A Comprehensive Guide to Construction Project Controls
It’s the early 1960s, and the U.S. Department of Defense is in the midst of a rapid response to the threat of a “cold war”. It is attempting to build technology and projects that had never been done before and to build them in a hurry. The risks are high, the schedules are tight, and the budgets are under severe scrutiny.
To alleviate the pressure, cost management control systems needed a serious overhaul.
Enter the Navy and its new concept of Program Evaluation Review Technique (PERT). In 1962, alongside a team from Stanford University, the Navy embarked on a journey to simulate the work of a project by adding resources to facilitate the management of both time and costs. This led to the advent of earned value management (EVM), the baseline principle for what is now known as project controls.
What Are Construction Project Controls?
Project controls are simply that, a defined set of processes for gathering and analyzing cost and schedule data to stay in control of a project. It is the integration of the three pillars of a construction project – scope, cost, schedule – to accurately measure project performance. Thus, at the most basic level, project controls revolve around EVM.
Based on planned values versus the actual values, EVM predicts the future outcomes of a project through past patterns in an objective manner. This prediction is a leading indicator for project managers, allowing them to adjust accordingly. While there have been many iterations and expansions in the decades that have followed, the fundamental principles for project controls remain the same.
Key Components of Construction Project Controls
Construction project controls are all about consistency in performance metrics. This means establishing a baseline for the project that allows for controlled changes and detailed performance measurement. In other words, proper project controls start before the project does and continue to evolve and things progress.
Planning and Scheduling
If you don’t know where you are going, how do you ever expect to get there? That is why the first step in knowing how to lead a project is developing the project schedule. This is the fundamental outline of work to be accomplished, but it is not simply putting dates on a page.
Remember the key for the Navy/Stanford partnership was integrating the resources and cost into the schedule. By doing so, they created a valuation of the planned work, or as EVM likes to call it, budgeted cost of work scheduled. This sets the baseline and becomes the map for your project journey.
Cost Management
While integrating cost with the project schedule is immensely valuable, cost management doesn’t stop there. As we mentioned, project controls requires a set of rules for controlled changes throughout the entirety of the project. If there is one thing for certain, change is going to happen on a project. How you manage that change will be vitally important to keeping costs in alignment with both the schedule and the scope.
In essence, the project forecast can only project toward the path it understands. If the path changes, things become confusing in a hurry. Developing a controlled cost management process will enable you to take the necessary detours required to maintain a successful project.
Risk Management
As construction projects continue to become larger and ever more complex, an increasing focus has been placed on the need for risk management to be ingrained in project controls. Identifying and assessing potential risks to the perfect path of performance is paramount to understanding the certainty of your outcomes.
In doing so, risk mitigation strategies become an integral part of your project plan. Even though we all want the project to follow a happy path, experience has taught us differently. As the saying goes, “failing to plan is planning to fail.” By forming plans that mitigate risk, you plan to ensure project stability.
Performance Measurement
Of course, all this setup and control means nothing without the ability to track progress. Performance measurement is the driver that evaluates actual costs and earned value against the original plan. As each new progress point is collected, a better understanding of whether you are under, or over-performing is obtained.
In other words, Earned (earned value) versus Burned (actual costs) becomes your best friend. This is what drives informed decisions, comparing variances between the actuals and the planned. It is both quantitative and objective, removing the emotions from the data. As the forecast begins to deviate you are no longer left relying on a gut feel, action can be taken to adjust course accordingly.
How to Implement Effective Project Controls
You may have noticed throughout our discussion that the underlying principles of EVM and project controls do not depend on the size or complexity of the project. Sure, we mentioned complexity increasing briefly when discussing risks, but that doesn’t change the foundation of what is required.
Effectively implementing project controls is something that can benefit projects of ALL types and sizes. The key is understanding what level of detail and control is important to you.
Setting Up Project Controls Systems
First and foremost, you must be able to appropriately define the work. This means selecting a project controls system that can be tailored to your work breakdown structure. While it is not necessary for this structure to be overly complex, it is important to keep the elements of work you plan to track mutually exclusive. Keeping things simple is vital in ensuring proper data collection in the field.
From there, you must be able to assign value to the defined work. As such, system interconnectivity between work breakdown structures and funding sources (such as contracts), enable efficient creation of the planned value. Additionally, remember that schedule and scope are equally important when assigning value, therefore a well-rounded system will include the planning and tracking of these additional data points.
Finally, an effective project controls system will allow the assignment of earning rules for each item. This is where your desired level of complexity will be on full display, as earnings rules can be simple 1-step check boxes, or complex rules based on a multi-step process. Whichever you fancy, selecting a project controls system that allows for scalability on larger projects and simplicity on smaller projects will be very important.
From there, it becomes all about execution. And for that, you will need detailed analytics.
Monitoring and Reporting
Ever since the birth of project controls back in the early 1960s, s-curves have been an inherent part of monitoring and reporting project performance visually. Aptly named for their recognizable shape, this mathematical curve showing planned, actual and earned values over time is now considered a fundamental requirement for project controls systems. To take it a step further, projecting the forecast values of each curve into the future is fuel for the informed decisions we discussed earlier.
With this most basic of graphs covered, the remainder of important key performance indicators (KPIs) for project controls are up to your discretion. Many of the additional metrics to consider include estimate to complete, estimate at completion, variance, variance at completion and of course, the performance indexes; cost performance index (CPI) and schedule performance index (SPI).
When evaluating possible systems for the viability in tracking project controls, keep these attributes in mind. The more you are able to configure dashboards for your project management teams, the better leading indicators you will have for delivering successful projects.
Adjusting and Improving Costs
While evaluating setup criteria and building a detailed understanding of performance metrics are paramount, everything culminates in the ability to make adjustments as the project moves forward. Some of these adjustments will be tactical, tweaking the operations and crew in a way to impact performance and keep the project on track.
Other adjustments will be more technical, requiring the planning, reviewing and approving of a new work breakdown structure and corresponding values. This is where implementing a fully integrated project controls system becomes the most valuable. When you can process an issue into a pending change, plan for it, allocate the appropriate costs and seek approval from all parties without ever needing to leave the system, you have project controls.
Common Challenges and How to Solve Them
So, what then can make it difficult for companies to implement comprehensive project controls?
Dealing with Scope Changes
Well, if we’re being honest with ourselves, the ability to deal with change remains the biggest struggle. That is what makes a fully integrated solution so important. Creating the plan and embarking on the journey are just the start, but things will go wrong, and the worst thing to do is be simply reactionary. Designing a system of controls with change in mind up front leads to a smoother ride as the project gets bumpy.
And nothing is more cumbersome than duplicate entry within a system that separates the planners from the approves. Remove the bottleneck and possibility of mistyping critical information by implementing a process that allows all project stakeholders a seat at the table.
Addressing Cost Overruns
With changes created by unforeseen issues under control, the next step is addressing where projects go wrong simply due to poor planning. Cost overruns are running rampant in the construction industry today, but that doesn’t have to be the case.
By integrating scope, cost and schedule to create project controls, leading indicators became more revealing. Then, as things change, the continual update of time and cost is enhanced as this information is brought together in a single system. Thus, enabling management decisions through the analysis of real-time information.
Managing Delays and Scheduling Issues
Finally, if we have learned anything from the last five years, scheduling around the supply chain can be the greatest guessing game of all. Knowing the interconnectedness of a singular asset within the project scope and the impact that one shipping delay can have on the entirety of the project is central to keeping the project under control.
That, more than anything else, was the fundamental need of the Department of Defense in the 1960s. Staying on track and ahead in the technology race was of the utmost importance, and project controls was created and implemented for that core purpose. It worked to overcome delays and scheduling issues then; it continues to work today.
Transform Your Project Controls with Kahua
At Kahua, we set out to solve the challenges that a one-size-fits-all project management system created for construction project controls. The goal was to remove the rigidness of a hard-coded solution and allow project controls on your terms. That’s why our mission from the beginning was to allow customers to build on a foundation, first and foremost. In doing so, we developed a platform as a service (PaaS) that empowers companies to move beyond the way things have always been and create their own fully integrated ability to control projects.
And with a fully integrated platform at the core, work breakdown structures are well defined, detailed analytics are baked into the system, and comprehensive adjustments are wholly controlled, all while allowing for the little nuances of running your particular project. In other words, you now have full control of your construction project controls.
