First Observation Report

I would like to use this opportunity to thank you for giving this challenging role at First Saudi. I am
honored to be appointed as Owner’s Representative.

In the past two weeks, I have been involved in getting acquainted mainly with all the project
management offices to understand the current processes and practices.

Summary
Current Project There are six ongoing projects worth of approximately SAR 550 million
Status
There are 5 projects in Tendering stage, (3 submitted + 2 to be submitted by this
month)

Meanwhile, waiting for the green signal to start the awarded project Saudi
Arabian Catering Phase I worth of SAR 124 million following with the Phase II
worth of SAR 122 million may also be awarded to First Saudi.
Major departments  Estimation
observed  Procurement / Purchase
 Cost Control
 Projects
 Project Sites
 Finance
Key issues observed  Lack of transparency between departments
 Lack of Co-ordination and information sharing
 Poor or nil usage of software across the departments
 Delay in finalizing the procurement decision
 Delay in payment to the sub-contractors
Suggestions  Deployment of an Integrated ERP system covering all the departments
 Implementation of benchmarking (best) practices over a period of time
 Implementation of proper biometric system to monitor the hired man
power resources involved (mainly at sites)
 To introduce the production report which needs to be submitted from
each site on a periodical basis
 To reduce the workload of the procurement head to improve the
efficiency and productivity
 Set-up a centralized Project Management Office at Head Office
Note: The above and below points are mentioned based on the initial observation. However the same
will be further investigated and validated with more points and incorporated in the monthly
executive report

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Detailed Report

1. Estimation Department
 The estimation department obtains quotation from the supplier / vendor during the tendering
process. However, most of the times it became a routine task as the supplier who quoted for
the tendering is not mainly considered after the contract was awarded. It also has to be noted
that no formal regret letters are being sent to the unqualified bidders.
 Not considering the suppliers / vendors who have submitted during tendering after the contract
awarded is made them to think it as just a routine task. Hence many of the vendors are not
approaching it seriously when asking for the quote.
 New contractors are invited by the procurement department after the project awarded. In
some cases, few contractors are requested to level with the least price.
 In many cases, the estimation department is not being informed on the awarding of
subcontracts.
 The entire process is being managed through MS Excel, No usage of any integrated system
o The contractors who have submitted the bid during tendering process shall be considered.
Revised quotation can be obtained from the above contractors along with the new
contractors after the project award.
o An ERP software with the supplier database and prices for materials would enhance the
process and may incur cost savings.

2. Procurement Department

The procurement department has established a process flow and they are adhering it strictly.
However, it is observed that the Team Head is highly over loaded and all other activities are
entirely depending on his decision. The procurement is acting as a center point for all the
process. Hence, a delay in procurement decision could affect the entire project.

 The Procurement Department is not synchronized with the Estimation Department. Hence
both the departments are having their own list of suppliers.
 The Procurement Department is maintaining the fixed price list which is being followed in
many cases. There may be a possibility that some prices might have fallen due to the current
local market condition. Revision of all the price lists to be done periodically.
 There was a purchase department to buy the day-to-day items for the different sites. It was
merged with procurement department last week. Although, it was a wise decision, the work
load for the procurement department is further increased
 There are some cases in which quotations received a year back is not yet finalized
 Procurement Department also does not own any special software to maintain the database
other than MS Excel.

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3. Cost Control
The cost-control department is maintained by only one engineer, who enters all the project
invoices to the system
 Centralized Project Management office may enhance the work.
 Over Head cost allocation on tasks are manually calculated and distributed by MS Excel, cost
control software such as Timberline, Primavera may further enhance the report.
 Recommending to introduce the production report which needs to be submitted by each
site on a periodical basis. This will control the usage of manpower (both hired and owned)
and improve the productivity
4. Projects Department
Every project has its own project / site manager who decides the execution of work. The Projects
Manager supervise all the project execution.
 Suppliers / Vendors are often visiting the site to promote their products. The procurement
department has set a procedure to recommend the products from the project site based on
their experience. However, it is not being followed by the project sites as they feel that it
may not be honored.
 The delay in decision by the procurement department has been one of the major concern for
the Project / Site Manager as it is impacting the execution.
 Accounts Departments are not updating the status of sub-contractor payments to the
project manager, sub-contractors co-ordination affects the progress due to delay payments.
5. Site
 The Time Sheets are entered by Time Keeper manually upon checking individually, the
chances for malpractices and human errors are inevitable. A biometric system deployed at
the jobsite may improve the quality and reduce the payroll entry.
 Inventory control or asset management are being done manually. There is no tracking
system to track or locate the items
o Implementation of integrated Asset Management System is highly recommended
 Project Planners are assigned for every individual site, which could be centralized at Head
Office
6. Finance Department
 General Delay in processing the payment observed.
 Invoice approval is mainly done based on the signature from site manager. A proper auditing
system to verify the invoices could be a better practice.
 The existing accounting software (DELTA) is primitive and having very limited modules only,
which is not suitable for a growing company.
 The co-ordination between the departments are very limited as every department is working
as an individual entity.

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  Fixed Assets are maintained by MS Excel (Depreciations on vehicles, materials are manually
logged at the end of year in MS Excel). No inventory control software is in place which could
have been a better option to maintain the assets.
 Sub-contractors are seeking the support of procurement to clear their payment with finance
department

Conclusion

The above observations are mainly based on the initial level discussion with different departments
and study of their archived files. However, the detailed monthly report which would be submitted
on every month will give a better picture of the overall status.

The below are the intended report for my first monthly report. Kindly let me know if you want
furthermore areas to be incorporated.

Executive Report

 Overall Monthly Report

Tender / Estimation

 Summary of Tendering status

Financial Status

 Cash Flow / AR / AP

Procurement Status

 Monthly Procurement Details by Project

Cost Control

 Budget Vs Actual by Project

Project Progress

 Level 1 Progress Schedule by Project

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