Large construction projects are notorious for inordinate delays and spiralling costs. Keeping a project on schedule and within budget is a goal that all construction companies start with, but most never reach.
Curtailing project costs is a challenge that needs a multi-pronged yet unified approach. That’s where integrated project controls come in.
The Many Facets of Cost
Costs in construction projects move from concept budgets to working budgets to refined budgets at various points in the project lifecycle as project details emerge during the course of design. During the project conceptual phase, the costs are estimated based on thumb rules and industry estimates and plans are put in place to start the process. As the design become more precise and the finer details are arrived at, the costs become more refined. But practically what happens is that concurrently while design is ongoing (on some packages), procurement and construction activities start (on other packages that are design complete). Interaction between these packages and delays associated with coordination between the among these functions leads to time delays and cost overruns. The important aspect to stay within the budget requires getting early warnings if costs will overshoot the budget due to misalignments, changes in design and/or procurement that also in addition leads to time delays.
Integrated Project Controls
The simple idea behind integrated project controls is that it puts people in control of the project, and not the other way around. It is a collaboration and controls platform that connects data to give forward-looking KPIs and creates an alert system that not only gives early warnings but also forecasts the impact of any deviation.
In the absence of integrated project controls, processes and data are fragmented and separated by roles and the programs used. For example, budgets are done in Microsoft Excel and procurement and actuals are done in ERP systems, or another solution. Altogether none of this being integrated to time that is managed in scheduling systems or design that is managed in 3D design solutions or document management systems. With multiple people using multiple programs, there is no ‘one view’ to see the budget. The lack of an integrated view makes cost monitoring difficult and understanding the impact of actuals and/or changes near impossible. In fact, the combination of a fragmented ecosystem and a lack of discipline makes cost monitoring completely ineffectual.
Funnelling all the information into one solution makes it possible to get the project in control by:
- Knowing the budget
- Breakup of the same into categories – civil, land, material, labour, etc.
- Tracking impact of changes in design to the budgets
- Tracking of any cost overruns due to procurement
- Tracking impact of idle time of labour and equipment in construction
- Keeping track of total costs
Connecting the Data Silos with Project Costs
An important element of cost monitoring is the estimation of time, quantity of materials, labour, and equipment, and so on. Integrated project controls not only enable more accurate estimation of all the elements of construction and tracking of orders, deliveries, stages of completion, and schedules but more importantly allows for the systems and stakeholders to be inter-connected so that the impact of action or inaction by one stakeholder can be propagated and understood at the overall project level. The virtual model provides the most accurate estimations and a single source of truth that cannot be calculated without integration.
Integrated project controls allow coordination across categories and aspects of the project. For example, materials can be ordered only for the quantity required only at the time required. This eliminates wastage through over-ordering, and delays due to under-ordering, and eliminates material loss and costs of storing on-site.
Integrating Financial and Physical Progress
The schedule is divided by the work breakdown structure and the budget is divided by the accounting-based cost breakdown structure. Integrated project controls help to synchronize the work line items with cost line items. Integrating physical and financial progress and adopting Earned Value Management (EVM) principles is critical to avoid negative surprises to project costs.
According to the Project Management Institute, earned value puts a Rupee value on the status and provides indices that tell you your project’s ‘health’ at a glance. That and the schedule performance and cost performance indices (SPI and CPI) gives early warning signals to decision makers on project health that potentially needs course correction.
Decision makers should realize that evaluating project’s health is more than just the status of major milestones and budget versus actual costs, it is the evaluation of the true condition of the project. That means tying other project information like hindrances, issues, documents to the physical and financial progress also. With that, CXOs can use management by exception and evaluation of indices to predict a project’s outcome. It is an efficient way and can mid-stream course correct the project to manage a project more proactively.
The integration of physical and financial progress ensures that budgets expended are in line with decision-makers’ expectations regarding physical progress.
The tracking of what has got done versus what needs to be done is an important aspect. The model works on forward-looking alerts – this got done, therefore this is what one can expect in the future – versus traditional backward-looking alerts of benchmarks passed. Since the data is integrated across all stakeholders and processes of the project, gathering the data needs to happen only once, but it can be used many times per the requirements of the stakeholders to produce dashboards and reports.
The key focus of project controls is on ensuring that projects meet the time, cost, and quality objectives. A specialization of project management, project controls aim to keep costs and schedules as close to the original targets as possible. Integrated project controls drive the successful delivery of a project, bringing all the critical internal and external members into a silo-less platform.