Project Risk Management Remove, Mitigate, Manage
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1 Project Risk Management Remove, Mitigate, Manage Jeri Krug Torsak Project Controls Manager Regional Transportation District
2 Overall Comments Hire the best and the brightest, hire enough staff to manage all aspects of project controls: Cost, Scheduling, Estimating, Contract Administration, Budget Analysis and Document Control It s been estimated project controls saves 10 times their cost. I have found that estimate to be conservative. My last project, project controls saved 38 times the cost of the project controls team Hire a seasoned document control staff, let them send and receive all documents to assure the correct metadata is attached to each document I include document controls within project controls, because they are a key element to the success of project controls and I want to make sure document controls is setup correctly They are the key to accurate data storage and precise data recovery
3 Overall Comments Continued Begin with the end in mind. Whatever is required at the end of the job should be identified and managed throughout the project Project Controls is the PM s conscience. It is our responsibility to provide the PM with informative data so they can make sound decisions. Don t be afraid to identify the risk of their decisions and provide alternatives Trickle-down effect What else is effected by a decision For Project Controls to be effective we must be the web therefore we must push and shove (if necessary) to get into every meeting or discussion where there is the potential for impact to cost, schedule, change order or claim
4 PRIOR TO NTP Clarity in a contract is to the benefit of the Owner and Contractor
5 Request for Proposal Stage - Owner Owner or Project Management Team Finalize all internal governmental agreements (IGA) prior to RFP One of the biggest risks for both owner and contractor are Stakeholders. It s imperative the IGA s are detailed, include who will pay for what, have a NTE cost by owner, time for reviews, tax exemptions etc. Limit the time that a Stakeholder can request a Betterment (work requested and paid by the Stakeholder) so out of contract work does not impact the schedule. Encourage Stakeholders to work directly with the contractor for added work Have the proposal read/edited by all managers, discipline leads and subject matter experts that will be managing the project. The RFP should be in essence the contract Attach all documents by which the project will be regulated. Clearly Identify criteria Have the contractor work in the same document control system and any other management systems possible i.e., quality, inspection, materials testing submittal management.
6 Request for Proposal Stage Owner Continued Require the Contractor include in the bid proposal their Overhead Rate (detailed). Use this as an element of the bid evaluation If it hasn t been completed already, prepare the Risk Register. This involves the entire team Specify what the Owner will approve or accept within the Contract Define the risks that will go to the contractor and those the owner will keep Require the bid be broken out in the same format used by the cost system (bid item, WBS, SCC) to a detail sufficient to understand the estimate. Ask for key cost elements to be explained and detailed. If you are thinking of adding scope to the base contract after NTP, include an option to the contract for the contractor to bid and include in the bid proposal. List all Key Personnel positions identifying fulltime and part-time and duration on the project. Require resume, and approval by the owner. No Bait and Switch. Require 95% of the staff identified in their bid must be on the job. Include the ability to remove any staff not performing their duties
7 Request for Proposal Contractor Contracting Management Team Make sure everyone preparing the bid READS THE RFP The Business Development department typically adds a lot of extra scope and commitments in the proposal. Make sure it is included in the bid price and the contractor s management team can support Review staffing make sure there is a Contractor to Owner counterpart. Make sure staffing is sufficient, staff is cheap compared to claims Make sure there is staff to manage any design and construction subcontractor work Meet with stakeholders to understand their expectations and requirements
8 The Contract Attach the Contractor s Bid Proposal to the Contract, all commitments within the contractor s proposal become contract requirements Require the Contractor to take over for Owner the Stakeholder responsibilities identified in the IGA s and any other ancillary agreements attached to the contract (excluding money commitments) There will always be a case, within the contract, where conflict exists between two or more sections, in this case include when in conflict the more stringent applies
9 The Contract - Mobilization Break mobilization payments out to 4-6 installments. Require submittal of specific scope to obtain mobilization Example: Following the Effective Date, the Mobilization Payments that the Contractor can claim shall not exceed the applicable Mobilization Payment set forth in Table 1. The total Mobilization value is equal to the total of 10% of the actual Design/Build Cost prior to mark-up Mobilization Payment #1 is based on the complete submittal of the Design Management Plan, Construction Management Plan, Document Control Plan, the Configuration Management Plan and the Subcontracting and Procurement Management Plan. Mobilization Payment #2 is based on the complete submittal of the baseline cost-loaded schedule. Mobilization Payment #3 is based on the acceptance by RTD of those items in 21.2(b)(i) and 21.2(b)(ii) and the Project Management Plan (PMP). Mobilization Payment #4 is based on the acceptance by RTD of Mobilization items identified above.
10 The Contract Require the Contractor s subcontracts include the prime contract requirements On a design build, require the designer and contractor are party to the prime contract Write into the contract withholding of money for contract noncompliance such as Corrective Action Request (CAR), Working at Risk (construction without RFC), Non-Conformance Reports (NCR), late Change Order Proposal, late Management Plans Prepare the initial Contract Data Requirements List (CDRL) the list of contractor required submittals; however, make it the responsibility of the contractor to verify/update and require final submittal within 60 Days of NTP No CDRL changes unless official written notice and must be submitted for approval No Planned Submission Date changes without approval Planned Submission Dates must be tied to the schedule for key milestones
11 The Contract - Change Control Limit tiered markup on contract changes Subcontracted Work In the case of subcontracted Work, in addition to the amount paid to the Subcontractor which has done the Work, only one mark-up shall be allowed, notwithstanding the actual number of intervening Subcontractors. This 7.5% mark-up shall fully compensate the Contractor for administration, overhead and profit with respect to subcontracted Work. Lower Tier Subcontractor Costs If work is being performed by a lower tier Subcontractor, the Contractor and higher tier Subcontractor(s) will share in the 7.5% markup. Remove Risk from change orders Change orders which additional risk is to be assumed by the Contractor, the contractor shall clearly identify and include the probability, cost/schedule impact The owner has the right to structure the change order in ways to mitigate or eliminate the risk.. If the contract requires a Disadvantaged Business Enterprise (DBE) commitment, Separate the base contract DBE % and the change order DBE % Change order work will have better prices Potential schedule impacts to change order work reduced
12 The Contract - Change Control Limit the notification time for a potential change notice and all cycles of the change process The Contractor must serve the Owner with a written Notice of Change within 7 Days of when it has knowledge (or reasonably should have obtained knowledge if acting as a prudent Contractor). The Contractor must serve the Owner a Cost Summary within 14 Days following the Written Notice of Change. Require an official letter to request a potential change notice. Avoid the Issues Log for notification of potential changes Only the Project Manager can direct changes to the Contract and it must be in writing
13 The Contract Change Control To minimize schedule impact due to slow change order process include in the contract Change Directives, directing the contractor to proceed with the work while the change is being negotiated Require copies of all subcontractor agreements The contract is transparent, therefore all supporting documentation for change orders or audit will be provided at the owner s request
14 The Contract - Schedule Identify all owner potential schedule risk. Include in the contract schedule contingency for that risk: Owner Directed Schedule Contingency (ODSC) is defined as an amount of time added to the Project Schedule to mitigate the effects of potential Schedule risks associated to the ROW Management process. The Contractor shall include a visible Schedule Activity within each ROW parcel fragnet of 30 Work Days of ODSC into the Baseline Schedule. ODSC shall not be added to the duration of individual Activities. The visible ODSC Schedule Activity shall be the sole successor to the ROW Construction Clearance milestone and the sole predecessor to the start of construction for the area affected by that ROW parcel. Make design reviews linear, then if necessary they can be concurrent to mitigate time Include Interim schedule milestones, and attach liquidated damages Require a Conduct of Construction, estimated quantities, crew sizes, resources Make the schedule submittal, the monthly report (and anything else that is difficult to receive timely from the contractor) all tied to the invoice submittal
15 Contract - Claims Claims dispute, It s the Owner s discretion to decide if final arbitration will be with Disputes Review Board (DRB) or court Schedule claims analysis method to be determined by the Owner Provide a maximum duration for the claims process Non responsiveness in accordance with the contract, by the contractor, will consider the claim closed Limit the notification duration of a claim The Contractor specifically agrees that it relinquishes and forfeits it s right to pursue the claim, and is forever barred from pursuing such a claim through any means whatsoever, including court litigation, if the Claim Notice is not properly served on the Project Manager within 7 days AND the cost summary has not been served within 14 days.
16 After NTP If you want peace, prepare for war Plato Si vis pacem, para bellum
17 Manage Risk Put the tools in place Immediately after NTP, have a joint meeting with all members of the Contractor Team and Owner Team to read through the contract page by page with all managers and leads to understand the contract requirements. This is to minimize the misunderstanding and illuminate intent of the contract moving forward. A contract amendment may be required after this meeting to further clarify the contract to both party's understanding Make sure all staff reads the contract several times Setup monthly Risk Management Meetings with the project staff. Assign every risk to a manager to champion. Have them speak to the merits of the risk removal, mitigation, or source of funding Make every project staff s responsibility to identify potential risk, participate in risk management and seek cost and schedule savings
18 Manage Risk Start each project assuming you will have a $100M claim that impacts cost, schedule, stakeholders, environmental, manufacturing, design and construction. What tools do you want to fight the claim?
19 Manage Risk It s not enough to make sure project controls has the correct management tools, all disciplines on the project MUST have effective management tools. Design Review Inspection Reports RFI s, DCN s, FCN S, NCR s Quality Control Configuration Management Environmental Compliance Safety Issues Tracking Log ETC Select management tools and require the contractor to use the same (Document Control, Design Review, Change Control, RFI, DCN, etc.)
20 Manage Risk It s necessary for project controls to keep an eye on both their own management team and the contractor s management team Provide manager s with a simple way to track issues Audit regularly, if not in compliance prepare a Corrective Action Report (CAR) this must be included as an element of the contract Correspond in writing weekly identifying noncompliance with the contract
21 When The Owner Needs to Find Money Identify scope in the contract that is not required. Remove and seek a credit Write in Value Engineering into the contract and share the savings Remove scope from the contractor that can be bid out cheaper Make sure the SOV includes money for every required submittal
22 Risk Management DO NOT WAVIER FROM THE CONTRACT
23 Risk Management - End of the Project As the project progresses, conduct project closeout Key staff leaving before the project is closed-out is lost project history
24 Conclusion not sure which quote to use The only virtue of being an aging risk manager is that you have a large collection of your own mistakes that you know not to repeat Donald Van Deventer
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