Week 7_LanreGiwa_Labour Rates

As a project Controls Engineer that has just been mobilized on a project, my task is to categorize the labour on the Project and calculate the Charge-out rates or Labour rates of each personnel per hour on the project.

From the list of personnel given to me by the Project manager, I have been able to categorize the personnel into 3 groups namely:

a) Direct labour – Civil, Mechanical, Electrical, Piping, Process, Instrument, Corrosion and Pipeline Engineering

b) Indirect Labour – Project Controls, HSE, QA/QC and Document Control Engineers

c) Overhead labour – Human Resources, Admin Services, Executive Directors, Accounts Unit, Business Development, Public Admin and Audit)

The classification of the personnel on the list into the above categories will help in calculating the labour rates per personnel working on the project.

After categorizing the Labour on the Project, there are 2 alternatives that can be used in determining the labour rates / charge-out rates per personnel:

1. To do an order of magnitude Guesstimate by arbitrarily allocating labour rates to personnel
2. To review the cost actual and follow a calculative process at determining the charge-out rate

Based on the two options available to me, I will opt for the second option as I believe I will get a realistic value that will be beneficial to the company. The 1^st option is prone to errors and may cause a loss to the company.

The main criteria that I have used in choosing option 2 is to properly analyze the rates and make profit for the company for each hour expended by a personnel

CALCULATING THE CHARGE-IN RATES

The charge-in rates or base rates for personnel is the exact amount the company pays each personnel. It is usually calculated by determining the total salary of the staff and dividing the salary by the total productive hours of the staff.

OTHER PAYROLL BURDEN

I also need to consider other costs borne by the company that staff benefit from such as Paid time off( holidays, sick leave, annual leave), Pension, gratuity, Medical services e.t.c

To get the total charge in cost of each staff, the total emoluments will be added together and then divided by the total productive hours.

In other words, (Total Salaries + Fringe Benefits+ Transportation allowance + other payroll Burden)/ Total Productive Time in Hours

To determine the productive time per staff, I did an estimate:

52 weeks make a year = 365 days

Weekends = 2 * 52 = 104 Days

Estimated Sick leave- 5 Days

Annual leave - 32 Days

National Holidays – 10 Days

Total - 151 days

Hence, total productive time – 365-151 = 214 days * 8hrs/day = 1712 Hours

So Let us assume the GRADE 1 staff’s total emolument is =NGN=5,000,000 naira, the base rate or charge in rate will be

5,000,000 / 1712 hr = 2921 naira / hour

CALCULATING THE OVERHEAD AND OTHER FACTORS

In order to calculate the overhead, the total emoluments of all staff, all capital expenses CAPEX such as Building rents &Cars, Operating expenses OPEX such as electricity bills will all be added together and divided by the estimated hours to be expended for the year. Other direct costs will be considered, taxes and definitely the PROFIT that the company will get for each staff working on a project per hour.

In a tabular form, the Charge out rate may be calculated below

DESCRIPTION	GRADE 1 STAFF Rates in Naira
Charge in rates	2921
Other Direct Cost	500
Overhead	1000
Profit (20% of Charge-in rates)	58.42
With Holding Tax (10% of Charge-in rates)	29.21
Rate Differential	0
Charge out rate/Hour in Naira	4508

With the results of the charge out rate achieved, there has to be an annual monitoring and review of the rates. Secondly, the rates has to be dynamic to be suitable for the client and job bided for.

References

1. Chapter 4, Skills and Knowledge of Cost Engineering. 5^th Edition Revised.
2. Chapter 34, Project management using Earned Value, pp 749 - 753. Humprey and Associates.
3. GAO Cost Estimating and Assessment Guide. Best Practices for developing and managing capital Program Costs
4. Engineering Economy,14^th Edition, Page 27,Table 1-1

Week 3_ Ejeh Udoka_ Drawing Conflict

Week 3_ Ejeh Udoka_ Drawing Conflict

Problem statement

Non conformance has been issued on the on going fabrication due to drawing conflict in the fabrication shop.

Possible causes

-Drawings are not properly revised- due to continuous comment and changes especially by the clients, the CAD designers fail to thoroughly revise the drawings

- Poor document control- the document control unit is situated at the head office which is far away from the fabrication shop. This results in:

• Conflict in drawing numbers- CAD designers are requested to generate drawing numbers.
• Nobody willing to take up document control responsibility.

Possible solutions/ alternatives

-Increase the drawing approval bureaucracy- this will minimize error resulting from drawing revision

-Creating a small document control unit or team at the fabrication shop- this will ensure control and eliminate drawing conflict. The unit will be responsible for generating drawing numbers, ensuring the use of global numbering practice, retrieving obsolete drawings.

-make foremen responsible for controlling drawings within their unit.

Comparing the alternatives

Creating a small document control unit be the most efficient. The reasons are clear as stated in the previous section. The disadvantage is that it is immense. More personnel is required, office space and office accessories are required.

Making foremen responsible for document control within their unit can serve as an ad hoc measure until the recommended practice is adopted.

Week 2_ Ejeh Udoka_ Quality Control

Problem Statement;

QC weekly report from the Fabrication shop records increased weld rejection rates within the last month.

Possible Causes;

-individual welders performance making the welds,

-use of damp or contaminated electrodes,

-use of un- calibrated equipment.

Action Plan;

-isolate the weld defect types,

-check trend if any

- establish the exact cause of the rejects.

Possible Solutions / Alternates;

-identify and withdraw the welder(s) and subject to retraining / requalification.

-ensure electrodes conditions are used as manufacturers recommended conditions,

-strengthen the process control measures,

-improve inspection and QC supervision / monitoring,

-train shop floor personnel.

Possible Outcome; Coordinated effort will improve the metrics.

Acceptance Criteria; developed quality metrics matched with project/ contract requirements.

Compare and analyze the alternatives (solutions); each of the alternatives as listed will not work in isolation if implemented, instead an integrated process approach is recommended to achieve the desired result.

And for this to be effective, personnel must be adequately trained, process control procedures enforced and a motivated work force.

References

GP 29-03-06 Onshore Structural Welding and Inspection

GP290309 Offshore Structural welding and Inspection

GP 20-01-04 Upstream Project Quality Assurance - General Requirements

Client specifications and control procedures.

Week 3_ Ejeh Udoka_ Drawing Conflict

Problem statement

Non conformance has been issued on the on going fabrication due to drawing conflict in the fabrication shop.

Possible causes

-Drawings are not properly revised- due to continuous comment and changes especially by the clients, the CAD designers fail to thoroughly revise the drawings

- Poor document control- the document control unit is situated at the head office which is far away from the fabrication shop. This results in:

• Conflict in drawing numbers- CAD designers are requested to generate drawing numbers.
• Nobody willing to take up document control responsibility.

Possible solutions/ alternatives

-Increase the drawing approval bureaucracy- this will minimize error resulting from drawing revision

-Creating a small document control unit or team at the fabrication shop- this will ensure control and eliminate drawing conflict. The unit will be responsible for generating drawing numbers, ensuring the use of global numbering practice, retrieving obsolete drawings.

-make foremen responsible for controlling drawings within their unit.

Comparing the alternatives

Creating a small document control unit be the most efficient. The reasons are clear as stated in the previous section. The disadvantage is that it is immense. More personnel is required, office space and office accessories are required.

Making foremen responsible for document control within their unit can serve as an ad-hoc measure until the recommended practice is adopted.

Lessons learned

-We experienced delay in fabrication because we had to suspend work in order to reconcile the drawings. Had ad-hoc measure been adopted, the delay may have been eliminated.

-We were lucky to have arrested the situation in good time else rework, rejection would have been the case.

Week 2_ Ejeh Udoka_ Quality Control

Week 2_ Ejeh Udoka_ Quality Control

Problem Statement;

QC weekly report from the Fabrication shop records increased weld rejection rates within the last month.

Possible Causes;

-individual welders performance making the welds,

-use of damp or contaminated electrodes,

-use of un- calibrated equipment.

Action Plan;

-isolate the weld defect types,

-check trend if any

- establish the exact cause of the rejects.

Possible Solutions / Alternates;

-identify and withdraw the welder(s) and subject to retraining / requalification.

-ensure electrodes conditions are used as manufacturers recommended conditions,

-strengthen the process control measures,

-improve inspection and QC supervision / monitoring,

-train shop floor personnel.

Possible Outcome; Coordinated effort will improve the metrics.

Acceptance Criteria; developed quality metrics matched with project/ contract requirements.

Compare and analyze the alternatives (solutions); each of the alternatives as listed will not work in isolation if implemented, instead an integrated process approach is recommended to achieve the desired result.

And for this to be effective, personnel must be adequately trained, process control procedures enforced and a motivated work force.

References

GP 29-03-06 Onshore Structural Welding and Inspection

GP290309 Offshore Structural welding and Inspection

GP 20-01-04 Upstream Project Quality Assurance - General Requirements

Client specifications and control procedures.

Week 6_ SeeGod Meregini_ Correctly assessing project performance with contractors

While supervising project controls work for different contractors, I found out some problems in the way project performance was analyzed and controlled, I would highlight some alternative solutions used by some of these contractors. I would also provide a possible solution based on recommended practices in any of these alternatives.

The problem is how to correctly implement project performance assessment.

Some alternative solutions carried out by different projects to the problem were:

·         1. Use the progress assessing methodology by contractors.

·         2. Modify the contractor’s methodology with the clients.

·         3. Impose the clients’ methodology on the contractor.

·         4. Use a standard best practice methodology.

I discovered that the outcomes of these alternatives were:

·         1. The Contractors‘s in-house progress performance assessment process does not fit all    types of projects. Also, in trying to customise the process, inconsistencies in creating performance baseline were done.

·         2. While modifying the contractors’ progress methodology to suit the clients’ own, establishing consistent control limits was a gap.

·         3. A major issue here was wrong assessment of labour productivity.

·         4. While it takes more time and effort in establishing best practices in project performance assessment, this method makes the project easy to trace and control variances.

A further breakdown of these best practices is:

Ø  Create a chart of WBS work packages having estimated cost, accountable person and a way to measure completion.

Ø  Create performance measurement baseline – develop a chart showing each deliverable across a time line, along with the cost of the deliverable ( i.e. PV)

Ø  Establish control limits – establishing some measurement criteria to indicate when project performance is too far from baseline.

Ø  Measuring project progress at any point in time by comparing PV (derived from performance measurement baseline) with EV (derived from performance reports) and AC (derived from cost accounting system).

Ø  Reviewing performance variances using EVM (SV, CV and so on). Also, bearing in mind that Labour productivity factor = Expended Hours/Earned Hours, where the earned hours = percent physical progress * control budget hours.[1]

Ø  Reviewing performance indices – SPI and CPI (most helpful in comparing performance across projects, deliverables and various levels of WBS)

Ø  Developing a forecast – EAC, EDAC (only for critical path), ETC and so on.

Ø  Taking preventive and corrective actions – correcting negative schedule and cost variances. Also, correcting deliverables that do not meet Acceptance criteria.

Ø  Establishing new baselines for the project – in response to scope change or if the original estimates are so incorrect that performance measuring does not provide reliable information.

My selection criterion for this problem is that the alternative to be chosen must objectively meet best and recommended practices.

Analyses of all alternatives bearing in mind my selection criteria showed the following results:

·         Alternative 1 showed lack of consistency and created room for rejected contractor reports – invoices etc. hence should not be used.

·         Alternative 2 also lacked clarity and control of all project variances. This alternative should not also be used.

·         Alternative 3 had a huge problem of acceptance by contractors. When this method manages to become implemented, a lot of claims by contractor occur. This method should not be chosen.

·         Alternative 4 involves a lot of collaborating effort on the part of contractor and client .It is also very consistent in its method with almost any project. This most definitely would easily create a win-win position for both contractor and client.

I recommend Alternative 4 based on the reasons above and its capability to exceed the selection criteria.

For performance monitoring, I would use quality submission and acceptance of deliverables based on Acceptance Criteria with a labour productivity of less than 1. Another key performance guide is a positive variance and an index greater than 1.

For post evaluation of results, the metric would be how much claims would need to be paid for. If too many claims are received, a through and rigorous review of the project performance process to adhere to these best practices would be done.

References

Giammalvo, P. D. (2010). AACE Certification Prep Course [PowerPoint slides], Day 5. Lagos: Nigeria.

Sullivan, W. G., Wicks, E.M., & Koelling, C.P. (2009). Engineering economy and design process. In M.J. Horton (Ed.), Engineering economy (14^th ed.) (chapter 1.3) (pp. 27). New Jersey, NJ: Pearson Education, Inc.

AACE International Education Board. (2010).Progress Measurement and Earned Value. In S.J.Amos (Ed), Skills & knowledge of cost engineering (5^th ed) (chapter 14) (pp.14.1-14.6). Morgantown, West Virginia: AACE International.

Humphreys, G.C (2002) Performance Measurement Calculations. Project management using earned value (chapter 34). (pp.675-701). California, CA: Humphreys & Associates, Inc.

AACE International Education Board. (2006). Project Performance Assessment. In J.K.Hollmann (Ed), Total cost management framework – A process for applying the Skills & knowledge of cost engineering (1^st ed) (chapter 10.1) (pp.199-208). Morgantown, West Virginia: AACE International.

Tate,T, & Stackpole,C. (2006) Controlling Project Progress.The advanced project management memory jogger(1^st ed) (chapter 7) (pp.91-110). Salem,NH: GOAL/QPC

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[1] AACE International Education Board. (2006). Process Map for Project Performance Assessment. In J.K.Hollmann (Ed), Total cost management framework – A process for applying the Skills & knowledge of cost engineering (1^st ed) (chapter 10.1.2.6) (pp.205). Morgantown, West Virginia: AACE International.