PROJECT MANAGEMENT KNEC NOTES

DCM MODULE 3

PROJECT AND CONTACT MANAGEMENT

Topic 1: Introduction to Project Management

What Is A Project?
A project is a complex of activities where resources are used in expectation of returns. It intends to achieve specific objectives. It has a sequence of investments and production activities and a specific group of benefits that can be identified and valued either socially or monetarily.

Key Characteristics of Projects:

Has an objective: A definable result, output or product that is typically defined in terms of cost, the quality and timing of the output from the project activities.
Complexity: many different tasks are required to be undertaken to achieve a project’s objective. The relationship between these tasks can be complex.
Uniqueness: a project is usually a ‘one-off’ not a repetitive undertaking. Even repeat projects e.g. road construction to the same specification, will have differences in terms of resources used & the environment.
Temporary nature: has a start and an end
Life cycle: Conception, planning and organizing phase, implementing, closure and handover.
Customer specific nature: a project is always made to the order of its customer who specifies the requirement
Sub-contracting: the more the complexity of the project ,the more the extent of sub-contracting
Risk and uncertainty: The degree of uncertainty will depend on how a project has passed through its various life cycle phases
Team work: a project calls for team work from members of various disciplines (profession), organizations and sometimes countries all working together to meet the project goals.
Control mechanism: like time schedule, cost, so as to achieve the desired level of quality and reliability.

What Is Project Management?
Project Management is the process of achieving project objectives (schedule, budget and performance) through a set of activities that start and end at certain points in time and produce quantifiable and qualifiable deliverables. Successful project management is the art of understanding the projects are properly planned and integrated with other related activities.

Ensure that managers of the separate tasks that comprise the project do not optimize the performance of their individual tasks at the expense of the total project.

TYPES OF PROJECTS

Various types or categories of projects should be identified so that the mix of projects funded by the parent organization will be spread appropriately across those areas making major contributions to the organization’s goals.

The location, type, technology, size, scope and speed are normally the factors which determine the effort needed in executing a project.

Research and development projects-refers to the investigative activities a business conducts to improve existing products and procedures or to lead to the development of new products and procedures
Manufacturing projects- aim to produce piece of equipment or machinery or consumable goods like soap, cooking fat etc.
Construction projects-Eg.roads, bridges, mining, quarrying
Turn-key projects.- a contract under which a firm agrees to fully design, construct and equip a manufacturing/business/ service facility and turn the project over to the purchaser when it is ready for operation for a remuneration. Turnkey means that the PM will only have to turn the key to have the business or project up running. See BEYOND ZERO mobile clinics PROJECT
Derivative Projects. These are projects with objectives or deliverables that are only incrementally different in both product and process from the existing offerings. They are often meant to replace offerings or add an extension to current offerings.
Platform Projects. The planned outputs of these projects represent major departures from the existing offerings in terms of either the product or service itself or the process used to make and deliver it or both. As such, they become platforms for the next generation of organizational offerings.

(vii) Breakthrough Projects. These projects typically involve a new technology than platform projects. It may be a disruptive technology that is known to the industry or something proprietary that the organization has been developing over time. Eg MPESA

PROJECTS ORGANISATION STRUCTURES

Def: Organizational structure which is also referred to as corporate structure refers to the specifying of the format of an organization reporting relationships, procedures, controls, authority and decision-making processes.

Def: It is also defined as a system of shared beliefs and values that develops within an organization and guides the behavior of its members.

Proactive management of projects and contracts has come to realize that project structures need to be dynamic and not static.

Organizational structures should have ability, capacity and capability of embracing rapid restructuring when environmental conditions dictate otherwise.

There are no organizational structures which are bad or good but such structures can only be appropriate or inappropriate.

FACTORS THAT INFLUNCE THE PROJECT ORGANISATION STRUCTURE

Technological changes. Technological revolution may lead to complexity, varieties of new products, development of new processes, new data, new labour competences, new tools, new ideas etc and all these factors must be harmonized to ensure conformity, compatibility and compliance with the ever-changing technologies in the market.
Simplicity or complexity of the project. Resources required to implement a project depend very much depend on how simple or complex a project is. A project organizational structure therefore must be developed in such a way that the unique needs of the client are addressed adequately, effectively and cost effectively.
Nature of the product to be rolled out by the project. A project rolling out tangible goods or services or works requires different and appropriate organizational structures if good and satisfactory results are be achieved. Expected profitability or value for money plays very crucial role in structuring the organization.
Market competition. The organization has to be structured in a way that will give it a competitive edge over the competitors in the market as only fittest can survive in such a market.
Value of the project. The total project cost or value of money invested in the project gives a proper guide on the most appropriate structure the project should adopt.
Staff technical competences. Develop an organizational structure that the available staff in the organization can conveniently, efficiently and effectively manage.
Whether the organization is mechanistic or organic. The need for centralization or decentralization of authority, making rules and procedures or fewer tasks, formalized communication or internal communication etc. will to a great extent influence the most appropriate structure to be adapted by an entity.
Differentiation-integration dimension. The need for specialized technical competences and division of labour plays a big role in deciding the appropriate structure an organization may adopt.
The size of the organization. The size of labour force on full time basis determines the right structure an entity may adopt. Larger organizations tend to more formal, have more rules, more regulations, increased job specialization, complex decisions to be made etc. while smaller organizations tend to be more informal, have fewer rules and less need for specialized technical competences. All these variables play very important role in determining an organizational structure that will fit best a particular entity.
The lifecycle stage of an organization. The stage at which an organization is very much influences the right organizational structure. An organization at birth, youth, midlife and maturity stages will have different organizational structures at each different stage of lifecycle as the organization evolves from one stage to another.

SIGNS FOR NEED TO RESTRUCTURE THE PROJECT ORGANIZATION.

It is important to regularly and consistently identify and interpret red flags or early warning signs that indicate the need for a new and better project organizational structure so as to ensure that the project delivers maximum results.

Such signs may include but not limited to:

The project management team is satisfied with its existing members in respect of knowledge, experience, efficiency and integrity but the project is not meeting lead time, cost and related deliverables.

There is high commitment of getting the project work done competently but performance not satisfying.

The key technical staff involved in the project management feel overworked, exploited and misused.
Particular technical groups or individual project team members have tendency of blaming each other for failure to meet specifications, lead time and costs.
Project obligations are completed on time, to the specifications and at the right cost but technical groups or individual team members are not satisfied with the gains

TYPES OF PROJECT ORGANIZATIONAL STRUCTURES.

Basically, below are the commonest types or forms of project organization structures:

Simple project organizational structure.

It is a type of organizational structure where only a few product lines or very limited activities are carried out and decisions are made by one person in authority without any consultations.

In this structure the owner of the business and a few employees with the arrangement of tasks, responsibilities and communication are highly informal and accomplished through direct supervision.

In other words, the organization is run by the personal control of an individual.

ADVANTAGES.

Easier to budget and control the project activities as only a fewer product lines and limited activities are carried out.
Specialists can be easily grouped together to share their competences and experiences.
Available technical staff can be easily used in other different projects or other activities where their inputs are critically required.
Provides broader manpower base to work with in any of the project obligations.
Provides continuity in the functional disciplines/areas such as policies, procedures, processes etc.
Provides proper control over personnel since each employee has only one immediate supervisor to report to.
There is effective flow of information for timely decision making since channels of communication are well established.
The project activities are easily prioritized when need arises.

DISADVANTAGES.

No individual staff is directly responsible for the total project activities as each expert only handles his or her area.
Does not provide the project oriented emphasis required to accomplish the project tasks.
Coordination of project tasks may become complex as no formal meetings are held to handle project issues.
Decisions are not arrived at through consensus as only influential individuals take the centre stage and steal the show.
Nobody can be held responsible for incompetent implementation of the project tasks.
Motivation and innovation are not given special attention.
Responsiveness to the needs of the project is very slow or even nil at times.

Functional project organizational structure.

For functionally organized projects, the projects should be assigned to the functional unit that has the biggest interest in ensuring its success or can be most helpful in implementing it.

It is a structure in which the tasks, people and technologies necessary to do the work of the business are divided into separate functional groups eg. Procurement, finance/accounting, marketing, operations, engineering etc. with increasingly formal procedures for coordinating and integrating their activities to provide the project products and services.

It should be noted further that only individuals with what it takes or relevant expertise in a particular project should be assigned responsibilities of managing it.

In other words, the organization is based on the primary activities that have to be undertaken by departments of functional units eg. Production, finance/accounts, marketing, engineering, supply chain etc.

ADVANTAGES.

The advantages of using functional elements of the parent organization as administrative home for a project include but not limited to:

There is maximum flexibility in the use of the available technical staff. Experts may be temporarily assigned to the project, make the required contributions and immediately be reassigned to their normal and routine work.
High efficiency due to specialization.
Day to day operations or activities are easily and effectively delegated.
Centralized control of strategic decisions is easily and effectively retained.
Tightly links structure to strategy by designing key activities as separate units.
Available technical staff may be utilized in many different projects. Individual experts may be switched back and forth between the different projects with relative ease.
Available functional specialists may be grouped to share knowledge and experience. Such expert individuals may provide potential source of creative and synergistic solutions to technical problems.
There is technological continuity when individual experts choose to leave the project and even the organization. This also ensures the procedural, administrative and overall policy continuity that results when the project is maintained by the parent organization.
Provides the normal path of advancement for individual technical staff whose expertise is in the functional area. The project may be a source of glory for those who participate in its successful completion.

DISADVANTAGES.

Just as there are advantages to housing the project in a functional area, there are also disadvantages namely:

The client is not the focus of the project activities and concern. The functional unit has its own routine work to do, which usually takes precedence over the work of the project and hence over the interests of the client.
There is orientation toward the particular activities of the project. It is not usually problem oriented in the sense that a project should be successful.
No particular individuals are given full responsibilities for the project hence exposing the project to risks. This failure to pinpoint responsibility usually means that the Project Manager is made accountable for some parts of the project, but another person is made accountable for one or more other parts. Little imagination is required to forecast the lack of coordination and chaos that result.
Response to client needs is slow and arduous. There are often several layers of management between the project and the client.
Risk of sub-optimizing the project. Project issues that are directly within the interest area of the functional home may be dealt with carefully, but those outside normal interest areas may be given attention if not totally ignored.
Risk of de-motivating technical staff assigned to the project. The project is not in the mainstream of activities and interest, and some project team members may view service on the project as a professional diversion.
Holistic approach to the project is not given sufficient attention. Complex and emergency project activities are not given special attention deserved unless they are designed as a totality. Sharing of new information is slow and difficult at best.
May promote narrow specialization and rivalry or conflicts if not effectively managed.
May create difficulties in functional coordination and inter-functional decision making if not effectively controlled.
May limit development of general managers.
May cost more to carry out a function than it does outside the organization unless outsourced.

Pure project organizational structure.

In this type of structure, the project is separated from the rest of the parent organization system. It becomes a self-contained unit with its own full time key technical staff, its own administration, its own resources, its own reports and its own detailed control procedures.

ADVANTAGES.

The Project Manager has full authority over the project and enjoys complete work force devoted to the project.
All project team members are directly responsible to the Project Manager. There are no functional specialists whose permission must be sought or whose advice must be heeded before making final technical decisions. The Project Manager is truly the project director.
Project Manager communicates directly with senior corporate management. The shortened communication lines result in faster information sharing with minimal failures.
Where there are several successive projects of a similar kind, the structure can maintain a more or less permanent cadre of experts who develop considerable skills in specific technologies. Indeed, the existence of suck skill pools can easily attract customers to the parent organization.
Project team members are more committed to the project. Motivation is high and acts to foster the task orientation.
Decisions are made much faster due centralized authority. The entire project organization can react more rapidly to the requirements of the client and needs of senior corporate management.
There is solid unity of command. There is little doubt that the quality of life of subordinates is enhanced when each subordinate has one, and only one, boss.
This structure is simple and flexible, which makes it relatively easy to understand and to implement.
The structure supports holistic approach to the project. The dangers of focusing on and optimizing the project’s subsystems rather than the total project are often a major cause of technical failure in projects.

DISADVANTAGES.

While the advantages of the pure organization structure make powerful arguments favouring this structure, its disadvantages are also serious:

Risk of overstaffing as such staff are not shared across other projects or parent organizational activities.
Equipment and technical assistance are stockpiled in order to be certain that they will be available when needed. Personnel with critical technical skills may be hired by the project when they are available rather than when they are needed. Such staff also tend be maintained on the project longer than needed, just in case.
Risk of technological changes rendering usefulness of some of the skills outlived. Though individuals engaged with the project activities develop considerable depth in the technology of the project, they tend to fall behind in other areas of their technical expertise in projects characterized as high technology.
Inconsistency in the way in which policies and procedures are carried out is fostered. There is tendency of not understanding problems due to easy excuse for ignoring dicta from the head office.
The project takes a life of its own. Team me

members tend to form strong attachments to the project and to each other. Friendly rivalry may become bitter competition and political infighting between projects is common.

Risk of worry about life after the project ends. Typically, there is considerable uncertainty about what will happen when the project is completed, whether project team members will be laid off or assigned to low-prestige work or break up altogether and this leads to the fear of unknown.

(D)Matrix project organizational structure.

This is a combination of both functional and pure organization structures. It attempts to couple some of the advantages of pure organization structure with some of the desirable features of functional organization structure in order to avoid some of the disadvantages of each and explore maximum benefits of each.

This combination of structures may take the forms of product and geographical divisions or functional and divisional structures operating in tandem.

It is for long term projects.

ADVANTAGES.

The project is the point of emphasis. The Project Manager takes responsibility for managing the project, for bringing it on time, within cost and to specification.
The project has reasonable access to the entire reservoir of technology in all functional divisions. The talents of the functional divisions are available to all the projects, thus sharply reducing the duplication required by the pure project organization structure.
There is less anxiety about what happens when the project is completed than is typical of the pure project organization structure. Even though project team members tend to develop a strong attachment for the project, they also feel close to their functional home.
The response to client needs is rapid and flexible. A project nested within an operational organization must adapt to the needs of the parent organization if the project has to survive.
The project easily accesses representatives from the administrative units of the parent organization. As a result, consistency with policies, practices and procedures of the parent organization are preserved.
It allows a better organization-wide balance of resources to achieve the several different time/cost/performance targets of the individual projects, where several projects are simultaneously undertaken. This holistic approach to the total organization’s needs allows projects to be staffed and scheduled in order to optimize total system performance rather than to achieve the goals of one project at the expense of others.
It covers a wide range of project activities in between. Some functional units might provide human resources while others only supply capacity. This way, it easier and more effective to adapt to a wide variety of projects and subject to the needs, abilities and desires of the parent organization.

DISADVANTAGES.

The balance of power is more delicate. There is no specific office solely responsible for overall final decision making as power and authority are shared by different offices depending on specific project deliverables. When doubts exists about who is in-charge, the project deliverables suffer. If the project is successful and highly visible, doubt about who is in-charge can foster internal infighting for the credit and glory. If the project is a failure, internal infighting will be even more brutal to avoid blame.
Balancing time, cost and performance between several projects is very demanding. Monitoring set of projects to achieve good results is a tough job. Further, the movement of resources from project to project in order to satisfy the several schedules can easily leading internal conflicts or infighting among the several Project Managers handling different projects, all of who tend to be more keen on ensuring success for their individual projects than in helping the total system to optimize organization-wide goals.
Severe problems of shutting down projects. The projects, having individual identities, tend to resist close out even when necessary.
The division of authority and responsibility is very complex. Negotiating for resources, technical assistance, delivery dates etc. is so complex that specialized and complex negotiating skills are imperative.
This type or form of project organization structure violates the management principle of unity of command. Project team members have different bosses to report to. This reporting line causes discomfort and de-motivation among the low level project team members.

(E) Mixed or team-based project organizational structure.

In many ways mixed project organization structure is not distinguishable from matrix project organization structure, but it is typically used for small, short–term projects where the formation of a full-fledged matrix structure is not justified.

It is an attempt to combine both horizontal and vertical coordination through structuring people into cross-functional teams,

Mixed project organization structure is simply a lower version of matrix organization structure. If the number or size of the projects being staffed under mixed project organization structure grows, a shift to a formal matrix organization structure naturally and automatically evolves.

NB:The most important thing to note is that mixed project organization structure has the same, similar and identical advantages and disadvantages as matrix project organization structure as only project period and size differentiate the two with all other variables or finer details remaining the same.

CHOOSING A PROJECT ORGANIZATIONAL STRUCTURE.

The choice of a project organizational structure is typically addressed to the senior management of the parent organization or benefactors. Very rarely do Project Managers have a choice about the way the project interacts with the parent organization.

Basically, the type or form of project organization structure may be influenced by variables such as:

The nature of the potential project, whether researching, manufacturing, works etc.
The characteristics of the various organizational goals.
The total costs and total benefits of each structure.
The policies, priorities and preferences of the parent organization.
The extent of resources required to implement the project more competently.
Geographical and cultural disparities.
The levels of the technologies to be embraced.
The number of projects to be handled simultaneously.
The uniqueness of the project to be rolled out.
The level of efficiency and effectiveness expected.

Before the right project organizational structure is finally chosen or determined, the procedure below is typically followed:

Define the project with a statement of the objectives that identify the major outcomes desired
Determine the key tasks associated with each objective and locate the units in the parent organization that serve as functional homes for such of tasks.
Arrange the key tasks by sequence and decompose them into work packages.
Determine which organizational units are required to carry out the work packages which units will work particularly closely with others.
List any special characteristics or assumptions associated with the project e.g. level technology needed, probable length and size, possible potential problems, who may be assigned to the project etc.
In light of the above, and with full cognizance of the pros and cons associated with each structural form so as to choose the most appropriate organizational structure.

TOPIC 2

What is a Project Life Cycle?
Most projects go through similar stages on the path from origin to practical completion. These stages are defined as project’s life cycle.

The project is born and management team selected, the initial resources are assembled and the work programme is organized. Then the work gets under way and momentum quickly builds. This continues to the practical completion of the project.

Project activities increase as planning is completed and real work of the project gets underway. This rises to the peak and then begins to taper off as the project nears completion, finally ceases when evaluation is complete and the project terminated.

Every project follows the same project life cycle:

Initiation
Planning
Execution(implementing)& Control
Close Out& handover

[1] Conception / identification phase/initiation.

This is the most initial and crucial phase of a project’s life. The idea of a proposing a project is floated and brainstormed widely with a view to supporting or rejecting it. Radical decisions and commitment are made at this phase. It is at this phase where comprehensive feasibility study is carried out to determine project viability. Duties and responsibilities of all members involved in project undertaking are clearly spelt out to avoid conflicts and this division of responsibilities among the project members must be accepted by the respective members.

At the conclusion conception phase, the project purpose and its design pave meters must be documented in clear, simple and accurate terms and agreed upon by all the stakeholders.

In order to achieve good results at conception phase, the following factors must be thoroughly analyzed;

The ability, capacity and capability of the organization and project management team to undertake the project successfully.
The total project costs from the scratch to post-conclusion.
The total budget with the specific breakdowns of project activities to be undertaken.
The detailed and complete specifications or terms of reference of the project.
The financial position of the organization or benefactor undertaking the project.
The knowledge, skills and competence of the project team managing the project.
The benefits that will accrue from the project if successfully implemented.
The supply market capability to avail the materials and services required to accomplish the project
The general acceptability of all the project/contract terms and conditions by all the interested parties to it
The technologies and best practices to be embraced in implementing the project obligations.
Commitment by the key stakeholders to comply with legal and regulatory requirements in place.

2] Development phase/planning.

It is at this phase where the project is developed and designed in sufficient details as is necessary to allow it to be created within the limits set at the conception phase. The project manager and his/her team are appointed to implement the Project Plan. Project Management Plan[PMP] may be defined as the statement of works that clearly spell out and in sufficient details on what, why, when, who and how much of the project will be handled subject to future variations as dictated by the prevailing conditions.

The project management team may also incorporate other functional specialists whose input is crucial to the project, if need be.

3] Implentation and control

It is at this phase where project obligations are actualized or transformed into practical reality. An appropriate reporting system on project progress is provided to ensure continuous information sharing for appropriate action taking by the concerned.

The project plan is fully implemented gradually and continually so as to make sure that all the deliverables of the project are fully realized.

The project deliverables need to be measured thoroughly to make sure that each and every project obligation is competently and cost effectively executed.

The resultant findings are also used in making improvements in future projects.

4] Termination or close out or saturation phase.

This is the saturation stage of any undertaken project. An analysis of the project reports is computed out to provide all the valuable information on:

Success of each method used in project accomplishment.
Performance level of each project team member.
Reliability of suppliers and other third party specialist participating in project accomplishments.
Any huddles that may have been encountered in the process of undertaking the project.
Possible corrective measures to challenges facing the project implementing.
Computation of final accounts so as to arrive at the actual total project cost before releasing the final payment to the contractor and discharging the contractor and final batch of project management team.

5] Post evaluation.

Top management in conjunction with the key project team members and any other functional specialists carry out post mortem of the project to make conclusions and recommendations for future projects.

TOPIC 3

PROJECT PLANNING

Meaning of Project planning
Features of a good project plan
Factors to be considered when planning a project
Types of project plans
Developing a project plan
Constraints in project planning
Techniques applied in project planning (CPA critical path analysis)

PROJECT PLANNING.

One distinguishing feature of projects is that each is tailored toward some unique end-product or result. That uniqueness implies that every project has to be defined anew and a scheme created telling everyone involved what to do. Deciding and specifying what should be done is the main function of project planning.

A complete project plan in summary covers project requirements, works tasks, responsibilities of each member of project management team, schedules, budgets, actual project performance, time frames, cost breakdowns, corrective actions to be taken, project control etc.

The Project Manager has a personal responsibility of assembling all the finer details required to accomplish the objectives of a project in a systematic and structured manner.

Before generating a plan for the project, the Project Manager and the entire project management team must:

Trace the origin of the set objective.
Understand fully the reasons why the objectives were set.
Understand fully the current status of the financiers of the project.
Analyze and understand fully the risks associated with the achievement of the set project objectives.
Involve all the key stakeholders in the design of the project plan right from the scratch.

Factors considered in project planning.

Availability of adequate funds to finance project activities.
Availability of technically competent and ethical staff to manage the project.
Adequate time to plan and manage the project competently including liability defect period.
Steady market supply capacity for the materials and services to be incorporated into the project works.
Need for compliance with the policies and culture of the parent organization and general interests of other key stakeholders.
Need to embrace the best technologies and best practices in rolling out the project end-products or results.
Need to comply with the legal and regulatory requirements in respect of project undertakings.

Developing a project plan.

When planning for the project activities, the steps hereunder should be systematically followed:
Analyze the project objectives, requirements and scope.
Set the works activities and tasks that are required to achieve the objectives and break them down, define them clearly and list them down for ease of reference.
Create the project organization and specify the reporting lines and specific duties of each project management team member.
Prepare the work schedule clearly showing the timings of each work activity, deadlines and milestones.
Prepare a budget and resource plan clearly showing the amount and timing of resources and expenditures for work activities and related items.
Prepare a forecast of time, costs and performance projections for the completion of the project.

Qualities or characteristics of a good project plan.

Projects with good plans stand higher chances of achieving the set project objectives, it is therefore the concern of the project management team to look into it that the developed project plan has the qualities desired. Precisely, a good project plan is likely to have the following features:

Simple, adequate, clear and accurate for easier and more effective interpretation and understanding.
Should provide realistic time frame, giving breakdown of each specific project activity.
Should provide finer details of all the relevant skills required, specifying when such skills will be required.
Should be comprehensive and exhaustive clearly indicating all the project activities.
Should be capable of accommodating future changes without difficulty and interference with planned project activities.
Should be capable of being monitored easily, quickly and effectively.
Should be more cost effective and capable of eliminating waste expenditures to enhance substantial project cost savings.
Should fully embrace and incorporate the most current technologies and best practices.
Should be capable of rolling out end-products or results that are environmentally compliant and environmental friendly.
Should incorporate project activities that fully comply with the legal and regulatory requirements and general interest of the society.
Should be capable to deliver the results or benefits that will achieve the objectives for the project was initiated.
Should comfortably accommodate multi-functional teams or committees.

Importance of project plans.

Project plans may be used for purposes of:

Viewing the mix of projects within each illustrated aspect.
Analyzing and adjusting mix of projects within each illustrated aspect.
Assessing the resource demands on the parent organization, indicated by size, timing and number of projects proposed.
Identifying and adjusting the gaps in the project categories, aspects, sizes and timing of the projects.
Identify potential career paths for developing project management staff.
Eliminating uncertainties or risks associated with the project implementation.
Improving the efficiency of the project management team.
Obtaining better understanding of the project activities.
Providing the basis for monitoring, evaluating. Reviewing and controlling project activities

Types of project plans.

Generally, the following are the commonest types of project plans namely:

BUDGET PLAN. These are the estimates of the expenditures to be incurred in implementing the project activities giving specific breakdown of a cost apportioned to a particular project activity.
CONFIGURATION PLAN. These are the activities associated with project designs and project change control.
FACILITIES PLAN. It lists all the physical operational facilities to be used in the course of implementing the project activities eg. Machinery, equipment, vehicles etc.
LOGISTICS PLAN. It is a summary of all the activities both inbound and outbound that are necessary in facilitating physical movements of materials and staff, procuring the materials and services, safe and secure storage of materials and operational facilities etc. needed to implement the project activities successfully.
MANAGEMENT PLAN. It is concerned with how the project management staff will be spread, their specific duties, roles and responsibilities and reporting lines.
PROCUREMENT PLAN. Summarizes all the goods, services and works that are required for translating and transforming the project activities into reality.
SCHEDULE OR OPERATIONAL PLAN. It is concerned with the breakdown of all the activities involved in the practical actualization of the project plan.
QUALITY MANAGEMENT PLAN. It is concerned with appropriate programmes and practices necessary for assuring and re-assuring consistent quality of the project works.
RESEARCH PLAN. It is a summary of the actions to be taken in scanning the market or industry for the best practices in managing the projects.
TOOLING PLAN. It is a timetable of how the available operational facilities will be used at different times and different dates in executing the project activities.
TRAINING PLAN. It is concerned with the appropriate arrangements for developing and building the capacity of the staff responsible for managing the project.

Contents of project plan or project plan work activities.

Before considering how to plan a project, we should decide why we are planning and what information the plan should address.

The project plan should be designed in such a way that the project outcome also meets the objectives of the parent organization, as reflected by the project portfolio or other strategic selection process used to approve the project.

A good plan should further include allowances for risk and features that allow it to be adaptive or be responsive to emerging events that might disrupt it while being implemented.

Finally, the plan should include any constraints on activities and input materials prescribed by law and society.

The purpose of project planning is to facilitate a formidable direction to project start to successful accomplishment. It is a complicated process to manage a project, and plans act as a road map of this process. The road map should have sufficient detail to determine what must be done next but simple enough that project staff are not lost in a welter of minutiae.

The more time you spend planning, the less time you need to spend on implementation. Plans are only good intentions if degenerated into hard work.

The process of developing project plans varies from one parent organization to another, but any project plan must contain the following basic and core elements:

Overview of the plan. This is a short summary of the objectives and scope of the project, together with the lists of the significant events in the proposed project. It also addresses the expected benefits or profitability and probable technical hitches. It is typically directed to the top management and contains a statement of the goals of a project, a brief explanation of their relationship to the parent organization’s objectives, a description of the managerial structure that will be used for the project and a list of the major milestones in the project schedule.
Objectives or Scope. This contains a more detailed statement of the general goals or project deliverables and outcomes noted in the overview for the purpose of communicating to project team members and other stakeholders to make decisions that are consistent with the proposed project expectations. Such statement should include profit and competitive aims as well as technical goals.
General Project Approach. It describes the managerial and the technical approaches to the project work, including plans that go beyond the parent organizational standard management practices. The technical discussion describes the relationship of the project to available technologies. If consultants and sub-contractors are to be engaged without special approval, it should be clearly made known in advance.
Performance plan. It includes a complete list and description of all reporting requirements, customer-supplied resources, liaison requirements, advisory committees, project review and cancellation procedures, propriety requirements, technical deliverables and their respective specifications, drawings, special instructions, lead times or delivery schedules, incentives for exemplary performance, penalties for non-compliance, specific procedures for making changes in project contractual obligations, payment modalities and any other specific management agreements.
Payment modalities. The conditions that must be met before any payment is made should be clearly specified.
Quality management practices. Safe-fail tests required to ensure right and consistent quality levels should be clearly specified.
Warranties and guarantees. Performance commitment required to assure and re-assure competent implementation of the project activities should be clearly specified.
Schedules. It outlines various schedules and lists of all milestone events. Each task is listed and the respective estimated time apportioned to it including specific staff responsible for each of such tasks are identified.
Human Resources. It lists the expected staff technical competences including special skills, types capacity building required, possible recruitment challenges, legal or policy restrictions on work force composition, security clearances, confidentiality protection, protection of intellectual property rights. It is helpful to time-phase personnel needs to the project schedule.
Financial and Other Resources. Details of both capital and expense requirements are provided. One-off budgets are separated from recurring project costs. Cost monitoring and control procedures should also be provided adequately. Special resource requirements for the project such as special machines, special equipment and other special physical and non-physical facilities should be fully covered.
Total project cost. Specific cost breakdowns for all the project activities required to implement the project competently should be clearly indicated.
Risk Management Plans. Potential problems that commonly strike projects similar to the one being undertaken as well as potential lucky breaks that could affect the project are analyzed and substantially covered. Mitigation plans to deal with such problems and breaks should be developed early enough in the project’s life. Improving project plan is a more effective risk management approach than using the actual risk management tools.
Staff obligations. The responsibilities, roles and duties of project management team member involved in the implementation activities should be clearly specified and counter-signed by each individual staff.
Evaluation methods. Each and every project should be evaluated against standards and by methods established at the project’s inception, allowing for both the direct and ancillary goals of the project. A brief description of the procedure to be followed in monitoring, collecting, storing and evaluating the history of the project should be developed.
Change control. These are the procedures for reviewing and making decisions about requests for changes to any aspect of the project plan.
Documentation. List of all the records and documents to be produced and how they will be organized and maintained is prepared.
Implementation. Discussion and guidelines showing how the client will convert to or adopt the results of the project are prepared.
Economic justification. Summary of alternatives in meeting project objectives clearly showing trade-offs between costs and schedules is prepared.
Testing. Listing of things to be tested including procedures, timing and specific staff responsible for each.

Causes of failures or constraints in project planning.

Project planning may fail due to one or more of the reasons or constraints hereunder:

Failure to understand and interpret the project objectives accurately by the stakeholders.
Inadequate funding that may lead to the stalling of plan.
Attempts to cover too much within too limited time.
Use of inaccurate and inadequate data in planning the project.
Engaging incompetent and unethical staff in project planning.
Failure to organize, harmonize and coordinate project plan activities systematically.
Use of inappropriate technologies in the project planning.
Lack of true support and total commitment from the key stakeholders.
Use of inappropriate materials in the project plan.
Lack of strong co-operation and teamwork among the key stakeholders.
Poor feasibility studies leading to the selection of a wrong project.
Exit of key technical staff from project planning without proper replacement.
Failure to comply with legal and regulatory requirements in place.

TECHNIQUES APPLIED IN PROJECT PLANNING

Much of the technical contents of the project plans is derived from the basic tools or techniques hereunder:

Work breakdown structure and work packages-Used to define the project works and breakdown of specific tasks.
Responsibility matrix-Used to define project organization, key individuals and their respective specific responsibilities.
Gantt charts-Used to display the project schedule and detailed finer tasks.
Events and milestones-Used to identify critical points and major occurrences on the project schedule.
Network analysis

Critical path}

PERT }NA SALEEMI , QT SIMPLIFIED

TENDERING METHODS VS CONTRACTING METHODS

A tender or bid is a formal offer to supply goods or services for an agreed price.

Tendering is a method of locating and identifying the potential and significant supply sources in the market by inviting them to come forth and make offer of the price and terms on which they will supply specific goods or services in response to the requirements of the procuring entity or client to be. On acceptance, this becomes the basis for the subsequent contract.

PROJECT TENDERING PROCESS

The interested eligible supply sources respond by obtaining the tender documents from the procuring entity, which they complete and submit back in accordance to the tender instructions.

Upon opening of the completed and submitted back tender documents, the procuring entity constitutes an evaluation committee carry out both technical and financial evaluation.

The evaluation committee, upon successful evaluation, forwards its final evaluation report to the relevant office or committee for further scrutiny with a view to awarding the tender to the most responsive tenderer.

Tendering may be done openly or restrictively, depending on the unique needs of the procuring entity.

Whatever the tendering method, whether open or restricted, the entire tendering process must meet the set objectives of the procuring entity or potential client.

TYPES OF PROJECT TENDERS

a)Open tendering

Open tendering may be national or international depending on the market supply capacity. In open tendering, any willing supply source is free to treat the offer. Open tendering whether national or international is characterized with the following features:

All willing supply sources or contractors are free to apply or treat the offers.
The offer will be advertised in newspapers of wider geographical coverage.
The required works must be accurately specified.
The information given in the tender documents must be uniform to all the tenderers.
The criteria for awarding the contract must be clearly spelt out in the tender document.
The deadline date and time for submission of the tender bundles must be clearly indicated.
The tender documents may be obtained upon payment of a non- refundable fee set by the tender committee.
Tenderers or their authorized agents are allowed to attend the tender open exercise.
Tender documents delivered after the deadline date and time will be returned back to the owners unopened.
Tender documents will be submitted in plain sealed envelopes.
Tender documents must guide the tenderers on where to obtain and deposit completed tender documents.
Any alteration in the information in the tender documents will be communicated to all the applicants.

ADVANTAGES OF OPEN TENDERING

Earns the organization good reputation in the market for fairness, transparency and accountability.
Increases supply sources for the selection of the best contractors.
Sourcing expenses are recovered through tendering fee.
Ensures that the contract terms and conditions are to the advantage of the

procuring entity.

Less involving in terms of cost, time and administration.
Enables new contractors to gain a hold in the market.
Prepares the potential supply source or contractor in advance on the expectation of the procuring entity or client.

DISADVANTAGES:

Loss of tender fee by tenderer incase of withdrawal or failure to win contract or failure to sign contract documents in time.
Tenderer cannot vary contracting terms and conditions even when such terms are harsh.
Some of the wordings in the tender documents may be too technical to interpret by the tenderer.
Tenderer has no free hand to modify the information in the tender documents once submitted to the procuring entity.
High possibility of appeals by unsuccessful tenderers leading to delays.
The procuring entity may get many applications leading to high administration work.
Good contractors in the market tend to shy off for fear of their trade secrets leaking to outsiders including their competitors.

It is a form of negotiation after receiving formal tender documents from applicants but before selecting the eventual winner of the tender. It is usually initiated to discuss some pertinent issues with a view to making improvements in some tender subject matter e.g. quality, costs, lead time etc.

b) Restricted tendering

Type of tendering where only few identified prospective profitable contractors are invited to submit their proposals or quotations for consideration unlike open tendering, each prospective contractor is handled individually with the discussed data remaining confidential.

After analytical comparison and contrast of proposals submitted, evaluation is carried out based on both technical and commercial benefits. Thereafter the most profitable contractor is awarded the tender.

Circumstances for using restricted tenders

If the provisions required are unique.
If there are only fewer contractors with required capacity.
If there is need to maintain both client’s and contractor’s trade secrets.
If the required provisions are urgent.
If it is organization’s own policy that certain specific procurement requirements be sourced through restricted tendering.
If there are only few approved contractors in market capable of meeting client’s requirements.
If the client is a non- profit maker and not interested in commercial aspects but superior quality.
If other tendering methods have failed before. If the client is an old player in the market and understands market conditions very well.

ADVANTAGES

Eases sourcing for contractors with unique service provisions.
Ensures that organization’s trade secrets are maintained and kept confidential.
Enhances urgent construction works.
Ensures that organization’s policies are adhered to strictly.
Reduces sourcing costs as only few contractors are handled.
Improves confidence in the contractor relationship.
Reduced administration cost.
Reduced lead times.
Motivates the supply source for having been recognized in the industry.

DISADVANTAGES

Reduced competition hence compromised quality and total costs.
Denies an opportunity to other would be better contractors.
Difficulty in developing new and better contractors in the market.
Encourages malpractices as tendering process is not open to ensure fairness, transparency and accountability.
Client may end up not getting the right contractor thus resulting into delays.
Gives the client bad history and reputation in the market.
New clients in the market may not find this method practicable as they lack knowledge and information on contractors to restrict themselves to.
Little known supply sources or contractors are denied the opportunity to participate in the tendering process as only the established ones have the advantage.

c)International Competitive bidding

Competitive bidding emphasizes direct prices rather than the total cost. Other added expenses apart from direct price are not given sufficient attention

It achieves the lowest price because of the following reasons:

There is post tender negotiation which ensures that prices remain lowest all throughout.
There are many bidding supply sources or contractors’ hence stiff competition and this leads to better offers.
There are quality assurance schemes which assure and reassure quality by all contractors.
There is true tight competition among the contractors with each one striving to offer the best to survive.
There are up to date approved contractor lists which give guidelines on who is offering lowest prices are.
The contracts are ever long leading to long term strategizing with low prices much more.

CAUSES OF COMPETITIVE BIDDING FAILURE IN ACHIEVING LOWEST PRICES:

Competitive bidding may at times fail to achieve lowest prices under the following circumstances:

When the market is non- competitive i.e. presence of monopolistic and imperfect market conditions.
When the contracting services are urgently required giving no room to source for many supply sources or contractors.
When contractors are not technically competent and actually not willing to contract.
When specifications are not clear to contractors making them not able to project true total costs, when the contract value does not justify the cost due to under evaluation.

PROBLEMS WITH COMPETITIVE BIDDING:

Common problems likely to arise with competitive bidding include:

Quality is not given sufficient attention as criteria bases mostly on direct prices
If it is a reactive provisioning approach instead of being proactive.
Operating with wider contractor base is very costly.
It conflicts with better contracting practices which advocate for total costs and quality rather attractive direct prices.
It is not capable of posting substantial savings hence reduced profits or benefits.

c) Negotiated tenders: Negotiated tenders are obtained by the employer inviting a contractor of his choice to submit prices for a project. Usually this is for specialized work or when particular equipment is needed as an extension of existing works, or for further work following a previous contract.

Sometimes negotiated tenders can be used when there is a very tight deadline, or emergency works are necessary. A negotiated tender has a good chance of being satisfactory because, more often than not, it is based on previous satisfactory working together by the employer and the contractor.

When invited to tender the contractor submits his prices, and if there are any queries these are discussed and usually settled without difficulty. Thus mistakes in pricing can be reduced, so that both the engineer advising the employer and the contractor are confident that the job should be completed to budget if no unforeseen troubles arise.However, negotiated tenders for public works are rare because the standing rules of public authorities do not normally permit them. But a private employer or company not subject to restraints such as those mentioned in the next section can always negotiate a contract, and many do so, particularly for small jobs. Even when a negotiated tender is adopted it is usual to prepare full contract documents so that the contract is on a sound basis. Production of the documents also means they are available for open or selective tendering should a negotiated tender fail, or should the chosen contractor be unable to undertake the work.

TENDER DEBRIEFING

Debriefing refers to disclosing of confidential information upon request by an unsuccessful tenderer.

Information requested for debriefing may include reasons for not selecting, advantages other tenderers had over him, names of bid winners etc.

Legally, debriefing information may only be given verbally and not in writing.

The advantages for tender debriefing include:

Establishes client reputation for fairness and transparency.
Getting unsuccessful contractors know what to do so that they can be more competitive in future.
Ensures smooth relationship with contractors/vendors in the market.
Reduces possibility of legal battles from unsuccessful tenderers.
The debriefed discussion reports help for future reference to ensure continuous service improvement.

Disadvantages:

Breaches commercial confidentiality.
Time consuming and costly.
May end up in arguments leading to poor relationships.
Any error committed by tendering board may lead to commercial disputes.
Opens door to further challenges by other unsuccessful tenderers.
May discourage (the would be) better tenderers who may not wish their trade secrets exposed out to competitors.
May lead to corrupt deals out of influence due to physical contact as familiarity can easily lead to contempt.

DEBRIEFING RESTRICTIONS:

The recommendations are that debriefing:

Should not disclose information about other tenderers which may breach commercial confidentiality
Should not be turned into arguments or casing to justify non- compromising tender issues
Should only confine itself to the unsuccessful bid and weaknesses for rejection g. quality issues, inadequate experience, lead times, total costs, technological level etc.
Should only confine itself to indicating perceived strengths of unsuccessful tenderers
Should request for contractor’s views on the debriefing process
Should strongly encourage the unsuccessful tenderers to continue having ambition to tender in the future
Information sought for should only be given verbally
Only one tenderer should be attended to at time and not two or more.

TOPIC 5

CONTRACT MANAGEMENT

Types of contracts

Contract pricing methods:

Design and development of contracts usually set the stage for either the success or failure of the commercial relations between the client and the contractor. A wide selection of contract pricing methods is necessary to provide the flexibility needed for effective management projects and contracts.

The contract pricing method selected helps in determining:

The degree and timing of the cost responsibility assumed by the contractor
The amount of profit or fee available to the contractor
The motivational implications of the free portion of the pricing method

Most contractors are very risk averse in the sense that they may not be willing to accept large money amounts of uncertainty unless they are able to transfer this risk to the clients in the form of higher prices.

The project and contract managers have a range of contract pricing methods designed to meet the needs of a particular project or contract. There are a number of contract pricing methods depending on the costs involved, lead time involved, simplicity

Or complexity of the project, risk level associated with the project, pricing policies practiced by the parties to the contract, urgency at which the project is required, track records of the parties contracting together. Etc. these include;

A] Firm fixed price contract

This is an agreement to pay a specified price after the contract has been competently performed and accepted by the client.

Since there is no adjustment in contract price after the work is completed and actual costs are known in advance, the risk to the contractor tends to be high making most contractors reluctant to accept it.

It should be noted that a firm fixed price contract may not always stay fixed. A contractor who is losing money may request and get some relief if any of the following apply;

The client in one way or another has contributed to the loss but this must be justified by the contractor
The client badly needs works and other contractors in the market are not willing to undertake the same at the established costs
The contractor has multiple unique works and time is too short to do anything but to get the works at the increased costs from the initial costs
The client’s staff do not employ sound project and contract management practices

ADVANTAGES:

Client is not affected by market price variations and therefore does not bear additional costs unless otherwise
Client can plan the finances accurately as no changes in the cost are expected unless otherwise
Client has easy time of managing the contract due to limited responsibilities
Client stands higher chances of making bigger savings
Chances of conflicts arising are very minimal

DISADVANTAGES

Client will not attract the best contractors in the market
Quality may be compromised in the name of reducing losses following price changes in the market
May lead to poor commercial relations between the contracting parties incase of sharp price changes in the market
Client may earn a bad image in the market for not having fair contact terms and conditions

B] Cost plus award fee method

In this method, the contract costs are only estimated with the client taking a commitment to cover all the contractor’s cost including profits. This method of pricing may only be appropriate to the client when it is impossible to use any other pricing methods.

ADVANTAGES

Client will attract the best contractors in the market
Better quality as contractor has free hand to spend
Better client- contractor relations as there is fair sharing of benefits
Clients earn good reputation in the market

DISADVANTAGES

Client is overburdened with managing the contract to ensure true contract costs
Possible disagreement over payments as there is no clear cut a way of measuring and justifying the contract costs
Difficulty in budgeting for the contract costs since accurate figures cannot be projected in advance
Difficulty in planning for future requirements due to lack of realistic cost data
May result into staff complacency giving the contractor a leeway to charge more than actual
Difficulty in setting performance measurement since standards cannot be reliable developed
Client may be tied-up to specific contractors hence compromising competitiveness

C] Fixed price with economic price adjustment method

This method is particularly used to recognize economic contingencies such as unstable market and economic conditions which would prevent the establishment of a firm fixed price contract. without a larger contingency for possible cost increases or decreases for the purpose of protecting client against future market price changes

When setting indexes for price adjustments clauses in this method, the following rules must be followed:

Collect information on market economic forces from reliable sources only
Avoid broad indexes and use the lowest level classification for each contract activity
Develop a weighted index for each contract activity
Select market economic index by type and location
Define energy taken by type and location
Analyze the past history of each proposed index versus the actual price change of the contract activity in question

d] Fixed price redetermination method

In this method, contracts provide for a firm fixed price only for initial contract period with a redetermination either upward or downward at a stated time during contract performance or after contract completion.

It is usually applied in those circumstances calling for changes at earlier stages when fair and reasonable prices cannot be established and the amount involved is so small and performance period so short that use of any other contract pricing method would be impractical

E] Cost sharing:

In some situations, the client and contractor may agree on what they can consider to be a fair basis to share the cost almost pro- rata for the purpose of sharing the benefits and losses fairly.

F] Time and materials pricing method:

Where the actual contract cannot be predetermined in advance, the contracting parties may agree on a fixed rate per cost hour that includes overhead and profits, with materials supplied at cost.

Issues in contract management

MANAGING CONTRACTUAL RISKS:

In order to ensure competent performance of the contract, the client must make sure that specifications are as much clear and accurate as possible, select the most competent contractor in the market, pay the contract promptly, hatch good working relations, motivate the contractor, include punitive clauses in the contract document and interface with the contractor regularly and consistently. Incase of any defects or incompetent contract performance, the injured party or plaintiff has contractual rights to be compensated for the damages suffered. The form of compensation for damages applied shall depend on magnitude of the financial injury suffered and contract terms and conditions under liability clause. However, the plaintiff shall be strictly required at law to provide proof to justify for compensation that:

Plaintiff was owed duty of care by defendant.
There was breach of contract.
Plaintiff actually suffered a loss.
There was nothing the plaintiff could do to prevent the loss or damage.

Any contract incompetently performed shall automatically nullify works certification. The parties to the contract therefore shall be squarely and solely held liable for any breach of contract. Where defects have been suspected, diagnosed and qualified, the following options are available:

The contractor to rework out such defects at own cost if defects in question are within tolerance
Client to suspend and contract out rightly and terminate any further payments if magnitude is beyond tolerance
Contractor to demolish the entire works so far performed defectively and start afresh at own cost
Client to reduce the equivalent price if defect is minimal but contractor must consent to this
Client to sue the contractor for damages or specific performance as the case may be

SOURCES OF CONFLICTS.

All stages or phases of a project appear to be typified by conflicts. Most conflicts mainly center on such matters as:

Decisions on schedules among different functional specialists.
Decisions on priorities among different functional specialists.
Misinterpretation of project deliverables among different stakeholders.
Disagreement on administrative procedures between client and contractor.
Having different goals and expectations among different stakeholders.
Uncertainty about who has the authority to make binding decisions.
Interpersonal conflicts between people who were parties-at-interest in the project due to conflicts of interest.

Methods of conflict resolution.

Commonly there are five major methods used in resolving conflicts namely:

Withdrawing, where the conflicting parties find it better to refrain than to retreat from the conflicting issues. Such parties believe that silence is golden and resort to seeing no evil, hearing no evil and speaking no evil.
Smoothing, by playing down the differences and emphasizing common interest. Issues that might cause divisions or hurt feelings are not discussed.
Compromising, by splitting the difference, negotiating non-agreeing issues and searching for an immediate position. Such parties believe that better a half loaf than none at all. In this method no one loses but no one wins.
Forcing, where the parties become antagonists, competitors and non-collaborators. At the end of it all, one party wins while the other loses. Fived and rigid positions and polarization are taken thus creating a victor and a vanquished.
Confrontational or problem solving, where there is open exchange of information about the cause conflict or problem with each seeing it and party working through of differences to reach a common solution so that both parties win.

Confrontational or problem solving conflict or dispute resolution method is characterized with features including but not limited to:

The parties in conflicts or dispute have vested interest in the outcome.
The parties in conflicts or dispute believe that they have the potential to resolve the conflict or dispute and to achieve better solution through collaboration.
There is a recognition that the conflict or dispute or problem is mainly in the relationship between the individuals and not in each person separately.
The goal is to resolve the conflict or dispute or problem but not to accommodate different points of view.
The parties involved are problem-minded instead of solution-minded and parties jointly search out the issues that separate them. Through joint effort, the problems that demand solutions are identified and later solved.
There is a realization that both aspects of a controversy have potential strengths and potential weaknesses. Rarely is one position completely right and the other completely wrong.
There is an effort to understand the conflict or dispute or problem from the other party’s point of view. Full acceptance of the other is essential.
The importance of looking at the conflict objectively rather than a personalized sort of way is recognized.
An examination of one’s own attitudes is needed before interpersonal contact on less effective basis has a chance to occur.
An understanding of the less effective methods of conflict resolution.
One needs to present face-saving situations. Allow parties to give so that a change in one’s viewpoint does not suggest weakness or capitulation.
There ie need to minimize effects of status differences, defensiveness and other barriers which prevent parties from working together effectively.
Parties must always be aware of the limitations of arguing or presenting evidence in favour of own position while downgrading the opponent’s position.

Dispute resolution involving third parties.

When the parties to a contract happen to have disputes that they cannot resolve themselves, they may involve third party specialists by using dispute resolution methods such as:

Of all the above dispute resolution methods involving third parties, arbitration has proved to be the most effective and efficient.

Arbitration

It is a method of settling disputes out of the courts.

Arbitration may arise by inserting arbitration clause in the contract where the lords in the house of the lords deem it befitting to refer a dispute to an arbitrator and by regulation by state where it is mandatory for certain disputes to be settled through arbitration e.g. marine insurance cases

Legally, arbitration verdicts cannot be reviewed under the act except under the following circumstances:

If it is an appeal on the question of law and both parties must agree on this
When it is necessary for the arbitrator to give his reasons in greater details. Leave for this must be obtained from the court of law
If it is necessary and reasonable to determine a preliminary point of law. All parties to agree or leave of the court to be obtained

ADVANTAGES

Formal and straight forward. Private hence no publicity.
Quicker hence no time wasting.
Easier revision of works certificate.
Flexible as there no court restrictions or rigidities.
Greater specialist knowledge. Cheaper i.e. no legal representation, simple procedures, reduced arbitration fee.
Freedom of choice of the arbitrator. However, courts may determine arbitrator where there is deadlock.
Reduced misunderstandings as it is regulated by statute.
Better commercial relations between the parties as there is no winner or loser in arbitration.
Freedom of choice of venue

DISADVANTAGES

Some arbitrators are not skilled enough.
No formal rules resulting in unpredictable decisions.
Parties may end up in court incase of deadlock.
Appeal is only possible on point of law and not point of fact.
Arbitrator has less powers and authority compared to the courts.
Arbitrators only concentrate in urban areas giving rural areas raw deal.

Qualities of a good arbitrator:

Must possess expertise skills in his area of specialization.
Must be impartial i.e. patient and tolerant.
Must be independent in decision making.
Must be honest and ethical.
Must be very current in his area of specialization. Must change reasonable rates.

2.Litigation

Where arbitration fails to resolve a commercial dispute, the parties can resort to the courts of law.

Parties only resort to litigation as the last alternative. This method has proved very unpopular in settling commercial disputes for the following reasons :

It is very expensive i.e. court fee, lawyer’s fee, witnesses expenses etc it takes longer before decisions are made leading to delays.
No secrecy as cases are heard in the public.
May result to poor client- contractor relationship as one emerges a winner while the other the looser.
Parties have no freedom of who should preside over their disputes. Parties have no freedom of choice of venue.
Very inflexible and rigid due to strict court restrictions and rigidity

ADVANTAGES

Law courts are handled with highly skilled learned friends.
Petitions against any unsatisfactory verdicts are possible so long as there are adequate and sufficient grounds.
Law courts have supreme powers and more authority than the arbitrators.
Law courts offering litigation services are spread all over the country.
Law courts have formal rules for easier prediction of verdicts.
Law courts have supreme powers as verdicts made by them are more respected compared to methods of dispute resolution.

3.Adjudication is the legal process by which an arbiter or judge reviews evidence and argumentation, including legal reasoning set forth by opposing parties or litigants to come to a decision which determines rights and obligations between the parties involved.

Mediation: Definition: Mediation is a voluntary process in which an impartial person (the mediator) helps with communication and promotes reconciliation between the parties which will allow them to reach a mutually acceptable agreement. Mediation often is the next step if negotiation proves unsuccessful.

The Process: The mediator manages the process and helps facilitate negotiation between the parties. A mediator does not make a decision nor force an agreement. The parties directly participate and are responsible for negotiating their own settlement or agreement.

At the beginning of the mediation session, the mediator will describe the process and the ground rules. The parties or their attorneys have an opportunity to explain their view of the dispute. Mediation helps each side better understand the other’s point of view. Sometimes the mediator will meet separately with each side. Separate “caucusing” can help address emotional and factual issues as well as allow time for receiving legal advice from your attorney. Mediations are generally held in the office of the mediator or other agreed location.

Agreements can be creative. You could reach a solution that might not be available from a court of law. For example, if you owe someone money but don’t have the cash, rather than be sued and get a judgment against you, settlement options could include trading something you have for something the other wants. If an agreement is reached, it will generally be reduced to writing. Most people uphold a mediated agreement because they were a part of making it. It can become a contract and be enforceable. If there is no agreement, you have not lost any of your rights and you can pursue other options such as arbitration or going to trial.

When and How Mediation Is Used: When you and the other person are unable to negotiate a resolution to your dispute by yourselves, you may seek the assistance of a mediator who will help you and the other party explore ways of resolving your differences. You may choose to go to mediation with or without a lawyer depending upon the type of problem you have. You may always consult with an attorney prior to finalizing an agreement to be sure that you have made fully informed decisions and that all your rights are protected. Sometimes mediators will suggest that you do this. Mediation can also be used at any stage of the conflict such as facilitating settlements of a pending lawsuit.

Characteristics of Mediation:

Promotes communication and cooperation
Provides a basis for you to resolve disputes on your own
Voluntary, informal and flexible
Private and confidential, avoiding public disclosure of personal or business problems
Can reduce hostility and preserve ongoing relationships
Allows you to avoid the uncertainty, time, cost and stress of going to trial
Allows you to make mutually acceptable agreements tailored to meet your needs
Can result in a win-win solution

5.Negotiation {parties themselves try to solve the problem}

Negotiation is by far the most common form of dispute resolution. The objective of sensible dispute management should be to negotiate a settlement as soon as possible. Negotiation can be, and usually is, the most efficient form of dispute resolution in terms of management time, costs and preservation of relationships. It should be seen as the preferred route in most disputes.
Its advantages are:

Speed/ cost saving/confidentiality/preservation of relationships/range of possible solutions/control of process and outcome

If you are unable to achieve a settlement through negotiation, you will need to consider what other method or methods of dispute resolution would be suitable.

NB; it will still be possible or may be necessary to continue negotiating as part of or alongside other forms of dispute resolution.

6.Conciliation – as per mediation, but a conciliator can propose a solution.

MAIN CONTRACT CLAUSES

Clauses in a contract document are inserted to safeguard against generous payments or safeguard against cost structure. They ensure that a party to the contract does not suffer a financial loss.

Clauses in a contract may be expressed or implied. The commonest clauses inserted in a contract document may include:

Force majeure clause:

The clause safeguards parties to the contract against liabilities caused by vents beyond help and control. The clause states that no payment shall be effected if any event beyond help and control of ether party or both parties takes place. No party to the contract shall victimize the other in liability should such an event arise.

Major risks covered under this clause may include:

Lightning
Bad weather effects
Acts of God e.g. earthquake, tsunami, floods
Death of principal party to the contract
Instabilities e.g. wars, rebellions, uprisings
Legal effects g. court orders, new legal restrictions
Enemies to the contract e.g. strikes by staff
Destruction of contract matter

Further take note that “force majeure” shall not apply in events where there is an alternative of performing the contract despite harsh prevailing events

2 Retention fee clause

This clause entitles the contractee {client} to hold certain percentage of contractor’s payment for a specified period after contract performance to take care of any thereafter liabilities. Retention fee clause therefore performs the following purposes:

Ensuring quality contract performance.
Taking care of post contract liabilities.
Compelling contractor to cost the contract accurately and honestly.
Motivating contractor to strictly honor up contract terms and conditions.
Giving client ample time to qualify contract performance before final clearance.

Dispute resolution or arbitration clause:

This clause helps to identify in advance the method of resolving contract disputes should they arise in future. The arbitrator to preside over the disputes may be nominated in advance or named on the floor. It helps to speed up disputes hence saving time and improving client- contractor relationship

Payment schedule clause:

This clause specifies modalities of client paying the contractor. The client to effect payments in accordance with schedules provided by the contractor subject to strict adherence to contract progress

As per clause:

The client to pay if contract is performed as per the statement of works or specification agreed upon in the contract document otherwise client to be compensated

Price variation{escalator} clause:

The clause requires parties to the contract to agree in advance on the circumstances that may justify future price changes and modalities of addressing same

Liability clause:

The clause requires the payment to be effected subject to clearance of liability considerations. Modalities applied in compensating the injured party by the party breaching the contract are clearly spelt out under this clause to avoid disagreements in future incase of contract breach

Time essence clause:

The clause requires the contractor to complete contract performance within the agreed upon lead time. Violation against this clause shall render the contractor liable in damages including profits lost by client if any

Title{ramalpa} clause:

The clause states that the client shall only be entitled to property or works ownership upon paying certain amounts of money to the contractor as per the contract documents otherwise property rights shall not pass

Exclusion/limitations clause:

This clause specifies responsibility limits of each party in the contract. However, at law no party to the contract shall exclude or limit its compensatory responsibilities unless such exclusions or limitations are reasonable at law and in public interest

Pay when paid clause:

This clause commonly to contracts involving third parties or sub-contractors. This clause empowers the main contractor to pay his subcontractors only when he {main contractor} has been paid by the client. However, the main contractor shall be under legal pressure to pay his sub-contractors{creditors} even without receiving payments from client if:

Nonpayment by client is caused by contractor’s own defaults
Nonpayment by client is caused by forces beyond help and control of client
Nonpayment is subject to legal considerations
Nonpayment is through agreement between main contractor and client
Without commitment clause:

This clause clears one party from the responsibility of paying another if the party to pay another did not commit itself to do so in the contract. This clause is usually used in correspondence such as “revocable letters of credit” letters of comfort etc. under this clause, there is no guarantee of payment leaving the party expecting such payment to perform the contract at own risk

Subject to contract clause:

This clause cautions that there is no contract until the details of the contract are settled, approved and exchanged. Any party incurring any expenses while this clause is still alive shall not be entitled to any compensation payment unless if the contract was sourced through tender, auction and letter of intent.

CAUSES OF PRICE VARIATIONS DURING THE COURSE OF CONTRACTS:

When there is no suitable rate on price in the contract.
When original cost lacks breakdown on specific deliverables such as labour, materials, overheads etc.
Increase in work often causes disruption forcing for variations.
Using wrong information while negotiating the cost.
Using poorly skilled staff.
Devaluation of the currency.
Unstable market supply.
Lack of adequate research.
Sabotage by staff who may have poor relations with employer.
Abrupt change in legal system affecting contracts.

SAFEGUARDS OF PRICE VARIATIONS;

Contractor must breakdown his cost into labor, materials and overheads.
Contractor to provide detailed build- up of price for variation.
Only reputable contractors to be engaged.
Price to be settled before variation to be executed.
Variation clause to be included in the contract with its contingencies well defined.
All non- core works to be avoided.
Thorough market scanning to ensure market price stability.
Employment of competent staff.
Motivating the staff.
Minimize contract specifications adjustments

PROCEDURE FOR PRICE ADJUSTMENTS:

Adjustments should be strictly authorized by a senior responsible officer.
Adjustments should be notified to all the interested parties before any action is taken.
Adjustments should be confirmed in writing.
A standard approach approved by top management should be followed in making adjustments.
The base date of both original contract and circumstances giving rise to an adjustment should be clearly identified.
Contractors should justify price increases.
Adjustments should be considered only if there is a clause in the contract providing so

Alternatives to price adjustments

Where request for price adjustment fails, the following strategies may offer solutions:

Look for alternative contractors.
Look for alternative materials.
Considering undertaking in- house.
Value analyzing i.e. researching for better practices.
Where the contractor is a monopolist, take the matter to the Restrictive Practices Court

ANALYSING PROJECT RISKS;

Before an option to undertake a project or contract is settled for, the client must analyze the risks involved in advance using any of the following techniques:

Financial ration projections:

Key financial ratios which give measures of the future risks are thoroughly analyzed e.g. effect of the contract expenditure on the capital structure of the organization. Important to analyze further are the long term loans effects on the financial position of the organization, organization’s business volumes and consistency, debtor’s credibility etc.

The resultant risks level will be compared and contrasted to guide in decision making

Sensitivity analysis:

Computer spreadsheet packages are used for incorporating the risk assessment. Each assumption underlying a particular option is critically analyzed to give a projected picture in terms of output. E.g. profits, market demand, better labor relations etc. this analysis helps to develop a clearer picture of the risks of choosing a particular option and its corresponding degree of confidence and reliability. Sensitivity analysis is therefore a useful technique for assessing the extent to which the success of a preferred option is dependent on the key assumptions which underline that particular option.

Decision matrices

Many possible options are proposed and after thorough analysis reduced to fewer and most profitable ones. Total costs and expected profitable gains are analyzed for each option and weighted against each other. This will help in ranking options from the best to the poorest. There are usually four rules applied namely:

Optimistic decision rule- best of the best outcomes for each option is determined i.e. options with the lowest possible cost
Pessimistic decision rule- worst of the worst outcomes for each option is determined i.e. options with highest possible costs
Regret decision rule- options which would minimize the lost opportunity by choosing a particular proposal are determined
Expected value decision rule- profitability level for demand is determined. This helps to weight the outcomes for each option with comparison and contrast analyzed. The option with lowest weighted average cost is settled for.

4 Simulation modeling:

Factors considered by financial projections, sensitivity analysis and decision matrices as techniques of assessing business risks are encompassed into one quantitative simulation model of the organization and its environment to assess the best strategic options

Simulation modeling as a technique of analyzing risks has its own shortcoming namely:

Danger of failing to encompass the most important uncertainties and risks due to gross over implication of reality
It is highly complicated as it requires a very large number of variables
Difficulty in assessing key data e.g. competitor reactions leading to poor decision making.

5 Heuristic models

These models help in identifying solutions in a systematic manner. They apply most and best in complex situations where there are many proposed qualified options. All the decision criteria are listed. A computer is used to search the various options until one that satisfies the criteria is found. By so searching the best of option is settled for.

PROJECT TERMINATION.

As it is to all contractual relationships, termination comes to every project. A project is usually conceived, born, lives and dies when time matures.

The termination of a contract does not necessarily mean failure or success and there may be positive as well as negative outcomes on the part of either or both of the parties in the contract.

At times, project death may be quick and clean but more often it is a long process and there are times when it is practically impossible to establish when that death occurs.

At the time of death of a project, the joy of discovery is past. Problems may have been solved, bypassed, lived with and ignored.

The client may be delighted, angry or reasonably satisfied. The termination process may be easy or complicated depending on the circumstances that have led to the termination.

There are several ways of terminating or closing out a project namely:

Termination by extinction. Project extinction occurs when the project activity suddenly stops although there is still property, equipment materials and personnel to disburse. The project may have been terminated because it was successfully completed or because the expectation of its failure was beyond reasonable doubts. When a decision is made to terminate a project by extinction, the most noticeable event is that all activities on the substance of the project cease to exist.
Termination by addition. This occurs when a project is merged together with another one making the new project quite different from the original one.
Termination by starvation. This occurs when it is impolitic to terminate a project but its budget can be squeezed. It normally applies to unsuccessful projects. The project may have been suggested by a special client or senior executive and terminating it out rightly would be an embarrassing acknowledgement of managerial failure. Usually a few project team members may be retained for the sake of pleasing the authority and nobody may be allowed by the top management to inquire about the progress of such a project.
Termination by integration. This is where the output of the project becomes a standard part of the operating system of the clients or sponsoring firms. It is mainly applied to successful projects.

When to terminate a project.

The decision to terminate a project pre-maturely by whatever method is very difficult to make but all the same decisions must be made however radical they might be.

Projects tend to develop a life of their own, a life seemingly independent of whether or not the project is successful. In view of the foregoing, a project may be terminated under one or more of the circumstances hereunder:

The project becomes inconsistent with organizational goals.
The project becomes impractical or non-value adding.
The management becomes insufficiently enthusiastic about the project and stops supporting its implementation.
The project scope becomes inconsistent with the parent organization’s financial strength.
The project becomes inconsistent with the notion of a balanced programme in some or all areas of the parent organization’s technical interests and cost.
The project takes longer than reasonable time to get practically completed.
The project deliverables are excessively overtaken by technological advancements.
The project becomes substantially unprofitable.
Some unavoidable events occur that make the implementation of the project practically impossible or radically different from the original concept.

Primary duties of the termination manager.

Special Termination Managers are often used for closing out projects. The task of terminating a project is another project altogether in itself. The core duties of a Termination Manager include but not restricted to:

Ensure completion of the project, including tasks performed by subcontractors.
Notify the client of project completion and ensure that delivery is accomplished in compliance of the expectations of the client.
Ensure that project documentation is complete, including a termination evaluation of the project deliverables and preparation of the project’s final report.
Redistribute personnel, materials, and any other resources to the appropriate places.
Clear for final billings and oversee preparation of the final invoices or certificates sent to the client.
Clear the project with legal counsel. File for patents, if appropriate. Record and archive all nondisclosure documents.
Determine what records including manuals, reports, general paperwork to keep. Ensure that such documents are stored safely and securely for ease of future reference. The responsibility for document retention should be turned to the parent organization’s archive.
Ascertain any product support requirements, decide how such support will be delivered and assign responsibility.
Oversee the closing of the project’s books.

THE USE OF ICT SYSTEMS IN PROJECT AND CONTRACT MANAGEMENT.

Ever service industry has IT system that fits best according to its needs. IT systems help in enhancing effective and timely communication which is a driving vehicle behind efficient and contract management

They offer services such as:

Designing specifications
Filling approved contractor records
Filling contractors performance evaluation data
Preparation of contracting tender invitations
Automatic monitoring of contract progress
Preparation of numerous operating reports for management of the contract
Auditing of invoices and preparation of cheques for payment
Electronic data interchange communication
Filing list of approved or pre- qualified sub-contractors
Filing data on approved budgets
Updating expenditure against each project or contact undertaking

FACTORS FAVORING USE OF ICT SYSTEMS IN PROJECT CONTRACTING:

Both employer [buyer] and contractor must be ICT compliant.
Both should be integrated technologically.
Both must be competent in data accumulation.
Both must have almost all their activities computerized.
Availability of funds to buy, install and maintain the system.
Availability of skilled staff to manage the system.
Both must have larger volumes of activities.

BENEFITS OF ICT SYSTEMS:

Accurate information.
Increased product quality.
Ability to use a sophisticated technology.
Ability to do what couldn’t be done before more responsive to the market.
Provides inspiration to the visiting customers.
Gives an organization a positive image or good reputation in the market.
Provides firm ground for entry into new ventures.
Saves time i.e. information.
Reduced total product cost.
Ensures effective communication.
Quicker responses.
Less fatigue i.e. not tiresome.
Increased information confidentiality.
Occupies less space.

DISADVANTAGES

Very costly to buy and install and maintain
Possible disruptions due to breakdown, power blackouts etc
Requires highly skilled staff
May end up being obsolete as some contracts especially in construction industry are only for a specified period of time
May lead to job lay off
May face some resistance from workers
May reduce physical contact among stakeholders hence poor relationship
Any slight error may cause a big problem
Some of the products designed may end up being impossible to roll out
Only applicable in areas serviced by power

COSTS ASSOCIATED WITH ICT SYSTEMS IN PROJECTS AND CONTRACTS.

An organizing that installs ICT system in managing project and contract activities stands to incur the costs below:

Cost of identifying data sources
Cost of collecting data from sources
Cost of purchasing, installing and maintaining IT system
Cost of checking and qualifying the data
Cost of transmitting data to destinations
Cost of aggregating and batching data
Cost of storing data safety and securely
Cost of paying electricity used in running IT facilities
Labor cost in terms of salaries, wages, allowances and other fringe benefits to the staff.

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Contractual relationship

Techniques of monitoring, evaluating and controlling of contract

Processing payments for contracts

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TOPIC 6 EMERGING ISSUES IN PROJECT AND CONTRACT MANAGEMENT

Challenges posed by emerging issues and trends in P C& M

Ways of coping with the challenges in P C & M

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DCM MODULE 3

PROJECT AND CONTACT MANAGEMENT

There is high commitment of getting the project work done competently but performance not satisfying.

TOPIC 2

TOPIC 3

PROJECT PLANNING

TOPIC 5

CONTRACT MANAGEMENT

Written by MJ

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