Industrial Project Management

INDUSTRIAL PROJECT

MANAGEMENT

Prof. Franco Caron a.y. 2019-2020

INDEX

0. INTRODUCTION ....................................................................................................................... 2

1. PROJECT AND PROJECT MANAGEMENT ................................................................................... 5

GASIFIER PROJECT ..................................................................................................................... 11

2. INDUSTRIAL PROJECT MANAGEMENT .................................................................................... 15

3. COMPETITIVE BIDDING .......................................................................................................... 17

4. CONTRACT ............................................................................................................................. 21

5. ENGINEERING ........................................................................................................................ 26

6. START-UP .............................................................................................................................. 33

7. PROJECT PLANNING ............................................................................................................... 37

10. PROJECT MODELS ................................................................................................................ 45

11. COST ESTIMATING ............................................................................................................... 46

12. WORK BREAKDOWN STRUCTURE ......................................................................................... 51

13. STAKEHOLDER MANAGEMENT ............................................................................................. 59

14. PROJECT RISK MANAGEMENT .............................................................................................. 65

15. PORTFOLIO MANAGEMENT ................................................................................................. 81

16. PROJECT SCHEDULING .......................................................................................................... 86

16.1 NETWORK TECHNIQUES ..................................................................................................... 88

16.2 RESOURCE CONSTRAINED PROJECT SCHEDULING ............................................................... 93

16.3 PERT AND CIM ................................................................................................................. 100

16.4 CRITICAL CHAIN PROJECT SCHEDULING ............................................................................ 105

17. CONSTRUCTION ................................................................................................................. 111

18. PROJECT PROGRESS ........................................................................................................... 117

18.1 S-CURVE ........................................................................................................................... 120

18.2 CONSTRUCTION FEASIBILITY ............................................................................................ 124

18.3 SMh PROGRESS EXERCISE ................................................................................................. 125

19. AGILE ................................................................................................................................. 133

20. COST MANAGEMENT ......................................................................................................... 135

21. EARNED VALUE MANAGEMENT ......................................................................................... 145

1

p. 1 - 4

0. INTRODUCTION

An Engineering & Contracting company’s activity consists in the realisation of projects characterized by

significant dimensions for external clients.

Considering the industrial sector, it is possible to find two different types of process, which can characterize

a project:

1) Repetitive process:

It is very similar to a “flow” of materials and operations. It is also known as operations; always the same

sequence (i.e. operations). A possible example can be an assembly line that gets an output at a specific

interval of time; people working in the assembly line make always the same sequence of activities.

They are the typical area of standardization; they are characterized by standardized product/process. Also

the process must be defined in a very detailed way, hence each operator must know in detail every operation

that he has to perform.

Characteristics:

• Standardized product/process → both the product and the process are standardized, since all the

activities are carried out with the same specifications. For example, an assembly line operator knows

exactly what operations he has to perform and what is their duration.

• Coordination by rules/procedures → no interaction is needed

• Incremental improvement of the performance → since we have repetition, as the time goes on, the

performance will improve.

• Permanent organization → since the activities are performed over the time, the organizational structure

is permanent.

2) Non repetitive process:

The work is never done in the same way we have done it last time, every time we have something new. It is

also known as project. So, the project must be re-approached with a different plan, different … . The project

is always defined temporary (so you have a planning date and a finished date); it implies that during the time

interval, we have a great concentration of effort. Looking at the effort we can derive the number of people

that must be allocated. The area of non-repetitive projects is expanding, we can find them also in the

manufacturing industry.

The objective is something made for the first time; this may imply a change in technology, people and

geographical area. Some examples can be the construction of a new building or of a ship. If the production

of a manufacturing company is performed according to the specification required by the client, every time

the company is producing something different and so it’s performing a project.

In the same company, it is possible to find both elements, indeed there is an interaction between these two

aspects: if we want to change and produce something new, somehow, we have also an impact on operations.

Characteristics:

• Unique product/process (progressively developed) → both product/process are developed in detail

during the project development (not from the beginning). The development is progressive, when I start

the project I don’t know in detail will be the final output. Every time the output of a project is a unique

product or service, since it is appositely designed according to the specifications required by the client

• Coordination by direct interaction → pm plan is something belonging to the project (you can’t move it

to another project, it is plan specific), while pm system is something belonging to the company (it is a set

of procedures, it gives a framework to the future projects in order to approach the planning process).

• Incremental improvement of pm system → after having carried out a project, it is possible to improve

the project management system, which can be applied to similar projects.

• Temporary organization → since the project has a defined duration, also the team project is just a

temporary organizational unit. 2

Inside a project we can define different type of processes: Managerial

- Operational processes → they are the only one that can generate

progress (industry specific).

- Managerial processes → they are general but must be adapted to

industry. They cannot generate progress. They are strictly related to

coordination (PM). Operational

- Organizational processes → they are connected to human resources.

The application of project management must be adapted to each

industry (operational level). We have to understand the operational processes in a specific industry

(engineering and constructing); Then, we want to see how the general rules of PM can be applied to that

specific industry.

Engineering & Contracting (E&C) operational processes:

• Engineering → will produce the technical documents

• Procurement → will produce purchase orders and delivery of material

• Construction → will produce materials, physical items installed and connected

• Commissioning/test → will produce working systems, we expect that the project is correctly working

Basic managerial processes by PMI BoK (Body of Knowledge):

- Initiation → put together everything to start the project

- Planning

- Monitoring/operational processes → you have to be sure that the production of document is in line with

the project (⟹ collecting information on the field in order to know what is the situation, in order to take

actions). Here we have the interaction between management process and operational process: the

operational process will generate all the information needed by the project.

- Control → taking corrective actions

- Close out → Since it is a temporary project, after the end of the effort, all the project teams must close the

work and must be addressed to other projects.

Organizational process is about human resources:

Recruiting of human resources Responsibility/authority assignment

• •

Selection Coordination mechanisms

• •

Education Performance evaluation

• •

Training Compensation

• •

Role assignment

•

3 main features of the project manager:

• Knowledge → ability to understand operational projects and how they work

Related to theory rigorous

⟹

• Skills → something that is obtained during working experience (you have to work on)

Related to practice flexible

⟹

• Attitude → in order to have a project manager, you should have also some leadership attitude

Usually, in university, when you try to solve a problem, you have all the data you need. In a working situation,

it happens that you have only partial information. This is why you need skills, as a way in which you preserve

the theory, but you are so flexible to adapt the theory to the specific problem you are dealing with.

Project manager’s fatal flaws (most relevant mistakes that a PM can do):

• Inability to learn from mistakes → PM should not be strict to his principles

• Lack of core interpersonal skills → hard skills are operational and management skills, but a PM should

have also some skills concerning the interpersonal skills (soft skills)

• Not open to new or different ideas 3

• Lack of accountability

• Lack of initiative → project is a matter of response actions, if I collect some information but I don’t take

any action it is un-useful

Project Management opposite poles:

• Objectives vs stakeholders → for objectives, the focus is on the traditional techniques of project planning

and controlling, considering also contents, time, costs and quality of managerial processes; so objectives

are budgets, completion time, final test, …; for stakeholders the focus is on the project actors, which can

be client, contractor, suppliers, partners, public entities and social groups; each actor can have a different

level of commitment. Recently, the focus shifted from focusing on objectives, to focusing on the

stakeholders. The relationship with stakeholders is becoming more and more important.

• “Hard” vs “soft” skills → switching from a macro vision to a micro vision of the project, we can focus on

the Project Team, which is the group made by different specialists and coordinated by the Project

Manager. In order to carry out a project in a successful way, there are two main aspects: managerial

capabilities (ability to plan and control the project) and relational capabilities (ability to interact with

members of the group).

• Synthesis vs analysis → the first consists in linking the project performances with some synthetic

indicators (quantitative parameters); the second focuses on all the details of the project (materials,

documents, activities). WBS is just a tool for keeping the coherence between high level (synthesis) and

low level (analysis). In a project you need both synthesis and analysis.

• Deterministic vs stochastic → Deterministic: we have to say that the duration of the project is 2 weeks

(eliminating all the variabilities). Stochastic: we have to take into account variability, so we consider the

distribution estimates (normal distribution) . We have to take into account centre value µ (mean, mode

and median) and standard deviation σ. During the project planning, it is traditionally used a deterministic

view, in order to estimate some parameters, such as time, cost and technical features of a project; in this

way, it is possible to set some milestone (contractual items, which identify deadlines for some specific

objectives. Once reached these objectives, the contractor is allowed to send an invoice to the client and

receive a cash inflow). However, projects are performed in uncertain conditions, which derive from the

uniqueness of the output and from the future projection of the project itself; this uncertainty derives

from the variability of parameters and from unexpected events, which can have a negative or a positive

impact. In order to manage this uncertainty, it is useful to perform a stochastic analysis. 4

p. 4 - 10

1. PROJECT AND PROJECT MANAGEMENT

Project = the problem

Project management = the approach/attempt to solve the problem

How can we find a compromise between:

Definite objective → what I want to build

• Product and process development during project

•

At the beginning I just give a functional definition of the objectives, I’m not going too much in detail. During

the project I develop all the detailed configuration of the plan. So, we can distinguish between the general

layout to be defined from the beginning and the detailed layout to be developed during the project.

we have to find a compromise between general and detailed layout

⟹

In the following case, we have to understand which is the specific progress for each step.

CASE 1 - Progressive development – engineering and construction

project of the construction of a chemical processing plant

Step 1:

Development of a chemical processing plant begins with process engineering to define the characteristics of

the chemical process (1), all the different phases that raw materials have to go through in order to become

the final product.

Step 2:

These characteristics are used to design the major process units (2), every phase of the process may have

one plant unit. Based on the connection between process phase and process unit. I have to associate a plant

unit to each phase.

Step 3:

This information becomes the basis for detailed engineering design, which defines both the detailed plant

layout (3) and the specifications (4) of the auxiliary facilities.

Process phase Equipment item Layout location

⟹ ⟹

Step 4:

Eventually, the detailed engineering results in construction drawings, that are subject to proper approval in

order to be sent to the site for construction.

Step 5:

During construction, revisions of the technical documents are made as needed.

Step 6:

This final development of the deliverables is captured in the as built drawings (it should be complete and

updated with all the changes).

It is possible to define the project as a non-repetitive process which realizes a final unique object

Some definitions of project:

1. Different resources 1. Temporary process

2. Temporary organization 2. Unique product or service

3. Defined goal 3. Progressively developed

4. Constrained resources

(Project Management Institute, 87) (Project Management Institute, 92)

“A project is a temporary endeavour undertaken to create a unique product, service or result” - (Project

Management Institute, 2004)

“A project is a temporary organisation to which resources are assigned to undertake a unique, novel and

transient (short duration) endeavour managing the inherent uncertainty and need for integration in order to

deliver beneficial objectives of change” - (R.Turner, 2003) 5

Project features:

• Defined unique objectives → this implies a definition of the needs that the project aims to satisfy, at

least in functional terms, then the best suitable solutions are progressively developed (they must be not

logically in contrast). Moreover, every project result must contain something innovative, which makes

the project unique.

• Progressively developed → during the project we have to develop the detailed configuration

• Temporary process → Every project has a defined lifecycle, with a starting point and a finishing date (the

end time is planned)

• Multi-disciplinary integration → an integration between workforce, material, equipment and service

(consulting and transportation) is needed. It’s important to integrate all these resources and, most

important, it is fundamental to integrate all the different kinds of knowledge.

• Constrained availability of resources → in every project there are limited resources available; before

starting a project, usually there is a competitive bidding (different competitors make their proposal and

the client will choose the best one). Then the winner has to sign a contract, which implies also constraints,

concerning the budget of the project in terms of time and cost.

• Uncertainty → every project has future implications, which increase the level of uncertainty. Close to the

concept of risk, linked to the future (not a repetitive process).

Project categories: R&D, product development, investment, Engineering&Construction, organizational

development, ICT, maintenance, etc.

Project classification:

Internal project → the client is inside the company itself (for example, the company wants to build a new

• warehouse, or substitute the information system); the processes are the same, since also internally there

can be many proposals to choose from. These projects are about internal innovation, which characterizes

the company evolution. The Project Charter is a document with no legal value t