current Ratio = Current Assets / Current Liabilities.
The ratio for a construction company’s liquidity
what are profitability ratios
Profitability ratios measure a company’s ability to earn profit from its operation
what is cpi
The Cost Performance Index (CPI) is a measure of the cost efficiency of
budgeted resources, expressed as a ratio of earned value to actual
cost.
what is the individual performance equiation
individual attributes x work effort x organisational
what is the order of mazlos hiarachy of needs
physiological, safety, social, esteem, self actualisation
what leadership style does a beginer need
directing
what leadership style does a learner need
coaching
what leadership style does a contributor need
supporting
what leadership style does an achieveer need
delegating
claassify beauracy
standardized procedures (rule-following)
* formal division of responsibility
* hierarchy
* impersonal relationships
calssify sicentfic manehement
Scientific Management analyses workflow processes to improve labour
productivity.
Decisions based upon tradition and custom should be replaced by precise
procedures developed after careful study of an individual at work.
classfy cultural approaches in managment
CA use the fact that results are made by teams instead of
individuals and that the team can have a ‘moral’ system that leads
to common behavioural code of conduct.
Total Float (FT)
- Defined as the amount time an activity can be delayed
without affecting the completion of the entire project.
Sometimes called slack.
activites with a total float of zero are defined as critical tasks
Free Float (FF)
The maximum amount of time an activity can be delayed
from its Early Start (ES) without delaying the ES of any
immediate successors.
Linear project
A linear project can be defined as a project where the majority of activities on the project are
“linear activities”.
❑Block Activities
A block is used to represent an activity that occupies an area on the project for
a period of time
Least Time Interval (LTI)
The least time interval (LTI) identifies
points where the time buffer between
activities is at a minimum
Least Distance Interval (LDI
The shortest distance between any two adjacent activities that lies within the coincident
duration and intersects the least time interval.
. Perform the upward pass
Identify potential critical path and activity segments
The goal of the upward pass is to determine which activities or portions of activities
could potentially be controlling. This will be verified with the downward pass.
- Perform the downward pass
Verify critical path and activity segments
The purpose of the downward pass
is to determine which portions of
the potential controlling segments
are actually on the controlling
activity path
Lowest Price Conforming (LPC):
The contract is awarded to the lowest price bidder provided it conforms. The attributes of the other bidders
are discarded or returned
The beauty of this method is that it does not allow value decisions on which bidder’s attributes are better
than the others. The decision is cut and dried. For this reason, LPC should only be used for contracts that are
low in value, where the scope/Risk is tightly defined
Weighted Attributes
t, assessing attributes and price with varying weightings to determine a
preferred bidder for cost and quality optimization.
This method lacks transparency regarding trade-offs between price and non-price components, potentially
leading to unexpected outcomes.
Target Price [Purchaser Nominated Price]:
Here’s the process (or similar):
1. The client sets a budget clearly outlined in the RFP and specifies the desired outcomes.
2. Suppliers describe their proposed solutions based on weighted evaluation criteria.
3. Bids are scored, and the winner is determined using the weighted attributes method, without the need for
a price score.
This straightforward yet robust approach ensures optimal value within a set budget, resembling the method
employed when purchasing a home, car, or significant asset—where you know your budget limit and strive
for the best possible value within those constraints.”
The Price Quality Method:
Like weighted attributes, the Price/Quality method starts by setting weights for the attributes and the price. At
that point, before the RFT is released, it’s possible to review the Supplier Quality Premium (SQP) that is
assigned to each attribute point. This is a dollar value that corresponds to the amount that the client is
prepared to pay for each attribute point that one bidder scores higher than another. It’s a perfect ‘reality
check’ for clients to consider, alongside the potential material impact of risks on the project and/ or the value
that innovations might deliver to the project or the asset in future.
Quality-Based Selection, or Brook’s Law:
This approach is applicable when project scope is uncertain, pricing is challenging to estimate, or when a high
degree of cooperation between the client and supplier(s) is essential for successful project delivery (common
in Alliance or Public-Private Partnership projects).
This method doesn’t involve pricing; instead, it focuses on a list of attributes defining the desired qualities in a
supplier or group of suppliers. Often, complex mechanisms are used in conjunction with this evaluation
method to quantify risks and conduct a thorough cost/benefit analysis of proposed solutions.
Schedule of Values (SOV
The SOV is used in the measurement process for determining what work has been accomplished or
earned.
Planned Value (PV)
The value of the work planned or scheduled to be accomplished within a specific time period as illustrated in the schedule. This is
also known as the Budgeted Cost for Work Scheduled (BCWS).
Earned Value (EV
The value of the work completed measured in terms of the planned value of the work. It is the earned value for a task and a principle
measurement in the Earned Value Management process. This is also known as the Budgeted Cost for Work Performed (BCWP).
Actual Cost (AC)
The actual cost incurred in the performance of the work for a given time period. It is one of the principle measurement tools of project
control. This is also known as the Actual Cost of Work Performed (ACWP)。
Cost Variance (CV)
Difference (in dollars) between what was
earned in performing the task(s) and what it
actually costs to perform the task.
CV = Earned Value – Actual Cost
CV = BCWP – ACWP
Schedule Variance (SV)
Difference (in dollars) between what was
planned on being earned and what was actually
earned for a task(s).
SV = Earned Value – Planned Value
SV = BCWP – BCW
Schedule Performance Index (SPI
The budgeted cost of work performed
(BCWP) divided by the budgeted cost of
work scheduled (BCWS). It is a ratio of the
earned value to the planned value
SPI = BCWP/BCWS
SPI = EV/PV
What is CPI cost performance index
The budgeted cost of work performed
(BCWP) divided by the actual cost of the work
performed. It is a ratio of the earned value to
the actual cost.
CPI = BCWP/ACWP
CPI = EV/AC
Estimate at Completion (EAC)
The total anticipated cost of the project when it is complete. Thus, it allows
the project manager to see what the final project cost estimate is.
EAC = BAC ÷ CPI
Estimate to Completion (ETC)
for determining the amount of money required to complete the task (or project) if
conditions remain as is.
ETC = EAC - AC
what is the cash requirement to complete the work?
Variance at Completion (VAC)
The expected cost variance at the end of the project
VAC = BAC - EAC
A positive VAC tells the project team that the costs are under budget.
* A negative VAC tells the project team that the costs have exceeded the current target budget.
To-Complete Performance Index (TCPI)
It computes the future required cost efficiency needed to achieve a target Estimate at Completion (EAC).
* TCPI answers the question of “how efficiently must we use our remaining resources (financial)?”
For TCPI greater than 1.00, there is more work remaining than there is budget to pay for it.
TCPI less than 1.00 indicates that there will be surplus funds in the budget after the work has been
completed.
1.2 cpi may be too high
Delay Claims
A ‘claim’ is a request from one contract party (usually the contractor) to another
party for additional compensation, an extension of time, or both.
A ‘claim’ is a request from one contract party (usually the contractor) to another
party for additional compensation, an extension of time, or both.
Also know as “Budget creep” occurs when a project’s costs increase beyond the
original budget. Unexpected changes, organizational mismanagement, or unrealistic
estimates can cause it.
Excusable delay
An excusable delay entitles the contractor to additional time for completing
the contact work
beyond the contractor’s control.
Non-excusable delay
Typically, a non-excusable delay is any delay that is either caused by the contractor or not
under normal conditions but should have been anticipated by the contractor under normal
conditions.
A non-excusable delay does not entitle the contractor to either a time extension or
monetary compensation.
What are liquidated damages?
Liquidated damages are not penalties, they are pre-determined damages set at the time that a contract is entered into,
based on a calculation of the actual loss the client is likely to incur if the contractor fails to meet the completion date.
They are generally set as a fixed daily or weekly sum
Liquidated damages might include:
Loss of rent. Loss of income. Fees. Storage costs. Rental costs. Fines imposed by third parties. Financing costs.
Concurrent delay
A combination of two or more independent causes of delay during the same general time period
may be considered to be concurrent delays.
There are two types of concurrent delay:
‘true concurrency’.
two or more delay events occur at the same time, one a Client Risk Event, and
the other a Contractor Risk Event, and the effects of these events on the project are felt at the same
time”.
‘concurrent effect of sequential delay events
where two or more delay events occur at different times, but the delay effects of
each overlap.
Accelerating a project
Accelerating a project means shortening the normal duration of the project schedule without
reducing the original scope of work. It also called schedule compression.
Normal duration
We define normal duration for a specific contractor as the amount of time required to finish the
project under ordinary circumstances without any deliberate acceleration or deceleration
Why need for time reduction?
Recover schedule and meet important project target dates
The contractor may desire an earlier completion date
Early completion bonus
Mandatory dependencies
Mandatory dependencies are those that are legally or contractually required or inherent in the nature of the
work. Mandatory dependencies often involve physical limitations
Mandatory dependencies are sometimes referred to as hard logic or hard dependencies.
Discretionary dependencies
Discretionary dependencies are referred to as preferred logic, preferential logic, or soft logic.
Discretionary dependencies are established based on knowledge of best practices within a particular application area
or some unusual aspect of the project where a specific sequence is desired, even though there may be other
acceptable sequences.
Constructability
defined as “the optimum use of construction knowledge and experience
in planning, design, procurement, and field operations to achieve overall project objectives
What is the
definition of
Risk?
Risk is a combination of (i) events A and the consequences of these events C, and
(ii) the associated uncertainties U (about what will be the outcome)
Risk
Management
process
Planning
Risk assessment
Risk treatment
Fault Tree Analysis (FTA
FTA is a system analysis technique used to determine the root causes and probability of
occurrence of a specified undesired event.
Deductive, it transverses from the general problem to the specific causes.
Cut sets
set of events that together cause the top undesired event to occur
Reactive FTA
Performed after an accident has occurred.
* Used as an accident investigation method
Proactive FTA
Performed during system development to influence design
by predicting and preventing future problems
* Used as risk analysis method
Event Tree Analysis (ETA)
An event tree analysis (ETA) is an inductive procedure that shows all possible outcomes
resulting from an accidental (initiating) event, taking into account whether installed safety barriers
are functioning or not, and additional events and factors.
ETA can be used to identify all potential accident scenarios and sequences in a complex
system.
What are Markov Chains?
Markov chains are used to compute the probabilities of events occurring by viewing them as states
transitioning into other states, or transitioning into the same state as before
Pre-posterior Analysis
A decision is ‘sensitive’ if
* after a test the decision is different for different test results;
* after more tests, the decision changes
Sensitivity of the decision will tend to reduce with the increase in
number of tests.
One can do a test, incur the cost of that test, and then make a decision
to take a particular action or do another test.
what is a type 1 error
Rejecting a true Hypothesis
what is a type 2 error
Accepting a false Hypothesi
Utility
Utility (U) is defined as the state of being satisfied ,useful, valuable, profitable, having worth or beneficia
Marginal utility (MU)
is defined as the additional utility gained from the consumption of one additional unit of
a good or service.
Total utility (TU) i
Total utility (TU) is defined as the total amount of satisfaction that a person/decision maker can receive from
the consumption of all units of a specific product or service
The Utility Maximisation rule states:
Decisionmakers decide to allocate their money incomes so that the last dollar spent on each product
purchased yields the same amount of extra marginal utility.
Utility Maximization model is built based on the following assumptions:
1.Decision-makers are assumed to be rational (trying to get the most value for their money)
2.Decision-makers’ incomes are limited because their individual resources are limited(budget constraint)
3.Decision-makers have clear preferences for various goods and services.(thus they know their MU)
4.Decision-makers must choose among alternative goods with their limited incomes/resources.
Deterioration modelling
Deterioration modelling involves the modelling and prediction of the
physical state of equipment, structures, infrastructure, or any tangible
assets.
forming the foundation for decisions related to
maintenance and rehabilitation
Individual Risk Appetite i,e explain risk neutral, averse and anot risk averse
A ‘risk neutral’ person bases all decisions on expected utility.
* A ‘risk averse’ person will be uncomfortable with a small p* (i.e.
large probability of big loss).
* A ‘not risk averse’ person will be comfortable with a small p* (i.e. a
small probability of a big win
what’s the difference between Outputs, Outcomes and
Benefits
outputs = tangible product or process from the project. enables a new outcome in part of operational organisation.
outcomes = desired operational result derived from delivery of an output
benfits = measurable gain to a stakeholder resulting from an outcome or part of an outcome
what should all asset management descions have in common?
policy driven, performance based, options evaluated, descions based on quality information, clear accountability
What is a Business Case?
A business case provides justification for undertaking a project. It
evaluates the benefits, costs and risks of alternative options and
presents the rationale for the preferred solution. Its purpose is to
obtain management commitment and approval for the investment or
funding”
the areas of main concern in IAM are:
that there is limited knowledge and information available on the condition of assets;
▪ that present financial provisions may be insufficient to meet long-term expenditure
requirements for capital maintenance and eventual replacement of assets;
▪ that asset valuation provides a statement of current replacement cost and depreciated
value, but only provides a rough indication of the size of likely problems, rather than the
sort of accurate information required;
▪ that methods used to determine renewal expenditure must reflect the way assets are
“consumed” over time;
▪ that Operators need to be able to apply a long-term perspective to the issue of asset
management to ensure no undue burden is borne by one generation over another.
Independent Systems
Do not share any processes or data
Interfaced Systems
Simply connected systems or subsystems
that can exchange information across the common boundary
which they share. Systems share data but no processes
Interoperable Systems
Provide and accept services from other
systems and use the services exchanged to enable them to
operate effectively together. Systems share limited processes and
data
Integrated Systems
Tightly coupled interconnection of
different, highly specialized devices, subsystems or systems, into a
broader system providing complex functions which require close
interactions between it’s components. Systems share many
processes and data.
what is the equation of a good decision?
expected value = odds of gain * value of gain
ALLAIS’ PARADOX
This involves calculating the expected utility of each action and
choosing the action with the maximum expected utility. However,
it has been found that decision makers do not always do this
Brute force with weighted expert opinion
Simple MCA advantges and disadvanteges
Disadvantages:
* -Weighting factors are often difficult to agree on by many parties.
* -There may be inconsistencies within weighting factors (discussed later on
in the lecture).
Advantages: Fast and dirty approach.
Risk Based approach
Technique that uses Risk = Probability x Consequence to
identify high risk areas that should be addressed.
* Risk is often used to balance the funding gap. Understanding
this gap will lead to better decision making.
Advantages:
* Based on Mathematical Decision Theory and is an industry
standard
* Generates ratio data
Disadvantages:
* Labour intensive
* Participants perceive the tool as a ‘black box’ if they do not
understand the mathematical theory
Analytical Hierarchy Process (3)
define objective
structure elements
make pair wise comparisons
: Calculate criteria weights vector {W} Normalized Matrix (below
Complete a consistency check
Evaluate alternatives according to weightin
Delphi Method
Delphi method is a structured communication technique that seeks to
minimize variance.
* Based on the principle that decisions form a structured group of individuals is
more accurate than those from unstructured groups.
* Based on the assumption that group judgments are more valid than individual
judgments.
* It requires a panel of experts.
The experts answer questionnaires in two or more rounds.
* After each round, a facilitator provides an anonymous summary of the experts’ decisions from
the previous round as well as the reasons for their judgments.
* In the next round, experts are encouraged to revise their earlier answers in light of the replies
of other members of their panel.
* Finally, the process is stopped after a predefined stop criterion (e.g. number of rounds,
achievement of consensus, stability of results
Cognitive Fluency
How easy an idea is to process and understand.
Suck Cost Fallacy
Not leaving a bad movie before it ends because you paid for it !!!
Self serving bias
If we win it is our success, if we lose, it is someone else’s fault. (defence mechanism that protects a
person’s self-esteem)
Consider both inside vs. outside view
Inside view is always optimistic.
Outside view often gives a less optimistic but more realistic view.
Example: When two companies merge: Inside view thinks things
are great, board members think this will increase stock prices.
Commonly when companies merge stock prices drop.
Scientific Management - Frederick Taylor what did he wittness
The more productive you are, the fewer workers will be needed
2. Workers get paid for their time, so work at slowest acceptable pace
3. Workers have the freedom to create their own work procedure
what are Fred Talyor’s 4 principles of scientific management
1.Use scientifically optimised work routines
2.Scientifically select and train workers
3.Ensure work routines are followed
4.Managers and workers to use scientific methods
Differences between traditional & Lean (1
Traditional
* Decisions are made sequentially
by specialists and ‘thrown over
the wall’
* Activities are performed as soon
as possible
* Not all product life cycle stages
are considered in design
Lean
* Downstream players are
involved in upstream
decisions, and vice-versa
* Activities are performed at
the last responsible
moment
* All product life cycle stages
are considered in design
What is the hawthorne effect
he alteration of behaviour by the subjects of a study due to their awareness of being observed
what is cost variance
Difference (in dollars) between what was
earned in performing the task(s) and what it
actually costs to perform the task.
CV = Earned Value – Actual Cost
CV = BCWP – ACWP
what does a negative schedule variance mean
behind schdule (EV - Pv)
What does a negative CV mean
Over budget EV - AC
what does a SPI lower than 1 mean
project is behind schdule = ev/pv
what does a cpi lower than 1 mean
project is overbudget
What are the components of SMARTER
S-pecific
M-easurable
A-chievable
R-elevant
T-ime bound
E-valuation
R-e asses
