Construction Cost Management & The Impact of the Project Schedule on Cost

Part 4: How the Schedule Impacts Costs By Ted Garrison Garrison Associates www.TedGarrison.com www.StrategicPlanningforContractors.com www.NewConstructionStrategies.com

Module 1: Fundamentals of Scheduling

Time has a huge impact in determining cost. Everything takes twice as long as anticipated. Save 1/3 of schedule time and you ll increase profits by 2 to 3 times.
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What Is the Purpose of a Schedule?

Schedules are for planning not for execution of the project.
Don t micro manage your schedule They are not a litigation device despite some advice.

It gives you a plan on where you are suppose to be so that you can adjust to get where you need to be. It allows you to plan for the future. The schedule is not an end in its self it s a tool to get results.
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Why Do We Need Schedules?

Reduces construction time. Reduces costs of labor, overhead, financing. Provides a more regular continuous flow of work. Increases productivity. When the schedule is measured the performance is improved. When the schedule is reported the rate of improvement accelerates.
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Why Do We Need Schedules?

Gives everyone a goal to work toward. Improves company image. Better control and management. Makes Owners more comfortable. Forces detailed thinking. Improves communications.
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Critical Time Dimension Factors

These issues must be resolved before you can proceed with developing a schedule: Estimating Time and Risk. Path Considerations. Establish Priorities.
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Module 2: Types of Schedules

Gantt Chart or Bar Chart
Henry Gantt developed for Aberdeen Proving Grounds during WWI

Network Diagrams Flow Diagram

q PERT Performance Evaluation Review
Technique (Navy developed for Polaris Sub project in 1950 s)

q CPM Critical Path Method (DuPont & Remington

Rand developed for the construction industry in the 1950 s) q Today s versions are a combined software.
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Gantt Chart/Bar Chart

Developed by Henry L. Gantt, an ordnance engineer at Aberdeen Proving Grounds in Maryland during WW1. Easy to construct and read. Great time line overview. Negative: Don t show interrelationships between tasks.
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Bar Chart
Advantages:
Simple easy to construct & read. Visual clarity great time line overview. Accepted.

Disadvantages:
Doesn t show interdependencies. Doesn t show critical activities. Difficulty in forecasting effect of changes. Doesn t show float.
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PERT Network Diagram

Developed by United States Navy for the Polaris project in the 1950 s. It is a method, not a chart. Shows dependencies. Uses three time estimates for uncertain or risky tasks.
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CPM Schedule/Network Diagram

Developed by DuPont and Remington Rand for the construction industry in the 1950 s. It is also a method, not a chart. Shows dependencies. Uses one time estimate for projects.
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What Is the Critical Path

It s the longest path through the project. How many critical paths can there be on a project? What s important about the critical path? To shorten the project you must shorten the critical path. Critical path is not necessarily the most important path.
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Critical Path vs. Critical Tasks

Critical path is often arbitrary. Critical tasks are tasks that are absolutely critical to the project being performed on time. Examples:
Out of the ground before rainy season begins. Closed in before cold weather sets in. Permanent power on when needed.

Therefore, you should focus on the critical tasks more than the critical path unless the critical path is truly critical.
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Network Diagrams
Advantages:
Shows dependencies Develops and shows critical path Identifies critical activities Identifies potential resource problems Allows management to set priorities. Shows impact of changes. Great analytical tool for different methods or sequences trouble shooting & bottlenecks
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Network Diagrams
Disadvantages:
More difficult to read. Can become very complex. Usually requires training. Requires significant commitment. Gets neglected because its too complicated.

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Module 3: Creating a Schedule

Elements of an Effective Schedule Functional Understandable Flexible Commitment by management to make it work.
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Steps to Creating a Schedule

Review estimate and plans familiarize yourself with the project. Project magnitude. Method of construction. Restrictions special conditions etc. Subs what s their scope? What do they furnish? Special delivery dates logistics.
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Steps to Creating a Schedule

Interview key participants:
Project managers & superintendents Subcontractors. Discuss project approach. Discuss most important areas. Problem areas anticipated. Degree of control tight or general terms.
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Six Fundamentals to Exceptional Time Estimating:

1. Use actual time estimates from similar tasks. 2. Involve the people most knowledgeable. (As a subcontractor fight to get positive input.) 3. Research the history of vendors and subcontractors.
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Six Fundamentals to Exceptional Time Estimating:

4. Consult standard reference books. 5. Concentrate on tasks that most impact the project s final outcome fight to build in extra time on critical tasks. 6. Train yourself to be an exceptional estimator.
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Schedule Analysis
Create list of tasks. (WBS) Keep contractual divisions separate. Keep trades separate. May even separate crews. Keep field work separate from shop work. Determine level of detail required. Things to consider:
Shop drawings, permits, inspections, curing time, delivery time of key items
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Determining Activity Durations

Best source is your own company records use actual time estimates from similar tasks. Can adjust for weather, special problems, or abnormal work conditions. Involve the people most knowledgeable. Research the history of vendors and subcontractors. Consult standard reference books.
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Effective Scheduling of Subs

Hold a preliminary scheduling meeting w/all subs and vendors. Avoid conflicting subcontractors being scheduled at the same time. Give ample notice to subs. Provide reminders. Base payment on compliance w/schedule.
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Effective Scheduling of Subs

Encourage cooperation and improvement between subcontractors. If possible, reward superior performance. (If they save you $$ - share the benefit.) Treat subcontractors like customers. Tie schedule to contract.
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Issues Effecting Productivity

(ENR Study)
Waiting for people and/or equipment to move material that is needed. There are errors in the drawing. Engineers are slow to address questions or problems with drawings. Lift, crane or or forklift isn t available when needed.
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Issues Effecting Productivity

(ENR Study)
Can t get consumables that are needed. Quality work is needed on prefabricated items. Power tools not available when needed. Supervisor doesn t provide enough information.
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Two Scheduling Options

Time-limited scheduling: time is limited resources are unlimited. Resources limited scheduling: resources limited time is available. If time & resources are incompatible you must renegotiate by presenting options & feasible schedules.
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Scheduling Secrets
Schedules are for planning not for execution of the project, so don t micro manage your projects Don t focus on tasks focus on milestones, key or critical events Make milestones measurable in essence a specific deliverable Lay out time-fixed tasks first
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Scheduling Secrets
Create as much flexibility in the critical tasks as possible.
Critical path tasks High impact tasks such as roof so interior work can start.

Concentrate on starting every critical task as early as possible. Schedule the beginning of the project more aggressively.
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Scheduling Secrets
Get commitments from key personnel, vendors and subcontractors on time frames don t dictate if at all possible. Remain flexible in your approach to the project just because you have always done something one way doesn t mean it is the only way. Prepare a calendar of events that senior management or owners must perform.
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Module 4: Avoiding Slippage

When people don t perform the reason revolves around one of the following reasons:
Insufficient training Insufficient knowledge Poor attitude Lack of resources
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4 Essential Remedies to Avoid Slippage

A schedule with clear, measurable milestones. Understanding the critical path. Understand your critical tasks. Avoiding the low level manager who doesn t want to worry his/her boss about small slippages.
Fear boss will over react. Must reduce risk & encourage sharing of info. Cut down on reports
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Slippage Problems
Often extra resources cause more slippage. Need to question why there is slippage. Usually slippage occurs from little things not major disasters.
These tend to sneak up on us.

Often easier to deal with major disasters respond with force or radical change or innovation.
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Questions to Ask When Slippage Occurs

Are the team objectives clear to everyone on the team? Are team members committed to the project? Does the team accept their targets as realistic?
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Questions to Ask When Slippage Occurs

Does the team believe their work is valued? Is training required? Is the scope too great for the available resources? Should some work be subcontracted? Are too many changes being made?
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Module 5: Lack of Slack Time

The legacy of the nineties has been a dangerous corporate delusion: the idea that organizations are effective only to the extent that all their workers are totally and eternally busy. Tom DeMarco Author of Slack

The 80-20 Rule

20% of what you do produces 80% of the results. (36% produces 96%) What makes an item a 20% item? It is the key to unlocking higher profits and greater rewards. As crazy as it seems: the solution is to do less not more. Bottom-line the more you have the less detail you can get involved in.
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Staff Cutbacks
Staff cutbacks have come out of middle management. Some of this was due to technology reduction of duplication of effort. But middle management s other roles are to adjust to change and deal with problem when you eliminate them: Who does this work?.
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Lack of Slack Time Causes Problems

No time for analysis, invention, training, strategic thinking, or contemplation. Living in a world of change this doesn t work. Net result instead of accomplishing what we suggested today just the opposite is achieved.
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3 Benefits of Additional Slack

1. Increased ability to handle challenges or problems. 2. Better retention of key people. 3. An improved ability to invest in the company s future. (learn from clients what they need)

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The Need for Greater Balance

Crisis Quadrant
(Burn-out)

Proactive Quadrant
(Higher and Higher)

Comfort Quadrant
(Rust-out)

Trivia Quadrant
(Waste-out)

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What Was the Last Slide Really About?

Effective versus Efficient! Urgency versus Importance! Understand planning helps prevent urgency!

Module 6: Multiple Projects

What is best for an individual project portfolio is not necessarily best for the portfolio itself.
Michael Dobson Author of Practical Project Management

Few Important Definitions

A project is a specific work assignment that has a planned end and a measurable accomplishment to achieve. Time-fixed projects are projects that have a deadline. (Time is the driver) Time-variable projects are projects with flexible deadlines. (Cost or performance is the driver. Independent projects consist of projects that are not directly connected to each other. Interdependent projects are interconnected and results from one affect the other.

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Five Step Process to Prioritizing Tasks

Lay out time-fixed projects first. Determine and schedule resource requirements for those projects. Identify available resources for remaining projects. Use least-resource scheduling to optimize production. Fit the final schedule together.
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Final Thoughts on Scheduling

Improved schedules can substantially improve your profits Leave enough time in the schedule to actually do something Focus on the most important (80/20 rule) Make sure the schedule has the right priority (Triple constraints)
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Final Thoughts on Scheduling

Schedules are for planning not execution, so use them accordingly. Obtain commitment in the beginning from all the players or you will be fighting battles throughout the project. Schedules need to be flexible things happen. The schedule is a tool to reach the completion date on time it s not an end in its self.
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Action Steps

Please turn to the inside of the front cover of the resource guide. Write down 1 to 3 action steps that you want to immediately implement from Part 4 of this program.