Reasons for Cost and Schedule Increase for Engineering Design Projects

Cost and schedule increases are common in engineering design projects. Some research has studied factors associated with better design performance, but the reasons for cost and schedule increases are not formally investigated. This paper identifies the reasons bottom up from four case project documents and further quantifies their contributions to cost and schedule increases. These reasons are complete and can be used to analyze the cause-effect relationship, trace responsibility, and improve performance for engineering design projects.     

Probabilistic Approach for Budgeting in Portfolio of Projects

This paper presents a mathematical model for calculating the budgetary impact of increasing the required confidence level in a probabilistic risk assessment for a portfolio of projects. The model provides a rational approach for establishing a probabilistic budget for an individual project in such a way that the budget for a portfolio of projects will meet a required confidence level. The use of probabilistic risk assessment in major infrastructure projects is increasing to cope with major cost overruns and schedule delays. The outcome of the probabilistic risk assessment is often a distribution for project costs. The question is at what level of confidence (i.e., the probability that budget would be sufficient given the cost distribution) should be used for establishing the budget. The proposed method looks at a portfolio of such projects being funded by the same owner. The owner can establish a target probability with respect to its annual budget. The model can help the owner establish confidence level for individual projects and also examine the effect of changing the confidence level of the portfolio budget on the budget and the confidence level of individual projects. The paper is relevant to practitioners because it provides a methodology for establishing confidence levels by the owner agencies in the emerging field of cost risk assessment for infrastructure projects. A numerical example is provided using actual transit project data to demonstrate the model application.     

Framework of Success Criteria for Design/Build Projects

Success has always been the ultimate goal of every activity, and a construction project is no exception. Due to the ambiguous definition of project success and the different perceptions of participants toward this concept, it may be difficult to tell whether a project is successful as there is a lack of consensus. Time, cost, and quality have long been the success criteria used to evaluate the performance of a construction project. However, such a list has been criticized as not being comprehensive. Even studies of the project success of a particular construction method, such as the design/build procurement system, are lacking in most previous research considering construction projects in general. This paper sets out to establish criteria for project success for a design/build project in construction, first by identifying relevant measures of project success for a construction project in past studies, with particular emphasis on design/build projects, and then by establishing a comprehensive assessment framework for project success for design/build projects. The significant impacts on the construction field of study, in terms of educational value and practical use, are also presented. With little research in the project success of design/build projects, the writers suggest a research focus for the study.     

Estimating Performance Time for Construction Projects

The prediction of performance time for construction projects is a problem of interest to both researchers and practitioners. This research seeks to gain insight into the significant factors impacting construction duration by developing a regression model. Data were collected for 856 facility projects completed between 1988 and 2004. These data were analyzed using Bromilow’s time-cost (BTC) model (1969) as well as multiple linear regression. The multiple linear regression model was found to provide the most acceptable prediction. As in the BTC model and previous research reported in the literature, a significant correlation was found to exist between cost and duration. However, several other factors were also identified that resulted in significantly lower than average construction durations. These include projects completed within certain management groupings, managed by a certain construction agent, and designed by in-house personnel.     

Selecting BOT/PPP Infrastructure Projects for Government Guarantee Portfolio under Conditions of Budget and Risk in the Indonesian Context

Guarantee provision in privately financed infrastructure projects implemented as build-operate-transfer/public-private-partnership (BOT/PPP) arrangements is not uncommon in many countries, and Indonesia is no exception. But, given that the government budget is, in most if not all cases, not unlimited, there must be a selection of BOT/PPP projects posing proposals for seeking government guarantees. This paper presents a project selection methodology under the chance-constrained goal-programming framework in the context of the Indonesian BOT/PPP infrastructure industry. The ultimate objective of the selection is to result in a portfolio of guaranteed projects that brings maximum welfare gain to the economy as a whole, maximum total net change in financial net present value but, at the same time, puts the government at the lowest fiscal risk for a given budget constraint. The proposed methodology allows the government to examine relationships among the expected total payment, budget-at-risk allocated, and a desired confidence interval of actual payment not exceeding the budget-at-risk. The government can also compare two or more alternative scenarios and choose the optimal one that delivers the highest value for the money. To illustrate the model application, without sacrificing the generality of the proposed methodology, a much-simplified hypothetical case is presented, examined, and discussed.     

Decision Tool for Selecting the Optimal Techniques for Cost and Schedule Reduction in Capital Projects

Projects must meet budget, schedule, safety, and quality goals to be regarded as a success. Many factors come into play, and many decisions are made that influence a project’s outcome. Today, owners are often faced with deciding between an execution strategy that emphasizes either project cost or project schedule. Such a decision may be made not once, but throughout the life of the project. Project teams, when required by the owner to make a cost-schedule trade-off, generate common sense ideas, best practices, and other means of achieving the desired trade-off through brainstorming sessions. This paper offers a tool for systematically identifying the techniques which are most effective in achieving the trade-off goal. Project teams can then use these techniques in a timely fashion to increase the likelihood of project success.     

Measuring Effectiveness of Materials Management for Industrial Projects

A measurement of the effectiveness of the material management process is needed in order to analyze problems, suggest solutions, and assess the impact of modifications to the process. Such measurement is also required for any benchmarking effort. Research was conducted to apply a set of key effectiveness measures on 17 ongoing industrial projects. This research showed that most of the measures were easily obtainable, but some were difficult to obtain. Research also showed that it was possible to obtain the highest score on all measures, indicating that best practice in industry is achieving highly successful results. Most of the projects appeared to have a highly effective materials management process, as indicated by the fact that median values of these measures were much closer to the best values than those of the mean values. A utilization plan for the measurement of the effectiveness of the material management process is presented.     

Critical Factors Affecting Schedule Performance: Evidence from Indian Construction Projects

Over 40% of Indian construction projects are facing time overrun ranging from 1 to 252 months; the reasons for which are being studied by researchers to suggest possible remedial measures. This paper identifies 55 attributes responsible for impacting performance of the projects. These attributes were then presented to Indian construction professionals in the form of a questionnaire. Statistical analysis of responses on the attributes segregated them into distinct sets of success attributes and failure attributes. Factor analysis of sets of success attributes and failure attributes separately grouped them into six critical success factors and seven critical failure factors. In order to understand the extent of contribution these factors have on the outcome of a construction project, a second stage questionnaire survey was also undertaken. The analyses of responses of the second stage questionnaire led us to conclude that two success factors and one failure factor: commitment of project participants; owner’s competence; and conflict among project participants contribute significantly in enhancement of current performance level of the project. The extent of their contribution has, however, been observed to vary for a given level of project performance. The analyses results are expected to help project professionals to focus on a few factors and get the optimum results rather than giving attention to all the factors and not getting the proportionate results.     

Virtual Shop Model for Experimental Planning of Steel Fabrication Projects

Traditionally, project planning in industrial shops, such as in a steel fabrication shop, has employed the experience of production engineers as its primary source in decision making. A scientific technique for analyzing a variety of short-term planning problems encountered during daily operations would therefore be of great benefit. This paper proposes the use of experimental methods to support engineers in analyzing daily production performance and making informed decisions through the implementation of a virtual production environment. In this study, a virtual shop model using a number of modeling techniques captures the intricacies of a dynamic shop environment. Specifically, the research presents solutions in modeling product uniqueness and labor productivity that are unique issues in modeling the steel fabrication process. A prototype model developed for an Edmonton-based steel fabricator is used to illustrate the development of the system and its application in project planning.     

Impact of Change Orders on Small Labor-Intensive Projects

In today’s construction, small projects can be just as important if not more important than the larger projects. However, small projects are usually fast track projects, which often involve overlapping design and construction time. Subsequent modifications may be required for the sections that are already under construction. These disruptions to the ongoing project are labeled as change orders. The impact due to changes has been described as the adverse effect upon the unchanged work due to changes in the contract. For this study, 34 projects were selected to develop a statistical model that estimates the amount of labor efficiency lost due to change orders for small projects. The variables in the final model are percent design related changes, percent owner initiated changes, the ratio of actual peak labor to estimated peak labor, the ratio of actual project duration to estimated project duration, and project manager’s percent time on the project. The results of this paper are of value to owners, electrical and mechanical contractors, and construction managers. The model quantifies the impact of change orders by introducing the most important variables that bring the largest disruptions.     

Organizational Alternatives for Large Projects

Organizing large construction projects can be as confusing and challenging as managing them. Many organizational variations are possible. This paper describes five major organizational alternatives and reviews the advantages and disadvantages of each. The alternatives include: (1) Strong functional organization; (2) functional organization with area coordination; (3) functional organization wth area management; (4) area management with craft discipline staff; and (5) autonomous area organization. This paper also proposes a method for selecting a project organization that involves developing organizational criteria and using these criteria in an evaluation matrix. Such a process could aid managers in meeting the challenge of effective project organization.     

Fast and Accurate Risk Evaluation for Scheduling Large-Scale Construction Projects

This paper presents the development of a novel probabilistic scheduling model that enables fast and accurate risk evaluation for large-scale construction projects. The model is designed to overcome the limitations of existing probabilistic scheduling methods, including the inaccuracy of the program evaluation and review technique (PERT) and the long computational time of the Monte Carlo simulation method. The model consists of three main modules: PERT model; fast and accurate multivariate normal integral method; and a newly developed approximation method. The new approximation method is designed to focus the risk analysis on the most significant paths in the project network by identifying and removing insignificant paths that are either highly correlated or have high probability of completion time. The performance of the new model is analyzed using an application example. The results of this analysis illustrate that the new model was able to reduce the computational time for a large-scale construction project by more than 94% while keeping the error of its probability estimates to less than 3%, compared with Monte Carlo Simulation methods.     

Reliability Buffering for Construction Projects

Buffering is a common practice in project planning. Project managers or schedulers have used a time contingency to guarantee the completion time of either an activity or a project. This traditional buffering, however, often fails to protect the project schedule performance, resulting in an unnecessary resource idle time. To deal with this problem, reliability buffering, a simulation-based buffering strategy, is presented. Reliability buffering aims to generate a robust construction plan that protects against uncertainties by reducing the potential impact of construction changes. The effectiveness of reliability buffering is examined by simulating a dynamic project model that integrates the simulation approach with the network scheduling approach. The research results indicate that reliability buffering can help achieve a shorter project duration without driving up costs by pooling, resizing, relocating, and recharacterizing contingency buffers. A case study of bridge construction projects also demonstrates how construction projects can benefit from reliability buffering in real world settings. Although further validation is needed, reliability buffering can potentially impact the planning and control of construction projects by improving the consideration of construction feedbacks and characteristics in buffering, and serving as an input to a dynamic project model.     

Selection Model for Delivery Methods for Multifamily-Housing Construction Projects

Selecting an appropriate delivery method that will achieve a project’s objectives and characteristics is one of the most critical factors for the project’s success. A selection model for this study was developed by using actual construction case data in quantitative data analysis methods such as logistic regression, factor analysis, and correlation analysis. The model was developed on the basis of the design-build and design-bid-build methods from various project delivery methods. To validate the developed model, comparative tests were conducted on the selection of the delivery method for multifamily-housing construction projects, which showed that the model resulted in 95.0% accuracy. It is expected that the developed selection model will enable owners to select delivery methods that accurately meet their needs characteristics, project characteristics, and external environments.     

Incentive Mechanisms for Project Success

The principles of incentive contracting are long standing. In recent years, however, there has been a greater emphasis on the need to use incentives whenever possible. Consequently, there is a growing requirement for a more thorough understanding of the principles and techniques involved. In this paper, the key features of motivation and incentive contracting are described, and three real contracts are outlined and compared with particular attention to the incentive mechanisms used. The writers found that incentive arrangements must align the needs of the client and contractor, correctly allocate risk, and allow an appropriate level of client involvement.     

Success of Supplier Alliances for Capital Projects

Energy sector capital projects typically cost hundreds of millions and even billions of dollars. Managing the engineered equipment is important not only because of their high dollar value but also because the long manufacturing lead times often drive the overall project schedules. In recent years, several supplier alliances have been successfully implemented on such projects leading to initial price savings in the range from 6 to 10%. This paper presents the result of a study to assess the opportunities and barriers with such partnerships. Interviewed company executives perceived that time savings and quality improvements, mostly due to the suppliers’ specialized expertise, are of much greater value than a lower bid price. Most surprisingly, very few companies use metrics to measure performance, thus leaving them in the dark on the question of how well an alliance worked or why it failed. The relevance of the presented work is in the amount of actual field data that has been generated and processed.     

Removal of Redundant Relationships in an AON Project Network for Evaluating Schedule Complexity

Since redundant relationships in an activity-on-node (AON) project network indicate that the schedule is more complex than it actually is, they should not be considered when evaluating the schedule complexity. However, identifying the relationships that can be removed while maintaining the project logic is not an easy task. For this purpose, this paper proposes a methodology, adapted from interpretive structural modeling, that basically transforms an AON project network into a network called minimum-edge diagraph which contains no redundant relationships. The methodology steps are explained through a demonstrative example of a simple hypothetical project. The application of the methodology to the AON network of a real construction project shows that it is easy to use yet effective in removing redundant relationships.     

Quantitative Definition of Projects Impacted by Change Orders

Change, defined as any event that results in a modification of the original scope, execution time, or cost of work, is inevitable on most construction projects due to the uniqueness of each project and the limited resources of time and money available for planning. Change may occur on a project for a number of reasons, such as design errors, design changes, additions to the scope, or unknown conditions. For each change, contractors are entitled to an equitable adjustment to the base contract price and schedule for all productivity impacts associated with the change. Changes may or may not have an impact on labor productivity. Existing literature uses subjective evaluation to determine whether the project is impacted. Projects impacted by change cause the contractor to achieve a lower productivity level than planned. The focus of this paper is to quantify whether an electrical or mechanical project is impacted by a change order. Through statistical hypothesis testing, groups of factors that correlate with whether a project is impacted by change orders were identified and used to develop a quantitative definition of impact. Logistic regression techniques were used to develop models that predict the probability of a project being impacted. The results of this research show that percent change, type of trade, estimated and actual peak manpower, processing time of change, overtime, overmanning, and percent change related to design issues are the main factors contributing to the project impact.     

Network Creation and Development for Repetitive-Unit Projects

Network scheduling is typically performed in three phases—network creation, analysis, and development. Although the critical path method (CPM) constitutes a well-established logic in network analysis, human intuition and experience are required for the creation and development of the network. Because of this, a variety of alternative CPM networks can be created in scheduling the same project. The use of the most desirable network can lead to a considerable reduction in the duration of the projects. This can be achieved by accurately identifying activities and linking them in an appropriate manner. Many researchers insisted that network scheduling lacks efficiency in scheduling repetitive-unit projects. Because of this, many scheduling methods have been developed to model such types of projects. However, most are not network based and require a large amount of input data, although most leading scheduling software remains network based and field engineers desire networklike forms of the schedule. In an effort to overcome this limitation, this paper presents a procedure for creating and developing networks for repetitive-unit projects. This network-based model incorporates a two-dimensional arrangement of activities, resource-space coordinates, for ease in creating a network and optimizes the activity linkage, thus resulting in the most desirable results. The model is applied to a typical repetitive-unit project to illustrate the use and capabilities of the model. The model can serve as an aid for inexperienced schedulers in creating a network as well as its optimization. An experienced scheduler can also check the desirability of his or her own created network via the use of this model.     

Quantiative Methodology for Determination of Cost Contingency in International Projects

This paper presents a quantitative methodology to determine financial impacts of the risk factors during the bidding stages of international construction projects. Project and country data of 26 construction projects from 21 countries were collected for evaluation of the international risk factors. The factors impacting cost contingency were identified using correlation and regression analysis techniques. The results indicated that four factors had major contributions for explaining the variations in the contingency levels. A regression model including the significant factors was developed to support bidding contingency decisions. The methodology presented provides a robust and practical statistical approach for determination of contingency by focusing on important risk factors. Details regarding model development and validation are presented along with a discussion on study limitations.