In our last article “How to Enforce the Culture of “100% Committed to Achieve” in Managing the Contractor’s Contract Price on Capital Construction Projects?”, we have explained how EPC Contractor, General Contractor, Subcontractor and other types of vendors who have been awarded lump-sum turnkey (LSTK) contracts can transform the awarded contract into commitments to ensure 100% outsourcing of the complete project’s scope to internal and external entities that can best manage the outsourced scope of work and manage the risks associated with this outsourced scope of work. This was crucial for building the culture of “100% Committed to Achieve”. Nevertheless, the baseline contracts, commitments, and budget on capital construction will always be subject to changes for which they need to be managed to ensure what is being monitored, evaluated, and reported is valid.
In general, there are two main categories for changes in capital construction projects. The first category is for changes that had been authorized by the project owner due to design revisions, wrong design, interferences, unforeseen site conditions, and other causes that the contract agreement entitles the contractor for change that could affect either the project cost, completion date or both. Those changes will affect the contract agreement between the project owner and contractor, some of the commitments contracts that the contractor has with internal and external entities, and the project budget. The second category changes are due to the contractor or his subcontractors or suppliers’ actions or due to risks that had actually occurred. Those changes will only affect some of the commitments contracts that the contractor has with internal and external entities and the project budget but not the contract agreement between the project owner and contractor.
Using the same PMWeb Project Management Information System (PMIS) solution, changes to the contract, commitments, and budget will be managed using ready-to-use business processes. Those business processes will use the cost breakdown structure (CBS) levels to ensure that all cost transactions are interrelated and can be reported on.
To start with, the PMWeb Contract Change Order module will be used to manage all change orders that have an impact on the contract agreement between the project owner and contractor. Some of those changes could be approved while others could be pending approval or disputed. The change order form will also capture any adjustment to the contract’s planned duration.
Changes to the commitment contracts will be managed using PMWeb Commitment Change Order module. Each line item in the commitment contract change order needs to be associated with the cost breakdown structure (CBS) that it relates to. The commitment change order form will also capture any adjustment to the planned subcontract or purchase order duration. Those commitment change orders could have their status as approved, pending negotiation, rejected, or disputed.
Since one of the reasons attributed to commitment change orders is risks that have actually occurred, the PMWeb potential change order module is used to capture the details of risks that have occurred. The potential change order form allows linking the form with the risk register record that the change is associated with. If a potential change order was reviewed and approved, then a commitment change order can be generated from the approved potential change order.
All changes that could have resulted in increasing or decreasing the approved baseline budget or resulted in transferring funds from the project contingency, management reserve, or any other budget item to another budget item must be captured. PMWeb Budget Request module will be used to capture those details. It should be noted that a budget request could have a positive, negative, or zero value if it was for a budget transfer.
To ensure that all budget requests are aligned with the changes made to the commitment contracts, the PMWeb change event module will be used to align those two business processes. The change event will capture the details of the budget request cost line items, as well as the commitment change orders, cost line items that are associated with this change.
For each business process template detailed above, there could be the requirement to attach supporting documents to better explain and support the transaction. Those documents could include pictures, videos, MS Excel files, documents among many others. The attachment tab for those templates will be used to attach all those supportive documents. It is also highly recommended to add comments to each attached document to provide a better understanding of what was the document for. The attachment tab also allows the user to link other records for business processes implemented in PMWeb as well as associate URL hyperlinks with websites or documents that are not stored in the PMWeb document management repository.
To enforce accountability for the review and approval process for each transaction for the business processes detailed above, the PMWeb workflow module will be used to create a workflow to formalize the review and approval tasks of those transactions of the business process. The workflow will map the sequence of the review and approval tasks along with the role or user assigned to the task, duration allotted for the tasks, and availability for each task. In addition, the workflow could be designed to include conditions to enforce the approval authority levels as defined in the Delegation of Authority (DoA) matrix. This will be required as all of the needed business processes have financial implications for which the decision to approve will depend on the roles and responsibilities of the individuals involved in those business processes.
When a transaction for each business is made and submitted, the workflow tab available on the template will capture the planned review and approve workflow tasks for each transaction as well as the actual history of those review and approval tasks. PMWeb will capture the actual action data and time, done by who, action taken, comments made, and whether team input was requested.
Many contractors might require having an output document for each transaction of business process to be printed and wet-signed by the individuals who have reviewed and approved the transaction. Although PMWeb comes ready with more than 150 ready-to-use forms, reports, and dashboards, each contractor has their own forms, reports, and dashboards to display the needed information in the required format while respecting each contractor’s branding requirements.