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Republic of the Philippines

UNIVERSITY OF NORTHERN PHILIPPINES


Vigan City
COLLEGE OF ARCHITECTURE

WRITTEN REPORT #3
Change Management
Critical Chain
November 27, 2017

Submitted by: Gemille A. Quinsaat, BS ARCH V-A

Submitted to: AR. Monserrat Pescador, SPL 151


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TABLE OF CONTENTS

1. CHANGE MANAGEMENT.................................................................5
1.1 Introduction...............................................................................................5
1.2 Changes in Construction Projects.............................................................6
1.3 Literature...................................................................................................7
1.4 Rework, Change Order and CCD.............................................................9
1.5 A General Change Process Model.........................................................12
1.6 Conclusion..............................................................................................15
1.7. A New Approach To Change Management...........................................16
1.7.1 Introduction...............................................................................16
1.7.2 The Form ‘X’ Concept...............................................................16
1.7.2.1 Cost Centers...............................................................17
1.7.2.2 Adjustment of Cost Center Totals...............................18
1.7.2.2.1 Design Changes........................................... 19
1.7.2.2.2 Changes in Construction Method..................20
1.7.2.2.3 Claims............................................................20
1.7.2.4 Flow Diagram and Control Documentation.................26
1.7.3 The Modified Form ‘X’ Procedure.............................................26
1.7.4 Summary...................................................................................31
1.8. Project Change Management................................................................31
1.8.1 Need for Project Change Management.....................................31
1.8.2 Project Change Management Process.....................................32
1.8.3 Project Management vs. Change Management........................35

2. CRITICAL CHAIN............................................................................36
2.1 Critical Chain Scheduling........................................................................36
2.2 Buffers and Critical Chain.......................................................................38
2.3 Examples of Critical Chan Scheduling....................................................38
2.3.1 Comparison Of CPM and CCPM Results.................................41

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2.4 Success with Critical Chain.....................................................................41


2.5 Applicability of Critical Chain Scheduling in Construction Projects.........43
2.5.1. CPM Scheduling For Construction Projects.............................44
2.5.2. Critical Chain and The Need For This Study............................45
2.5.3. The Critical Chain Terminology................................................46
2.5.3.1 Activity Durations and Path/Project Buffers.................46
2.5.3.2 Use of Buffers..............................................................48
2.5.3.3 CC VS. CPM Scheduling.............................................49
2.5.4. Awareness Sessions and Surveys...........................................49
2.5.4.1 Venues and Attendants...............................................49
2.5.4.2 Survey Structure and Major Findings..........................50
2.5.4.2.1 Current Practices...........................................51
2.5.4.2.2 CC Potential and Applicability.......................51

2.6 Application of Critical Chain Management in Construction Projects


Schedules in a Multi-Project Environment......................................................55
2.6.1 Introduction...............................................................................55
2.6.2 Background...............................................................................55
2.6.2.1 Schedule Pressure......................................................57
2.6.2.2 Critical Chain In Multi-Project Environment.................58

2.6.3 Critical Chain in Planning Construction Programmes And


Portfolios Of Construction Projects......................................................59
2.6.4 Case Study................................................................................60
2.6.5 Conclusion................................................................................64
3. References............................................................................................................66

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OBJECTIVES

This research paper is aimed to accomplish the following:

 To provide introduction to Change Management and its significance to project


management and the construction workplace. To further explain the various
processes and cycles involved in the flow of information and knowledge on
computing for values needed in charts and graphs needed in project
management.
 To further expand understanding of Project Change Management in
construction by providing a comprehensive researches and case studies on
new approaches in the construction workplace.
 To give definition to Critical Chain and its importance to project management
and construction. Additionally, it is also important to know the various
elements, features and benefits of Critical Chain in the construction industry.
 To further expand understanding of Critical Chain in the construction
workplace by providing a comprehensive researches and case studies.

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CHANGE MANAGEMENT
Decisions are made everyday in construction processes based on incomplete
information, assumptions and the personal experience of the construction
professionals. Project changes and/or adjustments are inevitable as they are a fact-
of-life at all stages of a project’s life cycle. Managing changes effectively is crucial to
the success of a construction project.

Change management in construction requires an integrated solution to discipline


and coordinate the process, for example, documentation, drawing, process, flow,
information, cost, schedule and personnel. The construction industrial needs an
effective construction change management process. This paper summarizes various
aspects of the existing construction change management processes and provides a
comprehensive literature review as well as some comments on possible future
directions.

INTRODUCTION
In much of the world, construction is an extremely fragmented industry. For example,
in Canada more than 95 percent of construction companies employ less than 10
employees. Except for a few large general contractors, the capacity of most
companies in the constructor sector is fragmented, for example, structural design
and specialty trades. A construction project can be classified as “one-of-a-kind”
production in manufacturing terms, or simply “one-off” projects. Project management
in the construction sector faces some critical issues that are very different from other
industrial sectors: 1) the team involves multiple players at multiple locations; 2) the
construction supply chains are short-term and project-based; 3) different styles of
project management and costing systems are used with different product delivery
systems, i.e. “design-bid-build”, “construction manager” and “design-build” contracts;
4) unique needs to manage the involved legal contracts and other related documents
(for example change orders); 5) the scope has extended to the life-cycle operation
and maintenance management of the finished product, in addition to the architect-
design construction process.

Project changes and/or adjustments are inevitable as they are a fact-of-life at all
stages of design and construction. In an EPSRC (Engineering and Physical
Sciences Research Council, U.K.) report (Sun et al., 2004), it states that “More than
a third of major clients are dissatisfied with contractors’ performance in keeping to
the quoted price and to time, resolving defects, and delivering a final product of the
required quality.” It may be inferred that the clients’ dissatisfaction is likely caused by
change orders running through the construction projects. The effort of managing
change orders has imposed a huge burden on project management, and it is a
nightmare that industry people wished they never have to face. Changes in
construction also cause serious ethical problems and disputes. According to an

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ethical survey done in 2004, 84 percent of respondents expressed that they had
encountered situations that they considered unethical in their business dealings,
while 61 percent of respondents stated that the industry was “tainted” by unethical
acts. Owners are blamed for bid shopping and for playing tricks in payments;
contractors were accused of over billing, front-end loading and playing change-order
games.

Change management is a pure application-oriented issue and requires engineering


innovation to solve the problem. Based on our investigation of the construction
change management area, and a pressing need from industry versus the scarcity of
literature and software tools in the domain, poses a promising opportunity for
research and development in construction. The following sections of this paper
summarize the various aspects of construction change management and provides a
comprehensive literature review as well as some insightful thoughts on this topic.

CHANGES IN CONSTRUCTION PROJECTS


Changes in construction projects are very common and likely to occur from different
sources, by various causes, at any stage of a project, and may have considerable
negative impacts on items such as costs and schedule delays. A critical change may
cause consecutive delays in project schedule, re-estimation of work statement, and
extra demands of equipment, materials, labor, and overtime. Changes, if not
resolved through a formalized change management process, can become the major
source of contract disputes, which is a severe risk contributing to project failure.

Classifications of changes in general terms apply to changes in construction domain.


Motawa et al. (2007) summarize that: “Based on time, change could be anticipated
or emergent, proactive or reactive, or pre-fixity or post-fixity. Based on need, change
could be elective or required, discretionary or nondiscretionary, or preferential or
regulatory. Based on effect, change could be beneficial, neutral or disruptive.”
However, since the construction industry is project-based, the best classification is to
discuss changes in the context of typical stages/phases in a construction project.
Table 1 summarizes stages, sources and impacts of construction changes.

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The primary causes of change orders are owner-initiated changes and designer’s
errors and omissions (Issac and Navon, 2008). The impact of changes to a
construction project needs to be evaluated case by case in order to assist with the
decision making process. Though some changes may bring in “benefits” to the
stakeholders especially to the owner in the long run, most changes, if not managed
properly, will result in “negative” impacts, most likely resulting in time and cost
overruns. In general, upper-stream changes have larger impacts. Lu and Issa (2005)
believe that most frequent and most costly changes are often related to design, such
as design changes and design errors.

LITERATURE
The industrial need of effective construction change management versus the scarcity
of meaningful R&D work appears to be a fact in the construction industry. There is
very limited research work addressing the change management issues specifically
within the construction project management context.

 Sun et al. (2006) designed a change management toolkit for construction


projects that includes a change dependency framework, a change prediction
tool, a workflow tool, and a knowledge management guide.
 Ipek and Ömer (2007) investigate requirement-design relationships and
enable traceable requirement in architectural design. They developed a
prototype system called DesignTrack and used LEED requirements as a case
study.
 Lee and Peña-Mora (2005) proposed using system dynamics to build dynamic
project models to assist planning and control of construction projects. This
dynamic project model captures several non-value adding change iterations

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(rework cycles and managerial change cycles). The simulation is


demonstrated using a case study in Road Bridge Construction, and many
change option/policy implications are summarized based on this case study.
 Motawa et al. (2007) presented some preliminary results on proactive change
management through an integrated change management system composed
of a fuzzy logic-based change prediction model and a system dynamics model
based on the Dynamic Planning and control Methodology (DPM).
 Charoenngam et al (2003) discussed Web-based project management and a
Change Order Management System (COMS) specifically developed for
coping with changes in construction projects. Standard web technologies
were used and a change order procedure involving workflows, roles/actors,
documents, records keeping, and a centralized database were developed.
 Recently, Issac and Navon (2008) have proposed a change control tool (CCT)
which creates requirement traceability through links between client
requirements and the building design. They believe that number of changes or
the impact of changes can be controlled by capturing client requirements
accurately at the beginning of the project and through the requirement
traceability that is build up afterwards.

Apart from the project management domain, some other researchers have been
trying to address change management issues in various other ways:

 4D or 5D integration which integrates time and cost models in addition to 3D


geometry models. In this way, changes can not only be controlled in the
design and engineering stages in the whole construction process, but also be
controlled in the built environment lift-cycle to some extent. Jongeling and
Olofsson (2007) suggest that location based scheduling provides a promising
alternative to activity-based planning approaches for planning of work-flow
with 4D CAD. In this approach, work schedules are integrated with design
models so that changes in design or during construction can be better
coordinated. In the latest 5D technologies of Graphisoft, automation extends
beyond design changes. ArchiCAD also automates and coordinates the
creation of documents, schedules, bills of materials, and quantities estimates
through its integrated “virtual building” model based on IFC’s BIM models
(available at: http://www.vicosoftware.com/).
 Data sharing and interoperation. Bakis et al. (2007) proposed an approach to
model the complex interrelations of the different components of the various
aspects of the design and the different versions of each component in order to
maintain consistency in architectural design. When changes happen, the
interrelation models help notification/propagation of version changes.
 Web-based integration and collaboration approaches. Lottaz et al. (1999)
proposed using constraint satisfaction techniques to express possibly large
families of acceptable solutions in order to facilitate and abbreviate the

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collaboration and negotiation processes, ultimately to improve the change


management and the productivity during phases of design and construction.
 By combining Web services and intelligent agents, collaborative workflow
technologies can be used to handle dynamic and complex business
processes on the Web and can be applied to construction project
management systems for effective and flexible change management. In a
recent work, we conducted a comprehensive literature review of collaborative
workflows in design and manufacturing integration (Hao and Shen, 2007a).

The concept of engineering change in manufacturing typically deals with any


changes or inconsistencies between product design, engineering and manufacturing
life-cycles. Engineering change management (ECM) is thus focused on the co-
ordinance of product life-cycle model (PLM) and the enterprise management model
in ERP, as shown in Figure 3. Since engineering change is not contractual, the
impact of engineering changes stays generally within an organization and is well
controlled via the vast adoption of integrated systems in manufacturing enterprises,
such as CAD/CAE/CAPP, PLM, and ERP software tools. Construction changes, on
the other hand, are harder to control because of the fragmented nature of the
industry as well as a low investment and limited adoption of IT technologies.

REWORK, CHANGE ORDER AND CCD


Most researchers distinguish three kinds of changes: rework, change order, and
Construction Change Directive (CCD) (Huang et al., 2007; Levy, 2006). Figure 1
shows the relationship of change orders, reworks, and CCDs.

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Change order refers to changes that are generated by unanticipated causes, for
example, scope changes from the owner, design / technological changes from the
architect, and cost and/or time changes caused by supplier problems, design errors,
material and operational failures, or by unsatisfactory site conditions. Change orders
are common to most projects, and very common with large projects. This type of
change has to be negotiated case by case and requires a common (documented)
agreement among all the parties involved. The owner or its delegated architect or
project manager has the authority to finalize change orders. Once a change orders is
submitted and approved, it generally serves to alter the original contract such that
the change order now becomes part of the contract. The contractual nature of
construction changes is a very distinguished feature of the construction industry.

A CCD is issued by an owner or its designate requesting a change in the contract


scope when there is no agreement on cost. CCDs are originated from disputable
change orders and could become change orders again, once the dispute can be
settled. The process of handling CCD is simpler than that of change orders in that it
directly starts from the implementation stage once the CCD is issued (see Figure 2).
Rework refers to re-doing a process or activity that was incorrectly implemented in
the first place and is generally caused by quality defects, variance, negligence, and
poor design and/or on-site management (Sun et al., 2004). Rework is usually pure
waste and should be avoided as much as possible. The only requirement for
handling rework is to perform all necessary correction activities to guarantee the
conformance of the “as built” to the “as designed”, which is more or less obvious.
However, the decision of rework is a difficult one since rework is normally
accompanied by the demolition of what has already built. In most cases, reworks
become change orders by minor adjustments in design, construction processes or
use of alternative materials as long as the baseline requirements can be still satisfied
by the new alternative.
A number of organization and associations produce standard contract forms. These
include the American Institute of Architects (AIA), the Association of General
Contractors (AGC), the Construction Management Association of America, and in
Canada, the Canadian Construction Association (CCA) and Canadian Construction
Documents Committee (CCDC). A construction project management authority can
choose to use any combination of these standard documents directly or develop their
own documents ether as modified standard documents or proprietary in-house
contracts. As change orders are part of the contract, all these standards have
articles or clauses to obligate the change management procedure.

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A GENERAL CHANGE PROCESS MODEL


Change management seeks to forecast possible changes; identify changes that
have already occurred; plan preventive measures; and coordinate changes across
the entire project. Small reworks with minor impacts do not need to go through a
formal change process. However, changes with noticeable impacts, either reworks or
change orders, all require following a formal process in change management.

A generic change process model is considered to have five stages in a sequence:


identify, evaluate & propose, approve, implement and review (Figure 2). The process
model is conceptualized based on a synthesis of the change process models
reviewed in the literature and the characteristics of computational environments.

1. Identify changes. This requires an effective change management system to


build up the relationships of the requirements, symptoms, malfunctions, and
various other aspects of changes. It is common for a typical change
management system to exclude the identification stage and start with the
change evaluation and proposal processes. This is because the initiating role
of a change is hard to be taken automatically by the system, or at the least, a
computational system is far less “smart” or “intelligent” than people thought.
However, from academic or innovative viewpoint, reaching the “intelligence” of
such pro-activeness in change management needs a lot of R&D efforts.
2. Evaluate and propose changes. Based on criteria and options, the
evaluation module calculates all possible impacts that an identified change
can have on other processes and team members, in terms of time and cost.
Analysis and (if possible) optimization of change options is required for
decision-making – whether to go ahead with any of the change options or to
undertake further investigations. This stage, again, requires heavy efforts in
modeling intelligent behaviors involved in the decision-making processes. The

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outcome of the evaluation is a proposal change order (PCO) which


summarizes the change itself and the impacts of the change – a new updated
action plan, cost, schedule, etc.
3. Approve changes. Each identified change needs to go through a formal
approval process. There are a set of predefined approval processes for
different types of changes and construction contracts. Firstly, all the parties
involved must agree on the proposed change of work described in the PCO.
This is done through a change review process. Next, the approval of the client
is required for the PCO to be finalized. This may involve decision making on
acceptance, improvement, or rejection of changes. An accepted change
modifies the contract while a rejected change may either become a
permanently rejected change, or it might still be enforced in the form of a
CCD.
4. Implement changes. The change management process model requires all
the parties involved to keep records of all relevant information on change
cases to build a case base for future use. Unlike previous stages, no major
decision is expected during the change implementation stage. An operational
system is needed to make sure that all aspects are updated, all parties are
notified, and all activities are done properly and coordinated well. Everything
recorded is linked with each other and to the change cases as well in order to
facilitate the change analysis procedures afterwards.
5. Analyze changes. Change analysis and system performance is reviewed
based on the data collected during the change implementation phase.
6. Challenges Towards Integrated Change Management
Developing an effective construction change management process is a
challenging task because it requires an integrated solution for coordinating
everything involved for the purpose of the change management in question
(see Figure 4). While one may find a couple of project management or
construction enterprise management software on the market, change
management in construction is a topic that one can hardly get through any
resources. The existing change management module, that some software
claimed to have, is mostly a feature for change information recording and
document approval. Change estimation, impact analysis, post-change
analysis, statistics, and more importantly, change traceability are not
implemented in most of these solutions.

An effective construction change management system will have the following


requirements:

 Consolidating all aspects of change information, including causes,


symptoms, sources, impacts, actions, and processes of changes and
their linkages
 Evaluating all elements affected by a change, across all design and
construction phases - Automating workflow processes for change
review, approval and implementation
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 Coordinating changes into operational systems of different parties -


Coordinating changes into a shared project management system
 Coordinating people’s activities (including notification, reminding,
monitoring, etc.)
 Coordinating the distribution and management of documents and
drawings in latest versions - Day-to-day process and cost recording
 Dispute resolution procedure

Change traceability and post-change analysis Change management is a part of


project management and enterprise management systems, but it can also stand
alone as an independent system or as part of an integrated system with its focus on
the construction change itself.

An integrated change management system requires technical supports from different


technologies, including Collaborative Workflow, System Integration and
Collaboration Technologies, nD Modeling, Web-Based Collaborative Project
Management Tools, and Online Document Management Tools.

We have other projects focusing some of these technologies. Shen et al. provides a
comprehensive survey on system integration and collaboration technologies in the
construction sector. Hao and Shen (2006b) has done a comprehensive literature
review of adaptive workflow and distributed workflow technologies. We strongly
share the vision that the integration agent, web services, and workflow technologies
provides a promising solution for effective coordination of product design,
engineering and manufacturing activities across or within enterprise boundaries.
Sharing similar ideas, Boddy et al. (2007) proposed an outline architecture for the
process driven integration in construction based on the use of agent technologies,

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Web services / composition, Semantic Web, and higher level protocols in web
services stack. Another report by our group (Neelamkavil et al., 2008) is focused on
the need for intelligent system in construction process automation. Based on the
FIATECH’s Capital Projects Technology Roadmap Vision
(http://www.fiatech.org/projects/ roadmap/cptri.htm), this report covers related
technologies such as 3D/4D modeling in automated design and engineering;
intelligent material management and control for automated construction supply
chains; robotics, mobile devices and RFID, etc. for construction process automation,
and project management and enterprise management systems.

CONCLUSION
Changes are inevitable in construction projects. And, during a construction project,
many decisions have to be made, often based on incomplete information,
assumptions and personal experience of the construction professionals. Change is a
common denominator in all construction projects, though the size, scope, and
complexity of projects may vary significantly from case to case. Change
management is a critical problem faced by the construction industry. The effort of
managing change orders has imposed a huge burden on project management.
Changes are identified as the major cause of project delay, cost overruns, defects, or
even project failure. More seriously, playing games on changes cause serious ethical
problems and disputes in the industry.

Changes in construction projects are very common and likely to occur from different
sources, by various causes, at any stage of a project, and may have considerable
negative impacts. This paper addresses the types the changes, as well as their
stakeholders, causes, impacts and correction actions in the context of typical
stages/phases in a construction project. Effectively managing change orders in
construction processes is not trivial because change orders are a part of contract
and they need to be strictly traced in terms of contracts, documents, approval
process, payment claim, etc.

Based on a synthesis of several change process models reviewed in the literature


and the characteristics of computational environments, a generic change process
model is proposed having five stages in a sequence: identify, evaluate & propose,
approve, implement and review. Building an effective construction change
management system is very challenging, and one can hardly find a mature software
tool on the market, that deals with this issue. Existing change management module,
that some software claimed to have, is mostly a feature for change information
recording and document approval. Change estimation, impact analysis, post change
analysis, statistics, and more importantly, change traceability are lacking in these
solutions. An integrated change management system requires technical supports
from different technologies, including collaborative workflow, system integration and
collaboration technologies, nD modeling, web-based collaborative project

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management tools, and online document management tools. We have not arrived at
a full solution for construction change management yet. More work will have to be
undertaken to develop innovative and practical solutions that are adoptable by the
industry.

A NEW APPROACH TO CHANGE MANAGEMENT


INTRODUCTION
The previous chapter dealt with the concept of project management in general and
change management in particular. The research deals with the problem of ensuring
that change management within projects is controlled in a manner which obviates
financial, programmed and technical difficulties.

This chapter sets out a new Change Management, or Claims for Extras, mechanism,
which will prevent many of the difficulties inherent in using the present, designer-led,
system and describes the procedures necessary for implementing the methodology.

THE FORM 'X' CONCEPT


The Form 'X' concept requires individual designers and construction
personnel to obtain formal approval for revisions to the design, or construction
methodology etc., and, in doing so, justify their actions, and those of their
colleagues, to an independent body representing the client organization.

The aim is to control costs and this is achieved by relating change to a


Contract Control Total, as amended by authorized additions and deductions, with
authorization for such an amendment only arising as a result of the approval, by the
client, of a Form 'X', or an "Extras" application.
The procedure applies at all stages of the project as, prior to the award of the
contract, Project Managers will be held responsible for the management of the
Estimated Contract Control Total for all works under their jurisdiction.

Prior to contract award, the Contact Control Total will be the Net Estimate of
Expenditure with Prime Cost and Provisional Sums and Day works allowances,
separately identified.

After the award of the contract, Project Managers will be held responsible for
the control of costs against the current Contract Control Total for all contracts under
their direct management.

The Contract Control Total, following contract award, will be the Contract Sum
less:
(a) All Prime Cost Sums, Provisional Sums and Provisional Items;

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(b) Day Work Provisions.

All Contingency Sums, including (a) and (b) above, will be held by the client
and these sums may be held by either the Project Manager, or by senior personnel
within the client organization, including the Chief Executive or the Director of
Finance.

This does not imply a lack of confidence in the individual Project Managers, or
their design teams, but stresses the importance of a corporate approach to the
allocation of scarce resources.

Following the award of the contract, applications to raise a Form 'X' will be required
in respect of proposals to:
(a) Commit Prime Cost or Contingency Sums;

(b) Instruct additional works which fall outside the obligations of the
Contractor under the terms of the Contract;
(c) Issue drawings, or other further information, in respect of work which will
modify the client's liability in respect of the Contract;
(d) Grant an extension of time to the Contractor;
(e) Accelerate or delay the progress of the Works, either in full or in part.

The Change Management Methodology is discussed under the following headings:


Cost Center’s

The Bills of Quantities are divided into Cost Center’s with each Cost Centre being a
trade element, with the exception of Cost Centre 'A', which comprises the
preliminaries or general items applicable to the whole Contract. Cost Centre 'A' also
includes Prime Cost Sums for Nominated Sub-Contracts and Supplies, Provisional
Sums for any work not defined in detail at the time of tender and Day works.

The Cost Center’s can be either based upon SMM6 or Work Category
classifications.

As stated above, at the commencement of each Contract, and for the purpose of
establishing a Cost Control Total, the following contractual adjustments are made:
(a) Prime Cost Sums for Nominated Sub-Contracts and Nominated Supplies
together with associated items for attendance and profit are deducted;

(b) Provisional Sums included in the Bills of Quantities for work not defined at
time of tender are deducted;
(c) The various Day works sums are excluded.

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The value of the above items form part of the Contact Sum, but do not form part of
the payment process and are held in reserve as a Contract Contingency Fund.

During execution of the work, adjustment to the various Cost Centre Values may
become necessary owing to the changing nature of the design, or construction
related difficulties, and the various types of adjustment are given below:
(a) Addition of the total value of each Nominated Subcontract or Nominated
Supply Contract into which the Main Contractor has been instructed to enter
together with the total amount due against associated items for attendance
and profit;

(b) Adjustment to each Nominated Sub-Contract or Nominated Supply


contract arising from the measurement and preparation of the Final Accounts
of Nominated Sub-contractors and Suppliers;

(c) Addition of the total value of supplementary Bills of Quantities to cover


work originally covered by Provisional Sums for work not defined at the time
of tender;

(d) Adjustment to the value of measured work items arising from changes in
quantities from those shown in the Bills of Quantities at the time of tender;

(e) Correction of errors in description or omission from the original Bills of


Quantities;

(f) Adjustment to the rates and amounts of measured items in the Bill of
Quantities where the Quantity Surveyor has stated a "Prime Cost" for the
supply of certain materials to be nominated by the Supervising Officer. The
Contract rate will be adjusted by the net difference between the Prime Cost
rate and the invoiced price paid at the time of presentation of the invoice;
(g) Addition or Deduction of the value of Supervising Officer's Instructions;

(h) Deductions on account of advance payments or down-payments which


may or may not affect the Cost Centre values.

The method by which the Clients' Project Manager gives his approval to the above is
the subject of this chapter.

Adjustment of Cost Centre Totals

The vehicle for instructing a Contractor in respect of a variation, and for


incorporating accepted claims, is the issue of a Supervising Officer's Instruction by
the Supervising Officer acting in accordance with the provisions of the contract.
The financial terms and programmed adjustments which occur must be
accurately quantified and, where it is necessary to instruct the Contractor prior to
final agreement as to cost and/or programmed implications, this must be shown to

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be to the benefit of the Client. The intention of the procedure outlined below is to
ensure that it is the client's Project Manager, or authorized representative, who has
the final decision as to the varying of the contract works. The methodology
envisages that specific and discreet application will be made for each proposed
adjustment to the "Contract Control Total", for each contract, by means of a Form 'X'
submission. In the case of building contracts, Form 'X' submissions will arise from
one of five sources: the Architect or Supervising Officer, the Structural Engineer, the
Building Services Engineer, the Quantity Surveyor or the Project Manager, acting on
behalf of the client organization. In the case of engineering contracts, Form 'X'
submissions will be raised by the Resident Engineer, the Engineering Consultants or
the Project Manager.

The procedure to be adopted will depend on the nature of the revision and
this will be either due to a design change, a site-originated, construction-related,
circumstance, or a contractual claim.
The procedure to be adopted in each case is detailed hereunder:
Design Changes
The production of working drawings will be monitored by the
consultants and the Project Manager, to ensure that they reflect the cost and
scope intentions of the contract, as amended by previously approved
variations.

Project Managers, in conjunction with their Quantity Surveyor, will cost


the work proposed in the working drawings or specifications in advance of the
construction, or manufacture, of the element and will establish the cost trends
implied by the change.
Where clear, specifically-identifiable, potential cost changes are revealed,
Project Managers will not allow the issue of the drawings to Contractors until
the Supervising Officer has :
(a) Had the design appropriately amended, or
(b) Obtained approval to a Form 'X' submission in respect of the
change.

Where a more gradual adverse trend is revealed by the "cost appraisal


before construction process", the Supervising Officer will draw the matter to
the attention of the Project Manager who will require formal assurance that
appropriate economies will be incorporated into subsequent working
drawings/specifications, failing which a Form 'X' - Design submission will be
raised by the Supervising Officer seeking allocation of appropriate additional
funds. The accumulated total cost will be compared with the interim cost
assumptions of the contract, as awarded, at the state of construction or
manufacture reached.

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The Project Manager will be held responsible for all projected and
current overspend against the projected contract cash flow, as amended by
any approved Form 'X' applications. The Project Manager will, therefore,
prove to be a vigilant monitor of excess cost arising as a result of the design
process. It is important to note, however, that the detailed work undertaken for
the purpose of raising a Form 'X' should be strictly limited to that necessary to
explain the proposal. An estimate of the order of cost is all that is necessary at
this stage.
Changes in Construction Method
Approval must be sought prior to instructing a change to the sequence or
method of construction which will affect the Contract Price either:
(a) Chargeable against Provisional Sums or Provisional Items
contained in the Contract; or
(b) Resulting in revised rates or prices.

An Emergency Instruction may be given on the authority of:


(a) The Clerk of Works up to HK$10,000
(b) The Supervising Officer up to HK$25,000;

in respect of any single instruction without recourse to the Form "X"


procedure.

Retrospective confirmation, by allocation of appropriate funds to the Contract


Control Total, must, however, be sought by means of a Form 'X' -
Construction submission in respect of each aggregate total of approximately
HK$50,000 of Supervising Officer's Instructions previously issued.

The issue of individual Supervising Officer's Instructions in excess of


HK$25,000 in value (or potential value) will be subject to a Form 'X'
submission and will be subsequently confirmed.
Claims
The assessment of claims notified by the Contractor under the contract is the
responsibility of the Supervising Officer. The function of the Client in this
regard will be delegated to the Project Manager.
Contractor's claims generally fall into three categories:
(A) Contractual Claims

These are claims which can be demonstrated to be due under the


contract. It is not sufficient to regard the circumstances giving rise to
the claim as being within the broad meaning of a particular contract
clause. The Supervising Officer must be satisfied beyond any doubt

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that the claim is admissible under the actual terms of the relevant
clause, or clauses, of the contract before any payment can be made, or
extension of time awarded.
(B) Extra-Contractual Claims

These are claims which, although not legally admissible under the
contract, appear to be an obligation by the client which the Courts
might uphold. Such an obligation will usually be attributable to the
client's action, or inaction, in relation to the contract.
(C) Extra-Gratia Claims

Even though there is no entitlement under the contract for the


submission of a claim and no basis for the client to make an extra-
contractual payment, Contractors sometimes submit claims requesting
an "ex-gratia" payment. The usual basis of such a claim is that the
Contractor has suffered a substantial overall loss on the contract which
he cannot recoup. Such claims are rarely entertained by the client.

Whilst the Project Manager should not bring undue influence to


bear upon the Supervising Officer in regard to his assessment of
claims, he is entitled to make his views known to the Supervising
Officer with regard to his assessment and to advise him of the client's
interpretation of his obligations and rights under the contract. The
Project Manager will represent the client's view to the Supervising
Officer.

As soon as a claim notification has been received, and


notwithstanding the fact that the claim may be deficient in factual,
contractual or financial information, the Contractor should be
approached for substantiation of the claim.

The Project Manager should, on behalf or the client, open a


separate file for each claim and, in conjunction with the consultants,
should take a view on the consequences of the claim.

The Supervising Officer should reject claims where, in his view,


they are ill founded or inadequately justified in the initial notification.
Whilst there will clearly be many cases where such immediate rejection
is justified, the emphasis must be to inform the Contractor that his
claim in unacceptable in its submitted form.

A Contractor will frequently notify his intent, or "reserve his


right", to claim when he first perceives that he is in a possible claim
situation. He may, however, decide not to pursue the matter further.
The initial action on this type of claim should be an
acknowledgement with a simple statement that the claim will be

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considered when full particulars are lodged. The decision on whether


or not to pursue a claim must be left to the Contractor.

However, a Form 'X' should be raised at this stage. If a


Contractor proceeds further with a claim, he should be requested to
submit clear evidence in its support by reference to the appropriate
wording of the conditions of contract.

Pursuant to the requirements of the conditions of contract it will


be necessary in such cases for the Supervising Officer, in the first
instance, to check that the claim has been submitted under the
provisions of one or more of the appropriate clauses of the conditions
of contract.

The Quantity Surveyor shall investigate and advise on the


contractual efficacy of the claim.

In many cases a Contractor will lodge a claim in respect of an


on-going event, the eventual outcome of which will not become known
for some time. If it appears that the Contractor may be able to
substantiate his claim, arrangements should be made with the
Contractor for the maintenance of agreed factual records so that these
are available for analysis in subsequent claims assessment. The
arrangements to maintain such records must be made without
commitment as to the Supervising Officer's eventual view of the claim.

The Supervising Officer is responsible for the preparation of a


complete analysis of the Contractor's claim and all the facts relevant
thereto, and the preparation of a detailed report for submission to the
Project Manager.

If this was not possible at the initial "proposal" stage of the Form
'X' - Claims submission, due to lack of detailed information, the
Supervising Officer should seek further information form the
Contractor. Each claims report prepared by the Supervising Officer
should be set out in the following format:
(a) Introduction
(b) Summary of the Claim
(c) Contractor's Contention of Principles and Value
(d) Analysis of the Principles of the Claim
(i) Circumstances giving rise to the claim

(ii) Principles on which claim is considered including an


analysis of the relevant conditions of contract

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(iii) Description and Justification of the Claim


(iv) Recommendation on Principles of the Claim
(e) Analysis of the Quantum of the Claim

(i) Analysis of Contractor's Justification


(ii) Apparent Discrepancies
(iii) Recommendation for Quantifying Claim
(T) APPENDICES

(i) Index and Copies of Correspondence


(ii) Tables
(iii) Drawings

In the assessment of the claim the Supervising Officer must


consider whether the Contractor has:
(a) clearly made out his case to justify and substantiate
the principles on which his claim is based, and

(b) correctly and properly marshalled all of the true facts


of the circumstances leading up the claim and the matters
of the claim itself, and

(c) explained and justified, by means of sufficiently


detailed calculations, the elemental build-ups of the
monetary or time amounts of his claim.

If, in respect of any of the matters referred to above, it is considered


that the Contractor has failed to provide sufficient justification or
substantiation then the Contractor must be told by the Supervising
Officer that he has the opportunity of providing further and better
particulars before a final decision on the claim is made. However, if
individual aspects of a claim appear to be clearly defined and
acceptably evaluated, certification of monies on account of the claim as
a whole should be considered and referred to in the claim report.

If there is a difference of opinion with regard to historical fact, then, as


far as is possible, agreement of the true facts should be reached by
discussion and the outcome of these discussion recorded by letter.

The Contractor will frequently lodge a claim for circumstances which


are likely to prevail for some considerable time and which may affect
other elements of the work.

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It is important that the principle of a claim should not be conceded at


too early a stage. The full effects on other elements of the work, and
other claims or potential claims, must be ascertained before a final
assessment is made. In this particular regard, caution should be
exercised in considering the "overheads" on an individual claim-by-
claim basis in order to avoid the risk of duplication of payment. It is
important that the principles governing any extension of time which
may be warranted are clearly established before proceeding to deal
with the cost effects. There will be cases where an award of an
extension of time is made but the determination of additional costs has
to be deferred until other related claims have been considered.

Upon the receipt of the Supervising Officer's claim report, the Project
Manager should assess the content and recommendations contained
in the report. Depending upon the complexity or degree of contentious
content of the claim and/or report, the Project Manager or, if requested
by the Project Manager, the Quantity Surveyor will produce a
summarized report to be submitted, with the Supervising Officer's
report, with the Claims Form 'X' proposal.

If the Supervising Officer's report signifies that there appears to be


differences of view between himself and the Contractor then, prior to
proposing or resubmitting a Claims Form 'X', the Project Manager
should convene a meeting with the Contractor. At this meeting he will
be supported by the Quantity Surveyor, the Supervising Officer and
such other staff as he deems necessary.

The object of such a meeting is to endeavor to reconcile differences of


principle and the approach to quantification of any award if such is
justified. A brief record of the meeting should be kept by the
Supervising Officer and, prior to the submission of the Claims Form 'X',
together with the Project Manager's report incorporating his final
opinion, the Supervising Officer's Report should be amended to reflect
the conclusions reached at the meeting. When negotiations have been
concluded by the Supervising Officer, the Project Manager or, if
requested by the Project Manager, the Quantity Surveyor will prepare a
summary report for signature by the Project Manager and submission
for final approval through the Form 'X' Procedure.
This report will take the following format:
(a) Introduction
(b) Summary of Claim and Recommendation
(c) Summary of Contractor's Contention
(d) Principles of Assessment

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(e) Quantum of Assessment/Reasons for Rejection


(f) Recommendation
(g) Appendices

Following final approval through the Form 'X' Procedure, the Project
Manager will convene a formal meeting with the Contractor to convey
to him the final assessment of the claim. Normally this meeting will be
chaired by the Project Manager who will be supported by the Quantity
Surveyor and the Supervising Officer.

In all cases, the decision must be confirmed, in writing, to the


Contractor by the Supervising Officer in line with the provisions of the
contract.

The Quantity Surveyor must ensure that all the contracts administered
by Supervising Officer are managed in accordance with the provisions
governing each contract. To this end he will advise the Supervising
Officer and his delegates on the interpretation and application of the
provisions of the contract. It is his duty to ensure that the Supervising
Officers', and his delegates', interpretations are applied uniformity
across all contracts and that all variations and claims are dealt with in
accordance with sound contractual principles. It is also part of his
function to ensure that the client's obligations in respect of public
accountability are met. He will ensure that the documentation on the
settlement of all Contractor's claims is properly prepared in a format
which clearly establishes that the provisions of the contract have been
observed and that the judgments made in arriving at awards are
soundly based.

The Quantity Surveyor must assist the Project Manager in the


management of the contracts under his control but should also have a
functional responsibility to the Supervising Officer.

The Quantity Surveyor should seek guidance and advice from the
Project Manager on the principles used in assessing claims and will
ensure that these principles are observed. He should have a duty to
report any departure from these principles to the Project Manager.

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Flow Diagram and Control Documentation

This rather complex procedural mechanism attempts to ensure that the client and
his, or her, consultants are very aware of the effect of their decisions on the project.
The Form 'X' procedure ensures that views are communicated and that knowledge is
imparted to all participants in the process. As noted in Chapter Two, the free flow of
information is the key to successful systems control.

The procedure to be adopted and the control documentation to be utilized is


illustrated in Appendix

The Modified Form 'X' Procedure

A method of change management control, which is very similar to the Form 'X'
Control Mechanism outlined in the previous section, has been used by the Hong
Kong Mass Transit Railway Corporation since 1982.

The mechanism was, however, modified by the researcher to suit the Corporation's
requirements as the approach, as described earlier, was originally designed for
building works. The Corporation is primarily concerned with civil engineering
construction although a number of their contracts have large architectural elements.

The Form 'X' concept was originally put forward, by the researcher, for the control of
change on contracts for the construction of multi-storey residential and commercial
developments above the Corporation's stations and depots. The Corporation's
Projects Director decided that the Form 'X' procedure could be used to control
design changes on civil engineering projects and the researcher was requested to
modify the control mechanism as detailed hereunder:
(A) Cost Variation due to Design-Related Changes

Under the Corporation system all proposals in respect of design changes originating
from Corporation Departments, or its Consultants, are communicated to the
appropriate Design Manager. This will include contention by Construction Managers
that working drawings, and/or detailed specification requirements, constitute a
change to the original requirement. Design Managers advise the Chief Engineer as
to the assessment of all such proposals, seeking such other input as necessary. The
Chief Engineer informs the proposer of his decision in respect of the proposals and
the reasons therefore.
The Engineering Director recommends the adoption of the proposals by means of:
(a) A draft Executive Briefing Note, where more than two contracts are directly
or consequentially affected, forwarded to the Projects Director. Following
approval of the Note by the Executive Committee, the Chief Engineer will
raise a Form 'X' as indicated in (b) hereunder, in respect of each affected
contract making reference to the approved Executive Briefing

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Note as an appropriate justification.

(b) Endorsing a Form 'X' which will be raised by the Chief Engineer and
initiating the processing of the Form 'X' in accordance with the procedure.

The endorsement of a Form 'X' proposal by the Engineering Director is the


authority to commence.

Both prior to and after the raising of Form IX', all correspondence with the
Contractor, in respect of proposed changes to the contracted requirement, is
routed through the appropriate Construction Manager.

(B) Cost/Variation due to Construction-Related Changes


Under the Corporation system, approval is sought prior to instructing additional
temporary work, changing temporary works or changing the sequence/method of
construction of permanent works which may result in a change to the Contract
Control values, either:
(a) Chargeable against Provisional Sums, or Provisional Items, contained in
the contract; or
(b) At contract or negotiated rates or prices.

(C) Cost Variation due to Circumstances Leading to Contractual Claims

The assessment of the Claims notified by the Contractor under the contract is the
responsibility of the Engineering Director. The function of the Engineering Director in
this regard is delegated to Construction Managers.
Whilst the Corporation, as employer, should not bring undue influence to bear upon
the Engineering Director in regard to his assessments of claims, it is entitled to make
its views known.

Flow charts and procedural documentation illustrating the Mass Transit Railway
Corporation's Form 'X' approval mechanism are depicted in Appendix 'C'.

Having described the procedures adopted by the Corporation in these critical areas it
is appropriate to note that the Corporation's contract documentation has certain
unique features to cater for the operation of the procedure in that the Bills of
Quantities were divided into Cost Center’s.
Each Cost Centre, with the exception of Cost Center’s 'A', was a complete Bill of
Quantities for either:
(a) A Station; or
(b) The tunnels between Stations or between a Station and the boundary of a
Contract; or
(c) Other specified major elements of work as may be applicable.
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Cost Centre 'A' contained general items applicable to the whole contract and also
included Provisional Sums for Nominated Sub-Contracts and Suppliers, Provisional
Sums for other work not defined in detail at time of tender, Provisional Items for
general application to the Contract and Day works. At the commencement of each
Contract and for the purposes of interim payment certification, the following
contractual adjustments were made to the value of the Cost Center’s:
(a) The total value of the Day works provision was excluded.

(b) Provisional Sums for Nominated Sub-Contracts and Nominated Suppliers


together with associated items for charges and profit and for general
attendance were deducted.

(c) Provisional Sums included in the Bills of Quantities for work not defined at
time of tender were deducted.

Whilst the conditions of contract sets out the contractual process to be followed, the
Corporation requires that sums in the Bills of Quantities for:
(a) Provisional Items, and
(b) Prime Cost Items

be separately monitored and internal authority sought via the Form 'X' procedure, as
and when expenditure against these items was necessary. Hence, the value of these
items, together with the values of the items listed above, are effectively omitted from
the tender sum and transferred to a Contract Contingency Fund.

The sum of money remaining and thereafter committed to the contract was known as
the Initial Contract Control Total. During the execution of the work, adjustments to
the Cost Center’s are necessary for interim payment certification purposes and
internal authorization to these adjustments was obtained through the Form 'X'.

A list of the types of adjustments which rose, together with a reference and notes on
the type of Form 'X' raised, to seek approval of the adjustments is given below:

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The Conditions of Contract made provisions for the Engineer to give instructions to
the Contractor.

Therefore, formal instruction were required to have some contractual basis and,
where pertinent, reference to the appropriate clause in the conditions of contract
were given on the standard Engineer's Instruction Form. Strict cognizance of
delegation of the Engineer's powers and authorities were observed to ensure that the
appropriate person signed the Instruction.

In respect of cost control, Engineer's Instructions were issued to the Contractor when
expenditure of any of the following were required :
(a) Provisional Sums for Nominated Sub-Contracts;
(b) Provisional Sums for work to be done by the Contractor;
(c) Provisional Quantities;
(d) Prime Cost Items;
(e) Day works.

Engineer's Instructions for Day works were given pursuant to the conditions of
contract with approval being given in batches not exceeding HK$100,000 in value.

Before instituting any change, which would lead to a variation, the direct and
consequential effects of the various alternatives were considered. Realistic estimates
were prepared by senior staff so that the best alternative could be progressed
through the Form 'X' procedure.
Item descriptions had to be sufficiently detailed to ensure precise identification of the
location and extent of the work required and/or the changes to be made. Where
applicable they were itemized as in the Bill of Quantities.

Examples of matters which require the issue of Engineer's Instructions


pursuant of the conditions of contract are as follows:
(a) Issues of drawings or details amending the Works;
(b) Additions to, and omissions from, the Works described;
(c) Changes in the specified sequence, method or timing of construction;
(d) Measures taken to deal with adverse physical conditions and obstructions;
(e) Changes in Specification;
(f) Changes in dimensions or locations.

The Corporation procedure, therefore, covers all design-related, construction-related


and claims-related situations and is comprehensive in scope.

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SUMMARY
 This chapter describes a change control methodology which imposes a
system of approval on members of the design team.
 The methodology imposes control on the design process from project
inception through construction to completion and financial reconciliation. It is
primarily a systems-based approach with the design and construction team
being required to describe and justify all proposed changes, and to quantify
their proposals in cost and programmed terms.
 In doing so the client is able to determine, at an early juncture, the possible
effect of the changes thereby avoiding funding difficulties. The system is
flexible in that it can be utilized for varying contract values and duration.
 The procedure can be used on a variety of projects and it does not rely on the
conditions of contract for legitimacy.
 It can be argued that the Form 'X' methodology represents a major step
towards achieving control over the change management process and this
argument will be tested using the research methodology detailed in Chapter
Four.

PROJECT CHANGE MANAGEMENT


Why do we need to prepare for project change management?
We set up all necessary planning documents, including a detailed Gantt chart that
tells us when to do what – we just have to follow our plan. And yet, things happen
which we cannot foresee and lead to problems which are not covered by our plans.
Then, it proves useful to have at least a generic procedure how to deal with
unforeseeable events and their impact, that is, how to manage project changes.
Especially, when there are legally binding contracts we want to minimize the number
of situations with any disagreement about the

 necessity of a change,
 time delay it causes, or
 additional cost to be covered.

In the practical approach here, we start with a situation where two parties, customer
A and contractor B, are involved in a project and draft a binding project contract.
These principles can be extended to more complex situations.

So, what do we need to prepare for project change management? In section Project
Contract Management, we introduce the generic project change management
process with this diagram:

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Now we need to translate this diagram into a clearly structured procedure how A and
B have to handle a change that is initiated by either party.

Project Change Management Process - Step By Step


Whatever event triggers the change, we need records of that event and notifications
to all parties involved, in order to enable a profound analysis of the situation and its
possible impact on all involved parties. Usually, we expect any change to have
impact in terms of project scope, schedule and budget. This leads to the first four
steps of the project change management process:
(1) Collect all records of the event that triggers a possible change.
(2) Notify all involved or affected parties, as soon as possible or reasonable.

(3) Each party analyzes the situation and impact the event can have and
identifies possible solutions and their impact.

(4) Notify all involved or affected parties of the analysis results and the
possible solutions, as soon as possible or reasonable.

In most project change situations, we expect different impact levels in terms of


scope, schedule and budget, like in this example:
Solution 1: Three new work packages, two weeks delay, 0.04%
additional cost;
Solution 2: Five new work packages, no delay, 0.7% additional cost;

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Solution 3: One new work package, four weeks delay, no additional


cost;

Solution 4: Do nothing and change the plan instead, eight weeks


delay, 0.01% additional cost;

(5) Prepare a change request, based on the different alternative solutions and
send it to the involved and affected parties, as soon as possible or
reasonable.

When we are already in project implementation phase we do not want to lose


too much time with preparing and negotiating change requests. Therefore, it
will be useful to setup a change escalation system for those different impact
levels and reserve a portion of the project float or buffer, as well as a portion
of the project budget, our project reserve, in order to cover “small” changes
without losing time. This provides for the next step of our project change
management process:
(6) Follow the change escalation system for the discussion, negotiation and
decision of the change request.

A simple change escalation system could look like the following table:

Cost

Delay Less than 0.05% 0.05% to 0.5% More than 0.5%

Sub-project Sub-project
Project managers of
Less than 3 weeks managers of A and managers of A and
A and B
B B

Sub-project
Project managers of Project control
3 to 6 weeks managers of A and
A and B board of A and B
B

More than 6 Project managers of Project control board Project control


weeks A and B of A and B board of A and B

In the example above: If we prepare a change request based on solution 1, then the
sub-project managers of A and B have to negotiate and decide, while with a change
request based on solution 4, the project managers of had to negotiate and decide.

Whatever change escalation system you choose, make sure that it helps you to
prioritize the change requests appropriately, following your experience with earlier
projects. Too conservative escalation leads to too much work for higher level
managers and most likely more time for taking the decision; with too lax escalation
the budget for changes might be consumed too early.

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After taking a decision about the change request, we continue our project change
management process:
(7) Issue the change order.
(8) Execute the change order.
(9) Issue the corresponding invoice, make the payment and close the change.

We conclude this sub-section with a summarizing diagram of the nine-step project


change management process:

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CRITICAL CHAIN
Critical Chain is defined as the longest chain considering task and resource
dependencies.

This means that both the task and resources in a project are scheduled. It’s
fundamentally different from the critical path that only considers task dependencies.

If a task dependency exists, a successor task can only start upon completion of the
predecessor task, however this assumes that the required resources will be
available.

Regrettably, this is seldom the case. This can be traced to ineffective scheduling of
the resources in planning and the lack of accurate information in project execution.
Critical chain recognizes the impact of variability in execution, providing metrics,
dashboards, and actionable information, pinpointing precisely where action must be
taken.

This is only possible because the critical chain, unlike the critical path, does not
change in execution. Decisions and actions taken to protect the critical chain will
always be valid. Leveraging the available information provided, assessing the impact
variability is jeopardizing the contractual delivery date, is the key to bringing projects
in on time and on budget.

Critical Chain methodology requires a more disciplined mindset in planning,


scheduling and execution of your projects. Perhaps this can be more accurately
described as challenging some of your long held beliefs on what practices lead to
successful project management.

Critical chain methodology consists of two parts, one is technical, the recognition of
the importance of resource dependencies while planning the project. And secondly,
a willingness to challenge your current paradigms, embracing a new way of thinking.
If you are committed to improving then you must accept that you must change.
Otherwise the results you are experiencing today will be the same in the future.

CRITICAL CHAIN SCHEDULING


 A method of scheduling that considers limited resources when creating a
project schedule and includes buffers to protect the project completion date
 Based on the Theory of Constraints (TOC)
 A management philosophy developed by Eli Goldratt and introduced in his
book The Goal and Critical Chain
o Like a chain with its weakest link, any complex system at any point in
time often has only one aspect or constraint that limits its ability to
achieve more of its goal.

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o For the system to attain any significant improvements, that constraint


must be identified and the whole system must be managed with it in
mind
 For example, two tasks originally scheduled to be done in
parallel, require the same resource 100% of the time. CCS
acknowledges that either one of the tasks must be delayed or a
similar resource must be found in order to keep to the original
schedule
 Attempts to minimize multitasking
 When a resource works on more than one task at a time – people are
assigned to multiple tasks within the same project or different tasks on
multiple projects.
 Someone assigned to three tasks, tries to please everyone and works a little
on each task and then goes back to finish the first one.
o This can actually delay the completion of tasks as compared to working
on each task in sequence .
o Multitasking also often involves wasted setup time, which increases
total duration.

 Critical Chain Project Management (CCPM), developed by Eliyahu M.


Goldratt, is a method of planning and managing projects that puts more
emphasis on the resources required to execute project tasks.
 This is in contrast to the more traditional Critical Path and PERT methods,
which emphasize task order and rigid scheduling.
 A Critical Chain project network will tend to keep the resources levelly loaded,
but will require them to be flexible in their start times and to quickly switch
between tasks and task chains to keep the whole project on schedule.
o Typically, CCPM case studies report 95% on-time and on budget
completion when CCPM is applied correctly.

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BUFFERS AND CRITICAL CHAIN


 In traditional estimates, people often add a buffer to each task and use it if it’s
needed or not
 A buffer is additional time to complete a task
 This time is added to when there is multitasking, distractions, interruptions,
fear that estimates will be reduced and Murphy’s Law
o Murphy’s Law states that if something can go wrong, it will
 Critical chain scheduling removes buffers from individual tasks and instead
creates:
o A project buffer or additional time added before the project’s due date
o Feeding buffers or additional time added before tasks on the critical
path that are preceded by non-critical-path tasks
 The tasks estimates in critical chain scheduling should be shorter than
traditional estimates because they do not include their own buffers
o Not having tasks buffers should mean less occurrence of Parkinson’s
Law - work expands to fill the time allowed
o Feeding and project buffers protect the date that really needs to be met
– the project completion date

EXAMPLES OF CRITICAL CHAIN SCHEDULING

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COMPARISON OF CPM AND CCPM RESULTS


According to the results we found above, project duration by CPM traditional
approach is 21 days and the project duration for the same amount of work by using
CCPM is 16 Days.
Using CCPM:

 Project Duration can be reduced by 25-40%.


 Resources can be utilized effectively.
 Project is fully focused on both critical and non critical tasks

SUCCESS WITH CRITICAL CHAIN


Now that we have defined the problem and substantiated the claim that the current
theory is in need of improvement, the next step requires creating a new theory (of
the project system): critical chain project management (CCPM). Expectations for the
theory are that it will, subject to critical evaluation, consistently achieve project
success. It should explain both past success and failure and provide testable
predictions of future performance. Preliminary experience with the new theory shows
benefits that exceed the minimal performance requirements for the new theory but
that the theory can explain. Those benefits (compared to the present critical path
theory) are the following.

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 Improved project success:


 Projects completed on time all the time;
 Projects delivered full scope;
 Improved market position and business growth.
 Reduced project duration:
 Projects completed in half the time (or less) of previous similar projects;
 Individual project plans reduced by at least 25%; Begin at the beginning 23
 Multiple project durations reduced by larger amounts;
 Project changes reduced;
 Early returns for commercial projects;
 Reduced payback periods for investment projects.
 Increased project team satisfaction:
 Reduced confusion from multitasking;
 Ability to focus on one task at a time;
 Reduced changes;
 Reduced rework;
 Reduced pressure from multiple project managers;
 Win-lose task completion (date-driven task pressure) eliminated;
 Buffer reporting used by individuals to decide task priority;
 Reduced insertion of new priority tasks.
 Simplified project measurement:
 Quick and easy plan status;
 Real-time project status; no need to wait for financial reports;
 Immediate focus by buffer, chain, and task provided by status;
 Decisions defined by buffer report;
 Focus of buffer reporting on management priority decisions (reflected in the
buffers by staggering project start).
 Simplified project management:
 Clear focus for project manager (critical chain, reduced early start);
 Simplified project plans reduce paperwork;
 Simplified project status reporting;
 Whether to plan or act decided by measurement;
 Resource priorities decided by measurement.
 Increased project throughput with same resource:
 Reduced resource demand conflicts;
 More projects completed faster for the same level of resources;
 Less need to hire new critical resources;
 Less delay due to resources;
 Improved project cash flow;
 Improved ROI. Evidence of other users often gives people confidence to try
new ideas.

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The present CPM project paradigm has been in force for over 40 years, making
change hard for many people to accept. More and more companies, small and large,
are demonstrating success with CCPM. Several examples illustrate that success.

Key points are:

 Projects success rate using the existing critical path paradigm is poor for all
types of projects in all types of cultures.
 Hypothesized causes of project failure do not address the project
management system as the potential cause, most often leading to remedies
of working harder with the old system. That does not seem to be the right
problem.
 Evidence suggests that the right problem is in the design of the project system
itself; specifically, the system fails to properly manage the reality of
uncertainty.
 The right solution requires a project system that has a much higher success
rate and that is simple to use.
 A growing body of evidence does not contradict the hypothesis that Goldratt’s
critical chain method satisfies the necessary conditions for project success.
Comparing the results of applying the critical chain theory to the existing
theory (i.e., the critical path theory as described in the PMBOK ) provides
support for using the critical chain theory while we continue to critically review
and improve it.

APPLICABILITY OF CRITICAL CHAIN SCHEDULING IN


CONSTRUCTION PROJECTS
Many industries, including construction, have been using CPM scheduling for a very
long time. However, due to the increasingly competitive business environment,
tighter time constraints are becoming the norm of the industry. And as a result, more
projects are slipping behind schedule. This led some to call for more efficient means
to plan and schedule projects. Following to the introduction of the theory of
constraints (TOC) by Eli Goldratt, a new and innovative project scheduling paradigm
emerged; that is Critical Chain (CC). This technique is evolving year after another,
with documented success stories in some of the biggest multinational companies in
the world. However, it seems to be almost unknown within the construction industry,
at least in the Middle East where the study was carried out. To better understand the
potential of applying CC in construction, this study aimed to:

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(1) measure the readiness of construction professionals in two Middle East


countries to adopt CC,
(2) determine suitable project type(s) for its pilot application,
(3) identify any technical obstacles to applying it, and
(4) investigate means to overcome such obstacles.

To this end, CC introductory seminars were organized in Egypt and Saudi Arabia.
Questionnaire surveys were disseminated after these seminars to solicit feedback on
these issues. One of the survey’s findings is that linear projects, e.g., pipeline
construction projects, were pointed out as potentially suitable for CC pilot application.
An obstacle identified by construction professionals to hinder CC real life application
is estimating the aggressive but achievable duration (ABAD). This term refers to
fundamental parameter upon which the CC calculations are based. The paper briefly
discusses how the intelligent capabilities of case-based reasoning are utilized to help
facilitate the estimation of ABAD.
Keywords: project scheduling, CPM, critical chain, pipeline construction, case-
based reasoning (CBR).

1. CPM SCHEDULING FOR CONSTRUCTION PROJECTS


The critical path method (CPM) and its underlying concepts evolved in the US
back in the 1950s (Aguanno 2002). Today, CPM tools are the norm for planning and
scheduling construction projects. According to surveys by Kelleher (2004), a
staggering 98.5% of surveyed ENR’s top 400 construction contractors were using
CPM as the fundamental technique for project planning. The smaller size companies
employed free-hand bar charts as well, while the larger size ones complemented
their CPM planning with the use of Program Evaluation and Review Technique
(PERT), 4D schedules, and others.

Many articles have been written about the importance of using CPM in
construction planning and scheduling (Hansen 1994). The last decade, nonetheless,
has witnessed a debate on the real effectiveness of such planning tools. Some even
critiqued the construction planning process and argued that there was over-
emphasis on the critical path terminology (Street 2000, Winch and Kelsey 2005).
Among the arguments was the need to continuously update and revise the schedule,
CPM becoming a ritual formality rather than a useful tool, among others (Baki 1998).
Other opponents tackled the issue from a different perspective. Goldratt (1997), for
instance, argued that there has been nothing really new in project planning and
scheduling in 40 years. The traditional CPM inherited certain foundational philosophy
in calculating activity duration, activity float, and the project total duration. However,
with CPM, it is not uncommon to see projects failing to be completed as planned.
There is a myriad of causes behind such failures, but one ought to think if the
planning tools themselves are sometimes incapable of safely navigating a project to
its end.

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2. CRITICAL CHAIN AND THE NEED FOR THIS STUDY


The critical chain (CC) method was first introduced in 1997 by Dr. Eli Goldratt
in his book “Critical Chain” (Goldratt 1997, Raz et al. 2003). Since its inception, CC
was realized to be a considerable deviation from the traditional CPM counterpart.
Today, it is a well-recognized technique for project planning and scheduling in the
literature (PMI 2008). Moreover, many success stories for its implementation have
been reported in various industries such as defense, pharmaceutical, IT, research,
and others (Leach 2005).

Despite this relative popularity in some other industries worldwide, there was
no documentation of applying CC in the construction industry in the Middle East.
Admittedly, there have been attempts at applying CC in the international construction
industry, e.g., Balfour Betty (1998). Yet, this does not translate, by any means, into
CC becoming a well-proven industry practice. The study in hand was initiated – back
in 2008 – as an effort to:
1. Gauge the level of awareness of construction industry practitioners in
targeted Middle Eastern countries about the CC technique.

2. Investigate the applicability of CC in construction projects, from the


perspective of those industry practitioners. Also, investigate the type(s) of
construction projects convenient for its pilot application.
3. Point out and possibly tackle an obstacle to its implementation.
To this end, the study proceeded in stages as follows:

1. Publications and earlier researches relevant to planning and scheduling


techniques were thoroughly reviewed, particularly those addressing CC. Also,
the CC awareness was informally investigated among industry practitioners
(to better guide the following stages of the study).

2. CC awareness seminars in both Egypt (as a representative of North African


countries) and Saudi Arabia (as representative of the Arabian/Persian Gulf
countries) were conducted. The support of professional societies was
sometimes sought in arranging the said seminars, to which industry
practitioners were invited.

3. Following each awareness seminar, questionnaire forms were


disseminated to the attendants to investigate CC applicability, potential
construction project type(s) for its application, obstacles, among other
aspects.

4. An obstacle to CC implementation was highlighted and a computerized tool


was developed to help overcome such obstacle. The intelligent capabilities of
case-based reasoning were particularly sought at this stage.

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3. THE CRITICAL CHAIN TERMINOLOGY

The CC was born out of the theory of constraints (Goldratt 1997). The
application of the theory of constraints in the area of project planning is based on the
notion that task-time estimates are normally inflated, e.g., weather-related padding
added to task estimates (Millhiser and Szmerekovsky 2012). Task owners typically
incorporate these safety paddings to ensure as much as possible they would be able
complete the work on time, regardless of uncertainties (Raz et al. 2003). In normal
CPM scheduling, the safety paddings are inseparable from the activities durations.
CC removes the safety paddings from the project activities and pools them to create
safety margins for its different paths, figure 1, and eventually the project as a whole.
The safety paddings/margin will hereinafter be referred to as the “buffer”. Also, it is to
be noted that the durations in CC is frequently called aggressive but achievable
durations (ABAD).
3.1 Activity Durations and Path/Project Buffers

The buffers which were hidden or impeded inside the activities in CPM
schedules become explicit and pooled in CC schedules. Under CC, the

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buffers appear on the project bar chart (Raz et al. 2003). In other words, it is
scheduled and managed. This can help visualize the level of uncertainty in the
project. The lengthier the estimated buffer for a path/project, the riskier it is.
Raz et al. (2003) further indicate that the combined buffer can be less than the
sum of safety margins for the individual activities. This argument is supported
by statistical theory that states that the standard deviation of the sum of a
number of mutually independent random variables (in this case the duration of
activities on the path) is less than the sum of the individual standard
deviations. However, in practice, it may be easier to gain task owners’
acceptance of polling their individual safety margins if the total is not reduced.
This human-related factor needs to be taken into account as well.

The developer of the CC method, Eli Goldratt, suggested halving the


durations of project activities under the traditional CPM schedules. Half of this
“saved” time is then used to create a buffer for the path/project. Accordingly,
the total planned project duration will drop to 75% of the original estimate.
This method, which is called the 50% rule, is criticized by some. For instance,
Herroelen and Leus (2001) argued that the 50% task duration estimate may
be based on a loose ground. Further, the mechanism used for the estimating
the task duration in CC will govern the created buffers for the paths and the
entire project. Having an accurate buffer size and corresponding estimated
completion date is of particular importance when projects must be won
through bids that are evaluated, at least partially, based on the delivery date
of the project (Millhiser and Szmerekovsky 2012).

Why does one need to account for the buffers of the different paths
rather than the longest path alone? This is quite a reasonable question to ask
when it comes to CC. After identifying the longest chain of activities based on
the CC-estimated task times, the buffer for this chain denotes the project
buffer. It is realistic to assume this will govern the actual project duration.
Millhiser and Szmerekovsky (2012) claim that such notion simply undermines
the significance of buffers on parallel paths. With the variability inherent in
project activities, it is possible to encounter a non-critical chain, as per the
plan, that leads to unrecoverable delays. The CC response is the insertion of
feeding buffers where non-critical sequences join the critical chain, figure 2.
Reason of such name is that it denotes where the non-critical chain feeds into
the critical chain (Raz et al. 2003).

A third type of buffers is used by CC is called a resource buffer, which


is a virtual task inserted prior to the critical chain tasks that require critical
resources. Its purpose is to issue a signal to the critical resource that a critical
chain task to which they are assigned is due to start shortly (Raz et al. 2003).
While working on the critical chain task, the resource is expected to work
continuously on this task, so drawbacks of multitasking do not materialize.

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3.2 Use of Buffers

The buffer sizing is a topic that has been under scrutiny by researchers
for some time now. There is no consensus yet on the best method to estimate
the size of the project and feeding buffers. A review of many of these methods
can be found in Geekie and Steyn (2008). But, assuming one of these
methods is used to estimate the buffers, then they become not only protective
means against variations but also transducers that provide vital operational
measurements and proactive warning mechanisms on the project
performance (Herroelen and Leus 2001). If activity variation consumes a
buffer by a certain amount, a warning is raised to determine what needs to be
done if the situation continues to deteriorate. These plans —expediting,
working overtime, subcontract, etc.— are to be put into effect if the situation
deteriorates past a critical point. Figure 3 illustrates a graphical tool, called
fever chart, for the tracking of project performance as per the consumption of
the allotted buffers (Leach 2005). This chart is particularly useful as it relates
the buffer consumption to the project clock or completion of the critical chain
activities. Three regions are identified and coded with the colours red, yellow
and green. In this context, the red region signifies the most alarming scenario
that induces proper intervention. Yet, the fever chart incorporates another
dimension, which is the percentage of work completed to date, or alternatively
said, the percentage of longest chain completion. Reaching the red region will
not be as alarming in case of 90% completion as in the case of 10%
completion. Only when the two dimensions are tied together, a more
informative judgment can be made.

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3.3 CC VS. CPM Scheduling

CC planning seems different from the CPM counterpart. However, they


still share some aspects in common. Both are represented by networks and
bar charts, and both use forward and backward calculations to predict start
and finish dates. However, unlike CPM, the CC terminology refers to the
longest path as the critical chain, denote durations by ABAD, safety margins
are pooled in the form of project/feed buffers, and the project health is
evaluated via the buffer consumption.

4. AWARENESS SESSIONS AND SURVEYS


Following to informal interviews with many industry practitioners in the Middle
East, it was realized that the CC technique is, simply said, unknown to all. The
exception was two Project Management Professionals (PMPs) who got acquainted
with it while preparing for the PMP exam. However, they have not used it in reality or
even investigated its use. This guided the research to arranging and conducting
awareness sessions in Egypt and Saudi Arabia, followed by a survey to solicit the
feedback of industry practitioners on the subject matter.
4.1 Venues and Attendants

Three awareness sessions were conducted in three locations in Egypt:


(1) an academic institution, (2) an authorized trainer for the Project
Management Institute (PMI), and (3) a top Egyptian contractor with multitude
of international projects. In addition, one awareness session was conducted in
Saudi Arabia during a Quarterly Meeting of the Egyptian Association for
Planning Engineers in Jeddah. All attendants of the latter session have many
years of experience working in Saudi Arabia. After end of each awareness
session, a survey was disseminated. Figure 4 shows the primary information
of the participants in the awareness sessions and the surveys that followed. A
total of 47 industry professionals took part in this research stage.

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4.2 Survey Structure and Major Findings


Survey had 19 multiple choice questions (with sufficient space for
comments and out-of-list answers). After the conventional introductory
section, two sections followed. First section investigated the current planning
practices, including: (1) level of planning in company practices, and (2) the
planning tools and techniques in use. The second section addressed CC in
more specific details, including: (1) general perception of CC, (2) obstacles to
practical implementation, (3) expectations for CC success/failure, (4)
construction project type(s) most suitable for its pilot implementation, and (5)
willingness of participant to engage in CC deployment in own company.

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4.2.1 Current Practices


All participants, with no exception, were found to use CPM for
planning and scheduling in their companies. Eighteen benefits were
identified for the use of CPM in such capacities, table 1. However, the
significance of such benefits, denoted by the rank, differs between
Egypt and Saudi Arabia. Both groups were in consensus, nevertheless,
on “scheduling project activities” to be the top benefit.

Survey investigated why the current CPM systems are deployed


and will continue to be popular in the future, Figure 5. Construction
professionals in Saudi Arabia cited such CPM schedules to be a typical
contract requirement, which enforces their use. Construction
professionals in Egypt were rather perceptive of their significance in
dispute resolution between the project parties. Familiarity of all contract
parties about the CPM terminology cannot be overlooked. Among the
other reasons is the validity of such technique (which was proven over
the years), not needing high/sophisticated skills, and the time/cost
savings associated with their use.
4.2.2 CC Potential and Applicability

As per the survey, 10% and 44% of the surveyed industry


professionals in Egypt and Saudi Arabia, respectively, had the opinion
that CC adds no real value in project planning despite the new
scheduling approach used. They see that using ABAD has a
counterpart in CPM schedules via utilizing aggressive activity
durations. Then, having a buffer between the planned end date and
deadline for completion is not atypical.

Construction professionals appreciated CC as a new and


innovative approach, nonetheless. Yet, the majority of the surveyed
professionals (68% and 62% in Egypt and Saudi Arabia, respectively)

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believed it was applicable in construction industry under certain


circumstances/constraints.

To clarify the perception of CC applicability in construction


practice, ten obstacles for its application were investigated, figure 6.
Professionals in Egypt identified the inexperience of project parties,
especially vendors and subcontractors, about CC terminology as the
most significant hurdle. Among the other pointed-out obstacles is the
software changes and reluctance to use new technique (i.e., it was not
deployed before in construction projects). The professionals in Saudi
Arabia were concerned primarily about the contractual context and the
fact that CC application is not a contract requirement. They also
showed concern about CC not being a “proven” scheduling and
management technique.
Another area of great concern was the estimation of ABAD and
the buffers. There are tied together. As per table 2, there was a
complete rejection of applying the 50% rule in construction practices.
All considered it to be unrealistic due to the nature of construction
activities. Construction professionals in Egypt were divided as to which
is the better approach for estimating ABAD and the buffer, where
approximately half opted for expert judgment and the other half
preferred using analytical means to make the estimate. For the surveys
in Saudi Arabia, there were more tendencies to use expert judgment as
the primary basis for the estimates. The surveyed professionals
conveyed an important point in this research; that is ABAD estimation
is a main challenge for CC applicability in practice.

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An investigation of the project type(s) most suitable for the CC


implementation in construction industry, professional in Egypt and
Saudi Arabia preferred linear projects, e.g., pipeline/utility projects,
over the traditional building counterparts. Other project types that are
not construction oriented were presented to the participants. This
allows those who feel less convinced about CC suitability in
construction to convey their opinions. Results are summarized in table
3.

The choice of linear construction projects that are characterized


by their repetitive nature should come as no surprise. Goldratt’s theory
of constraints, that is the theory upon which the CC method is founded,
was developed for managing repetitive production systems

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(Raz et al. 2003). Another reason is that, in more complex


construction projects, it is typical to see paths splitting and merging
again at various intermediate points. The resulting maze of paths in the
network will make is difficult, if not impossible, to estimate the buffers,
especially the feeding buffers (Raz et al. 2003). One ought to think of
the scenario of various merging tasks and how much feeding buffer to
use.

In conclusion, the majority of survey participants expected partial success for the CC
scheduling technique in construction. None of those in management roles agreed to
implement it immediately, but rather preferred to wait until implemented by others in
the industry. Some even questioned the success stories of CC; they consider it the
result of two types of changes, the first is the planning technique and the second is
the working environment. Their perspective, which is shared by the authors, is that
applying CC requires close supervision and better staff motivation and management.
They raised a simple question; that is, what if these changes in the work
environment took place while using a CPM planning system? what will be the result
then?

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APPLICATION OF CRITICAL CHAIN MANAGEMENT IN


CONSTRUCTION PROJECTS SCHEDULES IN A MULTI-
PROJECT ENVIRONMENT
INTRODUCTION
The ability to manage multiple projects in the dynamic and competitive
modern economic environment becomes a key competence which may have a
significant impact on building a company’s competitive advantage. Most companies
in the construction industry operate in a multi-project environment, generating
revenue from projects whose implementation is a result of sales activities and
obtaining external orders. The subject of managing multiple projects consists in
project programmes and portfolios. Projects which are implemented simultaneously
yet independently of each other and share the resources necessary for completion
create a project portfolio. Achieving synergy and strategic objectives of an enterprise
requires here a skilful overcoming of difficulties with regard to the selection of
projects, corresponding company strategies, and optimisation of the use of
resources by individual projects. While the distinguishing feature of the programmes
is the common objective of the group of projects, the achievement of which would
not be possible under separate implementation of individual projects. The dominant
problems in managing a programme are related to the coordination of individual
elements of the schedules with the programme implementation plan.

One of the crucial decisions conditioning effective management of multiple


projects is to determine an optimisation strategy. The deciding factor as to whether
the project portfolio or programme has been designed optimally may be a particular
resource, project risk or timeliness. Time is a particular type of resource. It cannot be
stored, therefore in the management of individual projects as well as a portfolio of
projects a lot of attention is paid to scheduling the undertakings and monitoring their
implementation with regard to completion within a specified timeframe.

BACKGROUND
Multiple projects management is characterized by the complexity of the issues
related to planning, organizing, coordinating and controlling a set of projects
simultaneously. Thiry defines the management of the project portfolio as a process
of analysis and allocation of resources between organizations, projects and
programmes, conducted in order to achieve the organization’s objectives and
maximize value for stakeholders. In this dynamic process of decision-making the set
of active projects is constantly reviewed and updated. The three main questions that
need constant verification of answers in managing a set of projects can be
formulated as follows:

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 whether the right projects are implemented in the context of the strategic
development vision
 whether the expenditure incurred on projects are strategically justified
 whether the organization has the resources necessary for the implementation
of these projects.

A comprehensive multi-project environment is formed mainly by two factors:


uncertainty and links between projects. The notion of uncertainty brings another
factor crucial for the management of a single project or a set of projects, i.e. risk. The
common feature of the management of multiple projects is the necessity to solve the
conflict of resources resulting from the links between the projects. Most frequently,
the critical resource are people – employees having specific qualifications. The
managers focus on the allocation of resources and their ongoing relocation, aiming
to solve the problems at the interface of projects on a daily basis. The resource
allocation syndrome as a common feature of management in a multi-project
environment results primarily from inadequate planning, the indication of which is
among others giving priority to projects post factum (after-the-fact prioritisation).
Also, the schedules are prepared at the level of individual projects, not at the
portfolio level. The Resource Constrained Project Scheduling Problem (RCPSP) is a
classic scheduling problem, the solution for which aims at minimising the makespan.

In a multi-project environment, management decisions connected with solving the


Resource Constrained MultiProject Scheduling Problem (RCMPSP) concern such
allocation of limited projects that will allow for minimising the average delay within an
individual project or shorten the completion period of an entire set of projects. The
methods aiming to solve resource allocation problems classified as N-difficult include
precise and heuristic methods, where the former are used with regard to simple
scheduling issues, whereas the second group is suitable for solving complex
problems, including in a multi-project environment. In practice, due to a significant
effort required when building a network, heuristic methods for calculation purposes
are used to a limited extent; algorithms based on the priority principle are more
frequently used. An ordered, comprehensive attempt to solve problems occurring in
the management of multiple projects consists in the critical chain method based on
the assumptions of E. Goldratt’s theory of constraints. The starting point of this
method is the identification of constraints and it also assumes the need to specify not
only physical constraints (of the critical chain) but also procedural constraints, which
are usually of a behavioural nature and arise from fixed patterns of employees’
behaviour. A constraint is a resource which prevents a better achievement of the
objective for which the system was designed. On the level of the system, a constraint
can be the insufficient availability of financial resources or multitasking.

The period of time in which a project must be completed is considered as one of


the main constraints, which is due to three main reasons:

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 a delay in project implementation has negative consequences regarding cash


flow, related primarily to the increase of general costs (overhead costs)
 a delay in project implementation results also in a very high increase of cost
contingency
 the expectations of stakeholders are modified and in a situation of extending
completion times of the project or project portfolios there may occur
expectations to change the scope of the said projects, change the technology
of implementation of project tasks or change the functionality of the subject of
project activities.

In construction undertakings there is a clear correlation between the project


completion time and its profitability. Exceeding the directive project deadline has
negative financial consequences, such as for example a delay in achieving the
intended benefits, postponing profit, and frequently loss of profit and share in the
market. The consequences of a delay in an investment and construction project may
be significantly greater than exceeding the budget alone.

Schedule Pressure
The perception of time as a key constraint is connected with schedule
pressure, defined by Yaghootkar and Gil as a gap between the assumptions of
the project manager concerning the time necessary to complete the project, with
the allocation of resources planned at the beginning of the project, and the actual
number of days necessary forthe completion of all activities under the project.
Frequent, unplanned transfer of resources of a specialist nature between the
projects which are aimed to remedy the situation regarding project delays, on a
fire extinguishing basis, are some of the reasons for scheduling pressure in a
multi-project environment. Lack of a thorough analysis at the planning phase,
abandonment by the project team at this phase of activities related to risk
analysis and assessment with indication of a strategy for mitigation of threats,
may lead to a situation of continuous fire extinguishing in next projects from the
portfolio, which will have a negative impact on the organisation. Multitasking
related to the necessity to organise work in a multi-project environment in which
multiple projects sharing resources are implemented simultaneously and the
limited availability of “key” resources necessitates competition between projects
for access to those resources. Overburdened resources migrate between
projects in reply to the last, “loudest” request, trying to satisfy as many clients as
possible. On the other hand, well-planned simultaneous performance of tasks
may be a significant element of improvement of effectiveness of activity, reducing
project duration and enabling better use of resources. Therefore, the issue of
multitasking should be approached carefully, considering the realities of a given
project portfolio or programme and accordingly determining its optimal level.

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Critical Chain In Multi-Project Environment


Completion of a task in a project is determined by the completion of the
preceding tasks and the availability of appropriate resources. The key constraint
which impedes the achievement of the assumed objective, being the maximum
reduction of the project completion time, is the duration of the activities necessary
to perform the tasks of the critical path. In the traditional approach, when
determining the critical path only logical relationships between the tasks are
considered, i.e. the cause and effect sequence of activities. A key aspect of the
alternative method proposed by Goldratt is the replacement of the critical path
with the critical chain. When determining the critical chain both logical
relationships between the tasks and the resource dependencies (availability of
the resources necessary to perform the task at a given time) are considered. The
estimation of duration of individual tasks in a project is carried out with the
assumption that in order to increase the probability of performance of tasks within
the assumed deadlines, when planning projects a common practice is to
overestimate the duration of individual activities. This way, in the traditional
method of the critical path reserves included in the estimation of time necessary
to perform each task are created. In the critical chain method those reserves are
eliminated by determining the most probable time, which in the case of beta
distribution is on average 50% shorter than the time estimated with probability
90%. For safety in terms of timeliness, three buffers are introduced to a schedule:
a project buffer, feeding buffer, and resource buffer. Whereas it is assumed that
the introduced buffers and shorter duration of tasks will not result in a change of
the course of the critical path.

A project buffer is introduced at the end of the critical chain. The aim of
this buffer is to allow for meeting the planned project completion deadline under
normal uncertainty connected with the duration of individual tasks. The critical
chain method assumes that the size of the project buffer constitutes half of the
sum of individual reserves in the critical chain, while the way of determining the
size of this buffer proposed in this method is subject to doubt and discussion.
Feeding buffers are introduced in places in which other tasks connect with the
critical chain. Their role is to protect the critical tasks against the impact of delays
on feeding paths, enabling also earlier commencement of activities in the critical
chain. Resource buffers are included in the schedule in places where the tasks in
the critical path require a different type of resource than the previous task. They
do not have a time dimension and their role is to provide the allocation of an
appropriate renewable resource for the performance of a given activity from the
critical chain. Many publications have been devoted to the issue of determining
the sizes of buffers. They include numerous proposals modifying the assumption
of the critical chain method and the methods for calculating the buffers. The
proposed methods for calculating buffer sizes and creating a schedule are to a

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large extent related to the attempt to ensure stability of commencement dates of


individual activities, which in literature sources is called solution robustness.

In a multi-project environment, the critical chain multi – project management


method (CCMPM) is used in scheduling the projects comprising a portfolio,
including the following stages:

 giving priorities to projects, in line with the organisation’s strategy


 developing schedules for individual projects with the use of the critical
chain method
 identifying the critical resource
 summarising critical resource tasks
 ordering the projects on a timeline so that they are carried out in
accordance with the given priorities with the shortest possible stoppage in
the operation of the critical resource which sets the pace of
implementation, hence the term drum resource
 introducing capacity constraint buffers.
The aim of the buffer for the drum resource is the protection of the next
project’s commencement date against the impact of delay in the preceding
project. Its size is determined according to the principles of uncertainty buffering.
At the final stage a resource schedule is generated, which includes the duration
of the drum resource tasks execution and a list of tasks of other resources.

CRITICAL CHAIN IN PLANNING CONSTRUCTION PROGRAMMES


AND PORTFOLIOS OF CONSTRUCTION PROJECTS
A significant aspect of applying the constraints theory is the transfer of
changeability in performing the tasks under projects to buffers, which facilitates to a
large extent the management of project uncertainty and risk. The most common
factors generating a high risk of investment undertakings in the construction industry
are: the heterogenic nature and lack of seriality of the production process (whereas it
does not include the production of materials and construction products),
implementation of projects in a complex environment burdened with great
uncertainty as to implementation conditions, very dynamic, involvement of many
stakeholders whose objectives are frequently not consistent or complementary,
dependency on natural conditions, including primarily regarding climate, long
preparatory period, division of responsibilities between many process participants.
The application of the critical chain method in managing multiple investment and
construction projects requires a reliable estimation of tasks duration as to enable
efficient functioning of buffers and completion of the projects as quickly as possible.

Lau E. and Kong J. state that the identification of the constraints as the first
step to apply TOC in project management enables to make better managerial
decision and achieve higher performance in construction project management.

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Based on literature review the constraints have been classified into five categories:
economic constraints, legal constraints, environmental constraints, technical
constraints, and social constraints. The identification of constraints helps projects
managers not only to understand the nature of those constraints but also enables
them to predict the time of occurrence of a given constraint with respect to the
stages in the life cycle of a construction project. Economic constraints and legal and
environmental considerations occur primarily at the stage of project
conceptualization and planning, affecting the scope and content of the construction
project. During the project execution stage and subsequently the operation stage it is
expected that technical and social constraints will occur. Reliable forecasting of
constraints facilitates the planning and allocation of resources, the project manager
can assess whether a given constraint is temporary or whether it will affect the
implementation process throughout the project’s life cycle. Estimating buffer sizes
and balancing the resources are the two main scheduling challenges of construction
projects using the critical chain method. Buffers play a key role, whereas it is
demonstrated that 50% of estimates is too arbitrary and therefore their use in
planning construction projects is not appropriate. The sizes of buffers may be too
large, which will result in resources being wasted or the project not being sufficiently
resistant to the influence of uncertainty and risk. Hence the numerous publications
proposing modified ways of estimating the amount of resources. Another area of
challenges for a project manager applying the CCPM method is planning of
resources. When planning resources in a multi-project environment, critical chain
method recommends staggering the release of projects around a key resource that
acts as a virtual drum. This is used to ensure flow and avoid too many open projects
that result in excessive multitasking and missed due dates.

CASE STUDY
The issue of scheduling construction projects implemented in a multi-project
environment with the use of the critical chain method has been analysed under a
case study of the construction programme of marinas infrastructure, whose aim was
to create a network of functionally linked ports and marinas.

According to the definition proposed by the PMI a programme is a group of


projects that are related, managed and coordinated so as to achieve the benefits
impossible to achieve in the case of individual implementation and management of
each project separately. An important feature of the programme in the context of
multi-project environment is centralized, coordinated management, focused on
objectives and strategic benefits of the programme as a whole. Managing the
programme as a set of projects, includes identification and managing the project
connections, prioritization of the use of resources and reduction of the total effort
related to managing all of the actions constituting the programme.

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The analysed programme of building a sailing route, has met the conditions
resulting from this definition. The scope of the programme included the development
and reconstruction of 4 existing marinas and construction of 6 new ones. Each
project could be executed individually. However, the goal of the programme has
been to build a supraregional tourist route, unique on a national scale, and thus an
economic development of the polish Baltic seaside region through the development
of the national and foreign water tourism. Achieving this goal was possible only as a
result of executing a comprehensive programme, which has been created by
financially and organizationally connected infrastructural projects. Their connection
manifested itself also in the manner of managing the programme. The analysed
programme included projects owned by ten investors of different legal status
(associations, local governments, municipal companies), who, for the purposes of
implementation of the programme, have created a common organisational structure
with characteristics similar to a consortium. A partnership agreement indicating the
programme leader has been concluded for the purposes of programme
implementation. A significant determinant of the programme consisted in the
implementation of individual investment and construction projects in nine different
places located at a distance of a dozen or so or several dozen kilometres from each
other. Therefore, it was vital to ensure an appropriate structure of programme
management. Within the organisational structure of the leader a common
programme management office (PMO) has been created, with the purpose of
coordinating the projects comprising the programme. There were only four persons
working at the PMO – programme manager, technical coordinator, finance specialist,
and promotion and administration specialist.

Investment outlays of over PLN 98 million included the costs of drawing up


design documentation, carrying out construction works, investor supervision,
preparing application documents, drawing up mandatory audits and conducting
promotional activities and activities regarding project management. A part of these
costs was subject to refund under the subsidies from EU funds. Due to financing
from external sources, an important responsibility of the PMO was the control of
compliance of programme implementation with the co-financing agreement, including
compliance with the assumed completion deadlines of individual investments and the
entire programme. All examined investments comprising the programme were
implemented according to the traditional model in which the investor – the ordering
party provides the construction documentation, while the contractor is involved solely
in the performance of construction works. Preparatory works (design and technical
documentation) regarding individual investment projects under the programme were
carried out individually by investors and were initiated in 2008. Whereas public
procurement procedures for the works and implementation of investment projects
forming the programme were planned for 2011-2013. As preparation of the
programme, an analysis and quality assessment of risk for individual projects and for
the whole programme was conducted.

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Due to the multitude of tasks performed under the programme, the key
identified risk was untimely investment completion. The specific technical nature of
the programme, under which some of the works were planned for implementation in
harbour basins, was significant for the assessment of this risk. The course of these
works strongly depended on weather conditions. The risk of postponing the deadline
for performance of works was assessed by determining a relatively high probability
of occurrence and significant influence on the programme. It was predicted that this
risk will be subject to systematic monitoring by the PMO. To minimise the occurrence
of a time risk, the draft agreements with subcontractors provided for liquidated
damages for failure to perform the works in line with the adopted schedule. Also, in
order to prevent the occurrence of this risk, it was agreed that the tasks of the
engineer’s team supervising the implementation of individual investments under
investor supervision included among others the control of compliance of
performance of individual investments with material and financial schedules of
individual contracts and the material and financial schedule of the programme. At the
programme planning stage, schedules of projects and programme were prepared in
the traditional method CPM with the use of MS Project, including the specific
technical nature of individual investment undertakings, considering also the climate
conditions on the coast, i.e. in the location of most of the investments.

For the purposes of this study, the schedule prepared for the programme was
modified in accordance with the assumptions of the critical chain method. In line with
this method, the first step should be giving priorities to projects, corresponding to the
strategy of the organisation’s development. In the examined case, each undertaking
was important in terms of programme objectives, as the achievement of the
assumed result, i.e. a consistent infrastructure of a nautical tourism route, was
determined by the construction and modernisation of all facilities planned under the
programme. However, it was assumed that it is important for the effectiveness of the
programme to keep the planned distance between individual units of the tourist
route, because it was determined considering the safety of sailing. Therefore, priority
was given to two undertakings, whose delay or failure to complete would break the
continuity of the route and result in increasing the distance between ports beyond the
adopted one according to the safety criterion. Subsequently, the schedules of 10
individual investment projects under the programme were modified in accordance
with the procedure algorithm adopted in the CCPM (Table 1).

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In order to calculate the size of buffers on the basis of the normal distribution
of duration of tasks covered by the scope of individual projects it was assumed that
the adopted duration of activities in the initial schedule was determined with 0.9
(t0.9) probability. The duration of tasks with e.g. 0.5 (t 0.5) probability was estimated
as reduced by 50% of the initial value. Based on the adopted estimates of task
duration and the probability of completion within the adopted deadline and assuming
a normal distribution of task duration, calculations of optimum task duration were
carried out and changes to individual schedules were made. Due to the limitations of
method for calculating the buffer size of the project in schedules of construction
works, a technique proposed in literature was used which is based on determining
the buffer size using the Finish-Start relationship with presence of both positive and
negative delays in these relationships.
The next step was to identify the critical resource. A list of tasks performed by
the critical resource was also developed. In the area of construction works, the
equipment necessary to carry out dredging works on water proved to be the critical
resource. Planning of works requiring the use of this equipment entailed with
additional complication that resulted from environmental factors causing mandatory
time limit on carrying out works on water except during water birds breeding period.
The second type of critical resource was the team of inspectors from investor's
supervision. According to the programme, works on individual projects could be
carried out by different contractors, and investor’s supervision was planned under a
single contract concluded by the project leader to ensure good coordination on
supervision of the whole programme. Accordingly, the next stage of the analysis
focused on the attempt of setting projects composing the programme in such a way,
that dredging works would involve critical resources, i.e. the equipment for dredging
and supervision of the hydrotechnical works inspector. Then, capacity constraint
buffers were implemented for protecting due dates for starting the projects, in which
it was necessary to use critical resources. Detailed results, discussion on the list of

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critical resources and network diagram of the examined programme with buffers
introduced with use of CCMPM method are the subject of a separate, more
comprehensive study.

According to information obtained from the statistics of MS Project, planned


duration of implementing the entire programme including the buffers was 586 days.
Planned implementation time of a complete programme with traditional approach of
estimating duration of individual projects was 794 days. The difference is 208 days. It
means that planning of the investment programme in this case with the use of critical
chain method could help to speed up the date of its completion.
Analysis of investment programme schedule described in the article was
carried out ex post, after the successful implementation of all projects under the
programme scheduled using the classical method of critical path. The actual time of
conducting the programme has been over four years, however an important factor
for such a long duration has been the need to conduct archaeological researches in
the course of one of the projects, which took over a year. The subject of this article is
however the usage of the CCMPM method at the stage of programme planning, thus
the issue of factors influencing the execution of the programme has not been
discussed in detail. The use of critical chain method in the analysed case could
result in tangible benefits for project participants, resulting from shorter
implementation time, better coordination of resources and stronger motivation for
programme participants to finish works before deadline. The condition for achieving
the latter effect, however, is the use of CCMPM method by all contractors of
individual investment projects that are within the scope of the programme, which
could be a significant barrier for implementation based on the assumptions of
method presented in the article, both at the planning stage as well as in the next
phase associated with monitoring of programme implementation.

CONCLUSION
Managing projects in multi-project environment are mainly activities focused
on synchronizing the use of critical resources while timing projects. At the level of the
programme or projects portfolio the critical chain method in projects planning proves
its usefulness primarily due to a systematic approach to the identification and
planning of the use of critical resources in time while taking into account the strategic
priorities of project organization.

Barriers resulting from construction practice for using CCMPM in managing of


construction projects portfolios are mainly connected with decision-making limitations
concerning due dates of starting the projects that in construction companies are
carried out as part of the stock of orders for which investors determine the time
frames in individual contracts for construction works. In the case study, a similar
barrier stemmed from the conditions related to external financing – financing
agreement stipulated the necessity of executing individual projects included in the

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programme in accordance with schedule, which is an integral part of this agreement.


The event of default could result in funding loss. In contrast, if the condition of proper
programme implementation would be the deadline for programme completion as a
whole, the planning based on CCMPM would allow flexible scheduling of individual
projects and their movement within the limits designated by capacity constraint
buffers. In this way, from the perspective of portfolio, management would be
improved first and foremost with a contract for investor’s supervision and reduction of
negative multitasking of critical resources. To verify the effectiveness of the use of
CCMPM in managing multiple construction projects, it is advisable to conduct further
analysis, mainly from the perspective of projects portfolio carried out within a
specified time by construction company, on the basis of a set of contracts and
schedules of various structures.

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