Project Control

and Audit

Copyright 2015 John Wiley & Sons, Inc.

Delhi Metro , pp. 400

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 Project Success…
Delhi Metro (began on 1 October 1998)

• Phase I (65.11km) was completed in December 2005

• On budget and almost three year ahead of schedule.
• Phase II (128km), 2010, Phase III (112 km), 2015 and Phase IV (108.5 km), 2020
• Eight lines at a total length of 413.61 km with more than 271 stations
Monitoring & Control: A Feedback
Process

Detect
deviations

Monitoring Control
1. Measurement 1. Actions
2. Performance Analysis 2. Revised Plans, Cash Flows, Schedules, etc.

Correct
Deviations

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Project Controls in an Organizational
Chart

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The Interaction of Project Controls
Team with the Project Team Leads

How a Project Controller Controls a Project?

https://www.youtube.com/watch?v=oOhS274XaQY
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Project Control: The Big Picture …

Given

Project is
Off-track

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Project Control: The Big Picture …

Given

Project is
Off-track

Monitoring indicates that:

- Project is behind time-schedule, and/or
- Project has exceeded budget, and/or
- Quality of materials or finished work is below standard, and/or
- Productivity is lower than as planned, etc.
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Project Control: The Big Picture …

Resources for Project

Given Control (the 4-M’s)

Project is
Off-track

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Project Control: The Big Picture …

Resources for Project

Given Control (the 4-M’s)

Project is
Off-track

Resources available to the Project Manager for Project Control:

- Money
- Manpower (labor)
- Materials
- Machinery (Equipment)
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Project Control: The Big Picture …

Resources for Project

Given Control (the 4-M’s)
Mechanism and
Elements of Project
Project is Control
Off-track
Adjust the resources

Adjust the project

characteristics: size,
scope, etc

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 Project Control: The Big Picture …

Resources for Project

Given Control (the 4-M’s)
Mechanism and
Elements of Project
Project is Control
Off-track
Adjust the resources

Adjust the project

More labor? Better labor? characteristics: size,
resources
Better supervision? scope, etc
More materials? Better materials?
More equipment? Better equipment?
More money?
Reduce project size? Reduce project scope?
project
Terminate project?
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Project Control: The Big Picture …

Resources for Project

Given Control (the 4-M’s)
Mechanism and Elements
of Project Control
Project is
Off-track
Adjust the resources

Adjust the project

characteristics: size,
scope, etc output

Project
brought back
Was the Project Control successful? How can we tell?
on-track
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Project Control: The Big Picture …

Resources for Project

Given Control (the 4-M’s)
Elements and Mechanism
of Project Control
Project is
Off-track
Adjust the resources

Adjust the project

characteristics: size,
scope, etc output

Project
brought back
on-track
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How can we tell
when Project Control is needed?

Is Project Control is needed now?

How can we tell?

General Clues Specific Clues

Time Cost Performance “Primitive” Other

and Quality Indicators Indicators

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How can we tell when Project Control
is needed?
GENERAL CLUES

◼ Time
- Technical difficulties require more time to solve
- Scope of work increases
- Task sequencing not done right
- Required material, labor/equipment unavailable when
needed
- Key preceding tasks were not completed on time.

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How can we tell when Project Control
is needed?

GENERAL CLUES

◼ Cost
- Technical difficulties that require more resources
- Scope of work increases
- Bid amount (accepted for the contract award) is too low
- Changes in market prices of the inputs

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How can we tell when Project Control
is needed?
GENERAL CLUES

⚫ Performance
- Unexpected technical problems arise
- Sufficient resources are not available when needed
- Quality or reliability problems occur
- Owner/Client requires changes in technical specifications
- Inter-functional complications and conflicts arise
- Market changes that increase/decrease the project’s value

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How can we tell when Project Control
is needed?
SPECIFIC CLUES planned
Equipment-hours
actual
⚫ “Primitive” indicators: planned
Total Man-hours
actual
– More resources or less
resources have been used Amt of concrete used (tons)
planned
actual
than planned
0 500 1000 1500 2000
Amount input to date
– Activities are taking long
than planned
planned
Equipment-hours
actual

– Cost of activity (or of Total Man-hours

planned
actual
project to date) is higher
planned
than expected Amt of concrete used (tons)
actual

0 500 1000 1500 2000

Amount input to date

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How can we tell when Project Control
is needed?
SPECIFIC CLUES
JAN FEB MAR APR MAY JUN

◼ “Primitive” indicators: Activity 1

planned
actual

– More resources or less resources

haven been used than planned Activity 2

– Activities are taking long than Activity 3

planned
NOW

– Cost of activity (or of project to

date) is higher than expected

Legend
planned

actual

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How can we tell when Project Control
is needed?
SPECIFIC CLUES

◼ “Primitive” indicators:
– More resources or less resources
Program
haven been used than planned (schedule)

Progress
– Activities are taking long than (actual)
$
planned

70%
– Cost of activity (or of project to Program
(schedule)
date) is higher than expected 50%
Progress
(actual)

now time
How can we tell when Project Control
is needed?

⚫ So we know Project Control is needed (at time t)

particularly when:

- CVt is –ve

- SVt is –ve

- TVt is –ve

- RVt is –ve,

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Elements of Project Control

Elements of Project Control

Resources-related Project-related

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Resource-related

Re-allocate resources

⚫ Manpower-related control

⚫ Machinery-related control

⚫ Money-related control

⚫ Material-related control

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Resource-related

Re-allocate resources
Also referred to as ”Human Resource Control” This
◼ Manpower aspect of control concentrates on the growth and
development of the people resources on the project

Machinery - Lay-off/fire any under-performing staff

- Hire staff with needed skills

Money - Assign staff with specific skills to specific activities

Issues:
Materials -PM may be seen as a “stern disciplinarian”
- PM must avoid heavy handed actions,
- Fix problems without blaming people
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Resource-related

Re-allocate resources
Also referred to as ”Physical Asset Control” This involves,

Manpower the issues of receipt, inspection, storage, inventory, and

maintenance of physical items.

- Decommission any under-performing equipment

◼ Machinery - Bring in equipment with appropriate capabilities
- Re-assign specific equipment to specific activities

Money Issues:
- Equipment decisions may involve some economic
analysis
Materials - Equipment-based control easier than manpower-
based control

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Resource-related

Re-allocate resources

Manpower
Also referred to as ”Financial Resource Control” These
Machinery controls are in some ways the most familiar in business as
they include the budgeting and capital investment
processes.

◼ Money
- How much money should be spent?
- How should it be spent?
Materials - PM assisted by:
- Project accountant
- Project Finance Manager
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Resource-related

Re-allocate resources

Manpower

Machinery

Money

◼ Materials - Discontinue use of sub-standard material

- Seek new sources of superior material

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Project-related

◼ Options:

- Reduce project size?

- Reduce project scope?

- Terminate project?

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Three types of control mechanisms
- Cybernetic

- Go/No-go

- Post-control

Every control process has some features in common:

✓ the selection of control points,

✓ the determination of how to detect deviation,

✓ the amount of deviation that will trigger a response,

✓ how much deviation from the plan can be tolerated, and

✓ the process to detect problems before they occur

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 Cybernetic control mechanisms
Monitoring mechanism (e.g. sensor) Mechanism:
- System output monitored by
Inputs sensor
Process Outputs
- Sensor measurements
transmitted to Comparator
Effector - Measurements compared with
and Comparator predetermined standards
Decision-
maker -- Deviation from standard sent
to decision-maker
Standards
-If deviation from standard is too
large, signal sent to Effector
Cybernetic control works to automatically detect -This complicated sounding
problems and act. This type of control aimed at process is embodied in simple
reducing deviation from a standard is called a devices like thermostats and
negative feedback loop. electronic computers
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 Cybernetic control mechanisms
Monitoring mechanism (e.g. sensor)

Inputs Mechanism:
Process Outputs
- System output monitored by
sensor
Effector - Sensor measurements
and Comparator transmitted to Comparator
Decision-
maker - Measurements compared
with predetermined standards
Standards
-- Deviation from standard
sent to decision-maker
This is a First-order cybernetic control system.
-If deviation from standard is
(Standards are fixed) too large, signal sent to
Example: Thermostat that keeps room temperature to Effector
24°C all year round.
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 Cybernetic control mechanisms
Monitoring mechanism (e.g. sensor)

Inputs Mechanism:
Process Outputs
- Same as described for First-
order Cybernetic systems, but:
Effector
and Comparator - Standards are not fixed, but
Decision- the manner they change is
maker fixed.
Standards

Memory Pre-programmed Responses

This is a Second-order cybernetic control system (standards vary according to a fixed set of rules)

Examples: Thermostat that keeps room temperature to 27°C in winter and 22°C in summer,
Robot installations, Automated inventory systems, Automated record keeping systems
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 Cybernetic control mechanisms
Monitoring mechanism (e.g. sensor)

Inputs Mechanism:
Process Outputs
- Same as described for First-
order Cybernetic systems, but:
Effector
and Comparator - Standards are not fixed but
Decision- are variable. Also, the manner
maker they change is variable because
Standards there is a consciousness
(human element) involved.
Consciousness Memory, Selection

This is a Third-order cybernetic control system (standards vary according to a variable set of
rules)

Examples: Most Project management systems.

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 Go/No-go Mechanisms
⚫ A go/no-go control is used to determine if a part has been made in
conformance to a specification. Parts within the spec’s tolerance will
be passed. Parts that are outside the spec’s tolerances will be
rejected.
⚫ Yes/No (discrete)

⚫ This process is often applied to design and product development

projects.

Example:
⚫ Was Activity X completed within 6 months?
⚫ Did Activity Y cost exceed its budget of $1.5 million?

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Post-Control
⚫ Also called: Post-performance control, Post-performance
review
⚫ Is done after the activity or project is over
⚫ Like a post-mortem or report card
⚫ Is it “We need to learn from the past to avoid future
mistakes”?
⚫ Generates lessons from current projects so that future
projects can be controlled better.
⚫ A formal post control report should contain the following elements:
o The project objectives
o Milestones, gates, and budgets
o The final report on project results
o Recommendations for performance and process improvement 11-36
 Project Control Tools
– Critical Ratio Control Charts: Critical ratios in conjunction with control charts
can be used to gather greater insight into project performance.

– Benchmarking: Making comparisons to “best in class” practices across organizations

– Phase-gate processing: The phase gate control the project at various points
throughout its life cycle (milestone) to make sure its remains on course and value of the
organization..

– Self-directed teams: is a group of people, usually employees in a company, who

combine different skills and talents to work without the usual managerial supervision toward a
common purpose or goal.

– Quality function deployment: is a structured approach to defining customer

needs or requirements and translating them into specific plans to produce products to meet
those needs.

– The design-build approach: is a project delivery system used in the construction

industry. It is a method to deliver a project in which the design and construction services are
contracted by a single entity known as the design–builder or design–build contractor.
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Critical Ratio Control Charts
⚫ The critical ratio is an overall measure of
project cost and schedule health.
⚫ Made up of two parts:

 actual progress   budgeted cost 

Critical ratio =     
 schedule progress   actual cost 

Using this measure, ratios less than one are “bad” and those greater
than one are “good.”

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Critical Ratio Control Chart

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Critical Ratio Control Charts

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Desired characteristics of a project
control mechanism
⚫ Flexible – PC should be able to react to changes in system
performance
⚫ Cost-effective – Value of PC should exceed cost of PC
⚫ Useful – Must really satisfy the needs of project, not the whims
of the PM
⚫ Timely – Be able to react quickly before the problem
overwhelms the project
⚫ Simple –Easy to understand and operate
⚫ Adjustable – Capable of being adjusted to reflect changing
priorities
⚫ Documented – so that training is possible
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Control of Change and Scope Creep

⚫ Coping with change is often cited as the single biggest

problem in managing projects.
⚫ Scope creep describes how a project’s requirements
can increase during its life-cycle. It may be a project
centered around developing a project that first had only
two essential features, but now needs to have seven.
⚫ Common Reasons for Change Requests
– Client and/or team proactively seeking “better”
solutions to the problems at hand
– Availability of new technologies and materials

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Guidelines for an Effective Change
Control Procedure

⚫ Include change process in all agreements

⚫ Issue a change order for all approved
changes
⚫ Project manager must be consulted
⚫ Changes must be approved in writing
⚫ Master plan must be amended

How to Control Change Requests on a Project

https://www.youtube.com/watch?v=WWdgFFVkPgA
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Schedule and Cost control for
Australia’s New parliament House,
411

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Project Auditing

Copyright 2015 John Wiley & Sons, Inc.

Project Audit

⚫ A formal review of any aspect of a project

⚫ Audits focus on whatever matters senior

management desires

⚫ Project evaluation appraises progress and

performance against standard

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Purpose of Evaluation

⚫ Efficiency – A measure of the project’s success at meeting cost

and schedule goals.

⚫ Customer impact/satisfaction – A measure of how well the

project met the customer’s needs.

⚫ Business/direct success – A measure of the commercial

success of the project. For projects that create a product, this might
be a measure of its market share. For internal projects, this could be
measures of process improvements or quality.

⚫ Future potential – A measure of how well the project developed

new technology or opened a new market.
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Type of Audit

– General Audit: The general audit attempts to touch

at least lightly on all the areas of the project.
– Detailed Audit: The detailed audit on a particular
area
– Technical Audit: The technical audit uses
specialized personnel to investigate the technical
aspects.

Time and money limit the depth of an audit

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Timing of the Audit

⚫ All significant projects should be audited

⚫ Larger projects may be audited several
times
⚫ An audit may also be conducted after the
project is over (post-project audits)

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 Use of the Audit Report

1. It should facilitate the comparison of actual

versus predicted results
2. Significant deviations should be highlighted
3. Reasons for significant deviations should
be given
4. Plans for resolving negative deviations
should be discussed

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 The Project Audit formal report
⚫ Introduction – This section gives the background of the project and its
objectives.

⚫ Current status of the project. Does the work actually completed match
the planned level of completion?

⚫ Future status. Are significant schedule changes likely? If so, indicate the
nature of the changes.

⚫ Status of crucial tasks. What progress has been made on tasks that
could decide the success or failure of the project?

⚫ Risk assessment. What is the potential for project failure or monetary loss?
⚫ Information pertinent to other projects. What lessons learned
from the project being audited can be applied to other projects being undertaken by
the organization?

⚫ Limitations of the audit. What assumptions or limitations affect the data

in the audit? 12-51
The Project Audit Life Cycle
⚫ Project Audit Initiation – During which the audit
methodology is established.
⚫ Project Baseline Definition – When the elements to be
analyzed and the standards of comparison are established.
⚫ Establishing an Audit Database – When the data from
the project is collected.
⚫ Preliminary Analysis of the Project – Involves the
auditor making preliminary conclusions about the results.

⚫ Audit Report Preparation – When the audit report is

written.
⚫ Project Audit Termination – When the audit itself is
reviewed for potential improvements. 12-52
Project Audit Recommendations

⚫ Identify problems earlier

⚫ Clarify scope, cost, and time relationships
⚫ Improve performance
⚫ Locate technological advances
⚫ Evaluate quality
⚫ Reduce costs
⚫ Improve risk identification
⚫ Many more…

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 Management of the Typhoon Project,
pp. 441

⚫ Question 1: Describe the various cost overruns that this

project is facing.

⚫ Question 2: Which issues can be traced back to the

partnership arrangements that underpin the Typhoon?

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Project Controls - Lessons Learned from
delivering the London Olympics

https://www.youtube.com/watch?v=ohqUJ3_9tYY

Essential Project Controls Tools to Master

https://www.youtube.com/watch?v=v1KkWTuZZ-8&list=PL0BCeHxZXW4um0BTGLc2OBuU9TwxuP3yU&index=8

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