Article #441 Monitoring, Evaluation and Reporting the Earned Performance for Procurement Deliverables on EPC and LSTK Contracts

One of the key requirements on Engineering-Procurement-Construction (EPC) Lump Sum Turnkey (LTSK) contracts is the formal documentation, monitoring, evaluation, and reporting of the earned performance against what was been planned for the procurement scope of work deliverables. This performance reporting is what the project owner needs to have access to and for which it will be part of the overall EPC project performance dashboard that will cover project management aspect areas like schedule and milestone dates, budget, potential changes, change orders, invoiced, and paid to date, risks and issues and other needed performance indicators.

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For procurement, the performance reporting should cover all mechanical and electrical systems for packages, equipment, and bulk items. The scope of work for procurement needs to be decomposed into work packages for which the EPC contractor will assign weight values that will be agreed on between the project owner and the EPC contractor. This will be part of the EPC project work breakdown structure (WBS).

A Project Management Information System (PMIS) like PMWeb will be used to implement a process to formally document, monitor, evaluate and report the earned performance for each one of the deliverable groups against what was planned. It should be noted that this is not replacing the requirement for having a weighted integrated project schedule that covers the complete scope of work for engineering, procurement, and construction, and commissioning. PMWeb will be used to formally document planned, earned, and deliverables of the procurement work packages and their associated deliverable groups.

PMWeb custom form builder will be used to create the form that the EPC contractor will be required to complete and submit to report the actual progress achieved. Although this form will be specific for procurement work packages, nevertheless, other forms can be also created for other types of work where progress needs to be reported.

The form will include details of the EPC contractor procurement asset that progress is being reported on, related WBS level and activity which will be imported from the EPC contractor’s integrated project schedule, data date, package weight, and progress narrative for the current period. The form will include a table that details the baseline early and late planned progress, actual progress to date, and early and late forecast to complete progress.

It should be noted the baseline early and late planned progress will be added once when the form is added for the procurement asset. As the project progresses, the PMWeb copy command will be used to copy last month’s progress so it can be updated with the current period’s progress. This will drastically reduce the effort in completing the form as only new data is to be added.

The progress form will include another table to capture the details of the reported actual progress. The EPC contractor will report the achieved progress against each procurement work package based on the agreed milestone weights and dates set for each. Those milestones and associated weight could differ from one project owner to another. Nevertheless, for the same project owner entity, it is highly recommended to standardize those milestones and weights across all EPC LSTK projects.

For example, for procurement packages, the usually used milestones will be for Prepare MR/PR, Issue RFQ, Receive Offers, Complete Vendor Clarifications, Complete Evaluation & Submit TBE to COMPANY, Receive COMPANY Approval, Commit / Issue P.O., Receive & Approve Vendor Drawings, Place Sub-Orders, Receive Sub-ordered Materials, Complete Manufacturing, Complete Final Inspection, Complete Material Dispatch, Receive Material at Site and Prepare MRV.

For each progress form, the EPC contractor needs to attach all supportive documents that were the basis for reporting the progress. Those could include for example the MS Excel files used to calculate the progress, updated project schedule report, purchase orders issues, factory and site tests, shipping documents, port delivery documents, site delivery documents, copies of the manufactured, shipped, delivered, and installed asset among many others. It is also possible to have all relevant PMWeb records linked to the progress form.

It is highly recommended that all those supportive documents are uploaded and stored on their relevant PMWeb document management system folder or subfolder. It is also recommended that this filing structure be aligned with the project’s work breakdown structure (WBS) levels as the main purpose of those documents is to support the reported performance.

A workflow will be assigned to the progress form to formalize the submit and review process. Those could include the tasks for the EPC contractor, PMC consultant, and the project owner team responsible for managing the project. The workflow will define the sequence for performing those tasks, whom they are assigned to, duration allotted for each task, available actions, what will happen if the reported progress is rejected and how it will be resubmitted. Also, the workflow allows adding approval authority levels if needed.

The progress card for each procurement work package will be available in case there is a need to communicate the progress details. The report will also a list of weighted milestones which was the basis for the reported progress percent complete for the procurement work package.

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About the Authorfounder

Bassam Samman, PMP, PSP, EVP, GPM is a Senior Project Management Consultant with 40-year service record providing project management, project controls services, and project management information systems to over 200 projects with a total value over the US $100 Billion. Those projects included Commercial, Residential, Education and Healthcare Buildings and Infrastructure, Entertainment, Hospitality, and Shopping Malls, Oil and Gas Plants and Refineries, Telecommunication, and Information Technology projects. He is thoroughly experienced in complete project management including project management control systems, computerized project control software, claims analysis/prevention, risk analysis/management (contingency planning), design, supervision, training, and business development.

Bassam is a frequent speaker on topics relating to Project Management, Strategic Project Management, and Project Management Personal Skills. Over the past 40 years, he has lectured at more than 350 events and courses at different locations in the Middle East, North Africa, Europe, and South America. He has written more than 300 articles on project management and project management information systems that were featured in international and regional magazines and newspapers. He is a co-founder of the Project Management Institute- Arabian Gulf Chapter (PMI-AGC) and has served on its board of directors for more than 6 years. He is a certified Project Management Professional (PMP) from the Project Management Institute (PMI), a certified Planning and Scheduling Professional (PSP), and Earned Value Professional (EVP) from the American Association of Cost Engineers (AACE) and Green Project Management (GPM).

Bassam holds a Masters in Engineering Administration (Construction Management) with Faculty Commendation, George Washington University, Washington, D.C., USA, Bachelor in Civil Engineering – Kuwait University, Kuwait and has attended many executive management programs at Harvard Business School, Boston, USA, and London Business School, London, UK.


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