PROJECT EXECUTION AND VALUE FOR MONEY: THE ROLE OF THE ENGINEER

This is the concluding part of a seminar paper presented by Engr. (Sir) M.O. Ebah, Chief Lecturer/Engineering Consultant, Delta State Polytechnic, Ogwashi-Uku, Delta State, Nigeria.

PART TWO: THE PROJECT MANAGEMENT TECHNIQUE

1.0    Introduction:     The fact that an organisation or firm is executing a project with its managers does not mean that it has a project management system. Modern project management is a system that has a specific form of organisation with formal mechanisms for the control and supervision of the quality and progress of a project work. No matter the project, it requires good and effective project management system for its successful execution. A project  management system has some characteristics that makes it different from the usual or normal organisational management set up(Ritchie,1992). These characteristics bring along some advantages that make the difference and ensures the successful attainment of the project management objectives which give value for money.

2.0    Project Execution Management Characteristics:       

Project management gives:

-        Specified Date/Time

-        Specified Budget/Cost

-        Specified level of Performance/Quality.

For project execution management – ie  control, monitoring, and supervision to be successful and give value for money the following objectives must be attained.

-        The final result must satisfy the performance/quality requirements of the end user----Adequate/Best .

-        All expenditure must be contained within budget ---Economical/Cheapest.

-        The project work must be completed within the stipulated time---Fastest/Reasonable .

3.1    Standard Project Execution Management Organisation

 

The management structure illustrated above is the standard requirement for the effective and successful management of the execution of any project. The project manager or supervisor must be vested will all necessary authority and responsibility. The above organisation chart shows that the power of execution is vested in the project manager. The functional managers provide the manager, monitor or supervisor with the required resources and technical knowledge. This is the standard requirement for effective and successful project execution or monitoring and supervision.

4.0    Project Execution Control

The activities, processes and programmes for the  execution of a project must be properly regulated or controlled for its management and supervision to be successful and effective. It is only then that the project execution can give value for money spent.

Below is a flow chart of the main components of the good project execution control system.

3.0    PEM (Project Execution Management) Objectives

It must be noted that the following  elements must be well understood and properly regulated or controlled if project execution is to give value for money:

-        -  Scope

-        -  Cost

-        -  Schedule

-        -  Quality and

-        -  The personnel

4.1    Scope                

Scope defines exactly the desired end product of the project which must be known to the management and supervision team or the project management team. The project scope must be known before any major financial commitment. Apart from the scope, an Execution Plan is also required for effective project management and supervision. The execution plan should be drawn up before the commencement of work. Normally, the plan should address every aspect of the work that will need policy decisions such as the following:

-        Who will manage and supervise the project – the client/government team/in-house or a managing contractor.

-        The contract strategy or type.

-        Major objectives to be achieved – low cost/economical? short/long schedule? or high/adequate quality?

4.2    Cost

Cost can be trend base estimates and department budgets

At the start of a project, it is usually difficult to make an accurate estimate of the cost of the project especially when detailed drawings are not ready. And so a trend base estimate is prepared which stipulates the estimate of required job hours for the project work, lists all known items and their estimated cost including allowances based on previous knowledge for unfully defined areas of work. Department budgets are trend base estimates broken down into essential functional areas of work or small segments. It is very important that all the jobs to be done are meticulously listed and costed accordingly. A job that cannot be measured cannot be monitored and supervised and its management cannot be effective. For projects that will last over a long period of time, provision must be made for inflation (e.g 10-15%). Also a contingency allowance should be added to estimates to take care of any inaccuracy in the cost estimate.(e.g 10-20%)

4.3    Project Schedule:      Once the project plan has been agreed upon an all embracing project work schedule is a must for an effective and successful project monitoring, supervision and control. There should be a Master Schedule and Department Schedules.

The master schedule schedules all the project jobs from basic engineering to completion indicating, the major functional activities which may be as many as fifty in number.

The department schedules which are very effective for supervising and controlling the project work is a detailed list of deliverables from the various functional segments. Department schedules is made from the master schedule which is broken into smaller units for the functional segments. The project schedule lists the jobs and time required to execute them.

Project schedule can be greatly enhanced by the use of Network Analysis. Network analysis is used during planning to brake down projects into activities that are arranged in a logical sequence. Network analysis uses a network diagram to show the relationship between all project activities. With network analysis time, costs and available resources are specifically allocated.

In a network diagram, there is a most important activity route or path called critical path. Critical path is the longest activity path(ABE) and takes the maximum time and so decides the total project duration. The critical path is made up of activities that must be carried out for a project to meet its scheduled completion date. It is most vital for a successful and economic project execution. It adds value to project management if accurately followed.

4.4    Quality     

Project managers and  supervisors must note that major delay in work schedule can result from poor quality engineering. Poor construction work and equipment supplied to the wrong specification affect project quality(Ritchie,1992). A comprehensive quality assurance system must be applied all through the project work to ensure that the quality of work is up to expected standard if project execution is to give value for money.

4.5    The Personnel

Once the project schedule has been worked out and the workhours determined, the number of workers needed for the job must be worked out for departments and units within them. Then work dates are worked out for each person or group of people as necessary. And based on the project execution plan, workers are then mobilized to their respectively duty posts. Workers are phased onto the job as required and immediately they complete their aspect of the job, they are phased out or demobilized. All project personnel, be they home office or field/site office staff, must be properly motivated for high productivity. Industrial disputes must be avoided or quickly settled to avoid job delay, which can adversely affect work schedule.

4.6    Reporting—Trend and Monthly

The easiest and most effective way to control a project is to have weekly trend meetings of all senior members of project management team and the client are in attendance. Weekly trend meetings discuss changes and problems related to scope, cost, schedule, quality and personnel. Reports of trend meetings are sent to the project manager who utilizes them to prepare monthly reports which keeps the client and organization management well informed on progress of work.  The importance of weekly or trend and monthly reports on anticipated changes or problems related to scope, cost, schedule, quality and the personnel cannot be overemphasized. From trend reports the management and supervision team leader or project manager gets up to date information on any  matter that can jeopardize progress of work and he or she then takes necessary corrective action or step.

Conclusion

To be successful and effective in its work, the project supervision team or project management team must have a comprehensive knowledge, and understanding of nearly, if not all, the subject matters contained in this paper. From experience, I can confidently say that in project management and supervision, to be effective and or successful a sure route is the meticulous listing of all job items to be done and the meticulous monitoring of cost, schedule, scope, quality and the commitment of personnel in those job items. Only then can project execution  successfully give value for money. Project management is cost-effective, efficient  and guarantees value for money in project execution if scrupulously applied. It is highly  recommended.   

 As a  general conclusion, it suffices to add here that any of the possible routes discussed in this presentation or a combination of any of them, will ensure value for money in our project execution  in Delta state.

References

         John L. Thompson (2000): Strategic Management, Awareness and 

        Change, London, Chapman and Hall.

file:///E:/Value%20Engineering%20Program.htm of 18|12|2010.

http://en.wikipedia.org/wiki/value engineering

Khana O.P. (2006): Industrial Engineering and Management, New Delhi, Dhanpat Rai Ltd.

Ohmac, K. (1988): Getting Back to Strategy, Harvard Bussue Review, November – December.

Porter, M.E. (1985): Competitive Advantage: Creating and Sustaining Superior Performance, Free Press.

Ritchie G.J (1992): Project Management Characteristics, Advantages And Phases; Bedford;Cranfield University Press.

Value Methodology Pocket Guide.

PROJECT EXECUTION AND VALUE FOR MONEY: THE ROLE OF THE ENGINEER

This post was contributed by Engr. (Sir) M. O. Ebah, Chief Lecturer/Engineering Consultant with the Mechanical Engineering Depertment, Delta State Polytechnic, Ogwashi-Uku, Delta State, Nigeria. I feel deeply grateful for this article and look forward to having the likes of this great and senior professional colleague being part of this blog.

Abstract

A project is an important and carefully planned piece of work, that is intended to build or produce something new, or to deal with a problem. A project could be the design and construction of a building, an airport, an offshore oil platform, or the development of a prototype car. Project execution is the doing of the project. For engineers to ensure value for money in project execution, there are two main, albeit interwoven approaches The approaches are Value Engineering and Project Management. The Value Chain method is also available for use and has been included herein under Value Engineering in the first part of this two part presentation. Value Engineering often thought of as part of Project Management, is a systematic method employed for improving the value of goods or products and services by using an examination of functions. In project execution, value could be derived from cost, use, esteem or exchange. Project Management is the science of assuring that meticulous attention is paid to all aspects of a project. The Value Chain details how the essential activities of an organization adds Value to  its products and or services. This  presentation lists and expounds  what the engineer can do in project execution to make the process both effective and efficient so as to ensure value for money. It is an exposition of how the professional engineer can use Value Engineering, the Value Chain and Project Management techniques to give value for money in the execution of projects.

PART 1: THE VALUE ENGINEERING AND VALUE CHAIN APPROACH

1 .0      INTRODUCTION

Value analysis or value engineering and value chain are systematic approaches currently being applied in industries and other business organizations for cost reduction and competitiveness. Value engineering is the analysis of the functions of a project, programme, system, product, item of equipment, building, facility, service or supply to improve performance, reliability, quality, safety and life-cycle cost. The industry and present day society have become so complex that it can no longer rely on the rule of thumb to execute and evaluate projects. Higher education has  enhanced knowledge, skills and the technical ability of people. There are now newer and advanced materials and equipment. Information is also now more readily available.

Systematic techniques such as value analysis and value engineering allow industry and business get projects executed more economically. A system is a collection of interacting elements that operate to achieve a particular objective. These systematic approaches can be used in the following areas:

-       Design and development of complex and highly engineered industrial equipment.

-       Design and development of military equipment and weapons.

-       Management of operations.

-       In choice of tactical alternatives and

-       In deciding major policy alternatives.

2.0       VALUE FOR MONEY

The value approach or value analysis and value engineering was developed in order to make or produce cheaper and so sell cheaper but retaining the utility of the product.

            Value is the cost (of a product or production) proportionate to function. Value is the ratio of function to cost. Value can be mathematically expressed thus:

Value =          Function/Utility Cost

From this formula for value it can be seen that the value of a product, in this case the output of project execution, can be increased by either increasing functionality or utility, or by directly decreasing cost of providing the function. Function is the purpose of product or project output and there can as many as three  types of functions:

a    Primary function

b    Secondary function

c    Tertiary function

        
            2.1 Examples of project functions

PROJECT	FUNCTION
Road	a). Transportation b). Economic development c). Status enhancement
Stadium	a). Sports building/Organization b). Development of sports c). Status enhancement
Airport	a). Air transportation b). Development c). Status enhancement
Painting	a). Protection against corrosion and deterioration       b). Recognition/Identification c). Appearance

Viewed from this perspective of functionality, a project can be properly evaluated to know its worth vis a vis the money expended. Value as already stated is the ratio of functionality/utility to cost. Also value can simply be increased by either improving the function or reducing cost. It is a primary principle of value engineering that basic functions be preserved and not reduced for value improvement (http://en.wikipedia.org).  Value engineering can be applied to just about any functional aspect of a project. Emphasis should not be on cost reduction alone. Cost is the extent of resource expenditure on all aspects of the project. It is better to spend on just what is necessary and not more. Most times we spend more only to be asked why later.

2.2      Value Types

Knowing the various types of values that can be derived from product or project execution result, will surely enable us as engineers to properly evaluate and execute projects for their worth in monetary terms. Types of values are:

-       Cost value: Which is the cost of producing or manufacturing a product or executing the project that gave birth to the product.-money expended on all resources.

-       Use or functional value: Which is the work that can be done, functions or services that can be provided by the product execution.

-       Esteem value: Which is the quality or appearance of the product or project execution output.

-       Exchange value and

-       Life span value: Will it serve out its specified life span?

-       Safety value: Reduction/Elimination of  accident and danger 

-       Reliability Value: Performing to expectation

 Fully functional outputs will guarantee value for money. Moreover, project execution must be thorough to ensure good quality and appearance of product. Good quality and appearance are good values for money. Reliability, safety, and life span are essential values for cost effective project execution.  

Exchange value, where applicable is also a sure value for money. If the life span of the output of the executed project is up to standard specification, then there is value for money in that project.

In all project execution therefore, we cannot compromise all the above stated types of values. They must be given the utmost consideration if our interest is value for money in project execution.

3.0       The Value Chain

The value chain as shown in figure1 below, is an illustration of how the essential activities of an organization can add value to the products and or services it provides (Porter, 1985)

The value chain is very useful for assessing the ability of an organization’s various functions to contribute towards competitive advantage so as to give value for the money it gets from customers or clients (Thompson, 1990)

For clients to have value for money in their patronage of your organization or firm, it must be efficiently and effectively managed to produced values from the aggregate of support and primary functional activities. And in this case, for project execution or operations to enhance value for the money paid for its outputs or productions, primary activities must be properly linked to the appropriate support activities. See figures 1 and 2.

3.1       Value Chain Activities

As illustrated in fig 1 above, the value chain consists of five primary activities. The primary activities are linked to four support activities.

3.1a    Primary Activities

The five primary activities are inbound logistics, operations, outbound logistics, marketing and sales, and service. Primary activities are physical activities that create the product or service which is then sold to the buyer with required after sale service.

Inbound activities consists of activities that concern the receiving, storing, internal distribution of inputs for operations. These are warehousing, stock control and internal transportation.

Operations are activities that transform inputs to finished products and services in project execution.. Examples are machine/plant assembly, machining, production-sand filling, compacting, plastering,   packaging etc.

Outbound logistics are activities that concern the distribution/handing over of finished goods and services to customers or clients.

Marketing and sales activities include advertising and promotion, pricing and sales matters.

Service activities concern, the provision of required after sales service, such as installation services, maintenance  and repairs.

3.1b    Support Activities

The four support activities are the firm’s infrastructure, human resource management, technology development and procurement.

Firm’s infrastructure concerns organizational structure, planning, financial control and quality management used for the whole value chain.

Human resource management concerns activities that have to do with recruiting, training, developing and rewarding and motivating staff.

Technology development activities concern know-how, research and development, product design and process improvement.

Procurement activities concern the purchase of inputs used in the value chain.

Like the primary activities, all support activities can contribute in sustaining competitive advantage in project execution and so add value for money (Thompson , 1990)

Depending on the nature of the industry, proper linkage of these listed activities can contribute to the creation of competitive advantage and so provide value for money. As engineers involved  in project execution, the activities must be of crucial importance to us if we want to provide value for money paid by our clients.   

                   

Conclusion

By applying the concepts of value analysis or value engineering  in project design and its execution process,  we can cut down on unnecessary costs without impairing  implementation. By so doing we can add value for the money paid for  our work by  clients. This is the value approach.

Another means of ensuring that our project execution delivers value for money is the value chain. This approach analysis the value chain activities and highlights how well the activities of the various functions and business units in an organization can be organized and coordinated. When the activities within our ministries and parastatal organizations are effectively managed, and linkage opportunities are utilized, cost can be better controlled and reduced to deliver value for money in project execution.

The value approach comprising analysis and engineering, and the value chain are suitable and appropriate methods that can be applied to deliver value for money in all industrial/engineering  project executions. They are hereby recommended for use.

Comin up in the next post, Engr.Sir. M.O. Ebah will conclude this discuss in

PART TWO: THE PROJECT MANAGEMENT TECHNIQUE

Once again, I say thank you to Engr. (Sir) M. O. Ebah, Chief Lecturer/Engineering Consultant with the Mechanical Engineering Depertment, Delta State Polytechnic, Ogwashi-Uku, Delta State, Nigeria. I feel deeply honoured to have you as part of this resource sharing network for the development and advancement of the practice of engineering and management.