Monitoring, evaluating and reporting the performance of schedule, cost and quality will always be a core requirement when it comes to managing the execution of capital construction projects. Nevertheless, it is also true that project owners and in particular those of the public sector, each project they undertake will contribute to their entity strategy and in many times even to their country strategy. Usually, the benefits of capital construction projects will be only realized when the project is completed and goes into operation. Organizations are usually interested in monitoring, evaluating and reporting the benefits realization of those projects over a period of 5 years after going live.
It should be also noted that although benefits do contribute to each project Return of Investment (ROI), nevertheless, in many cases, projects with low ROI values could be as important as projects with high ROI. This makes monitoring, evaluating and reporting the benefit value that each project brings to the organization or the country required to be done across the complete portfolio of projects that an organization has.
Nevertheless, there is always a challenge on how to have a measure that is common to all categories and types of projects’ benefits to provide an integrated value monitoring, evaluating and reporting. For example, when it comes to building highways, the benefits could be reducing travel time, reducing fatal accidents, reducing CO2 emissions, creating service islands to generate job opportunities among others. Although each one of those benefits could have its own measure, nevertheless, all those measures need to be monetized to standardize their performance reporting at project, program and projects’ portfolio levels. In other words, there is a need to establish the dollar value of preventing a fatal car accident, reducing travel time by 5 minutes and other type of benefits.
This will enable capital project owners to have a comprehensive value projection of their complete portfolio of approved capital construction projects. This will be achieved by using a modified version of the Earned Value Management (EVM) method that will exclude the cost measures. Accordingly, the Budget at Completion (BAC) will be the total anticipated value of benefits to be realized and where the planned realization of those benefits will be the Planned Value (PV). As completed projects move into operation, there will be an assessment of the actual achieved benefits or Earned Value (EV).
Since the main objective of using the EVM method in monitoring, evaluating and reporting the performance of benefits realization, the measures for Actual Cost (AC), Estimate to Complete (ETC), Estimate at Completion (EAC) and Variance at Completion (VAC) will not be used. Instead, the Earned Schedule (ES) measure will be used. The EVM measures will be used to calculate and report on the EVM metrics of Schedule Variance (SV), Schedule Performance Index (SPI), Time Variance (TV) and Time Performance Index (TPI),
A Project Management Information System (PMIS) like PMWeb will be used to capture the details of all anticipated benefits using the default revenue contract module. Each benefit to be realized will be added in terms of the quantity to be realized, the unit of measure, the unit price of the benefit and at which period its anticipated to be realized. For example, reducing fatal car accidents will be one those benefits for which the anticipated benefit is to reduce those fatal accidents by one accident by March 2022, additional two accidents by June 2022 and so on. The sum of all benefits will be total anticipated benefits to be realized on the project after five years, which is the Budget at Completion (BAC). Since each benefit was assigned to the period it was anticipated to be realized at, this will automatically generate the Planned Value (PV) of benefits realization. It is highly recommended to have separate Revenue or Benefit contracts for each category of Benefit anticipated from those projects.
To organize and manage all types of benefits anticipated across the complete projects’ portfolio for an organization, PMWeb cost breakdown structure (CBS) will be used to achieve this. PMWeb allows having 16 levels for the CBS which will help in mapping benefits into the strategic performance reporting levels used by the organization whether this was aligned with the balanced score categories or not. Each benefit captured in PMWeb revenue will be assigned its relevant CBS level.
To manage all changes that might affect the benefits expected from each project, the change order module will be used to manage those changes. Those changes will be used when there is a requirement to increase or decrease the values of anticipated benefits or to expedite or delay the planned realization dates of those benefits. Similar to the Benefits contract, each change for any benefit should detail the period that the change will impact. The approved changes will be the basis to maintain the revised Budget at Completion (BAC) and Planned Value (PV) projection.
As the projects move into the operation stage and the anticipated benefits start to be realized, the requisition module associated with the revenue contract will be used to capture the actual benefits that were realized at the current reporting period. This value is the Earned Value (EV) needed for the EVM performance reporting. The payment requisition template will include a field to capture the Earned Schedule (ES) value which is the point in time when the current earned value (EV) was to be accomplished or earned. It is the point at which the Planned Value (PV) supposed to be equal to the current EV.
The estimated ES will be calculated by using the formula that equals to ES = (((EV – PV of the last period)/(PV of the current period – PV of the last period)) X (Current performance period duration which is Actual Time (AT) – last performance period duration)) + Last performance period duration.
Most of the time, transactions associated with the business processes detailed above require to be attached with documents that supports what was transmitted. The attachment tab for each business process will be used to attach all those supportive documents. It is also highly recommended to add comments to each attached document to provide better understanding of what was the document for. The attachment tab also allows the user to link other records for business processes implemented in PMWeb as well as associate URL hyperlinks with websites or documents that are not stored in PMWeb document management repository.
To enforce accountability for the transactions of each business process detailed above, PMWeb workflow module will be used to create a workflow to formalize the review and approval tasks of those business processes. The workflow will map the sequence of the review and approval tasks along with the role or user assigned to the task, duration allotted for the tasks, rules for returning or resubmitting a document and available for each task. In addition, the workflow could be designed to include conditions to enforce the authority approval levels as defined in the Delegation of Authority (DoA) matrix. It should be noted that those who will be involved in those workflows could include other members of the organization that are not necessarily part of the project management team.
When a transaction is initiated for any of those business processes, the workflow tab available on each template will capture the planned review and approve workflow tasks for each transaction as well as the actual history of those review and approval tasks. PMWeb will capture the actual action data and time, done by who, action taken, comments made and whether team input was requested.
The data captured for the benefits realization business processes will become the basis for creating real-time single version of the truth Benefits Realization EVM report. The report will include performance gauges for the Schedule Performance Index (SPI) and Time Performance Index (TPI) for each benefit as well as the summary of all benefits. The report will also include a table that will details the EVM measures for each benefit for the current performance evaluation period. For each benefit, the table will include the values for Budget at Completion (BAC), Planned Value (PV), Earned Value (EV), Earned Schedule (ES), Schedule Variance (SV), Schedule Performance Index (SPI), Time Variance (TV) and Time Performance Index (TPI).
About the Author
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 system to over than 200 projects with a total value in excess of 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 in 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 500 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 Association for the Advancement of Cost Engineering (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.