Project Management View from Rail Transit Programs and Projects

Basic Management Fundamentals

Owners’ upper management and project governance, and Project Management Offices’ (PMO) leadership are always looking for the single biggest issues that can be resolved to remove impediments to project progress and performance, and to get a stagnate project back on track.   But sometimes it is the smallest most basic activities that create the largest issues for maintaining proactive management on a project.

Recently, a new management team was introduced on a mega project to convert the contract management centric approach to a PMO centric management approach.   This change was understandable and foreseen as beneficial to improving the overall management on the project.   While this was aligned with the standards and practices defined by the global professional organization Project Management Institute (PMI), there was Owner oversight, construction management, contract management, project controls, quality management and risk management – but no defined project management roles in the organization’s management structure.  

As expected, the new PMO team focused on analytics and decentralized management into specific physical asset project boundaries that will be managed independently to meet goals within a segmented territory of the project.   The basis of this approach was adopted from a predecessor review by an industry management consultant that assured the Owner that the approach, which worked in 2001 on a major European project, would do the same for a 2018 project in North America. 

While understandable in its presentation to the Owner’s Board, it did not resolve the root cause of the performance attributes affecting overall project progress.   Hidden in plain site were common management interactions between project participants that deteriorated the work environment required for effective project management.   Some of the typical factors negatively affecting project performance, included:

• Failing to respond to Letters from consultants and contractors
• Continuously submitting Cost Recovery Letters to consultants and contractors
• Ignoring requirements in contracts with consultants and contractors
• Demonstrating distrust of hired consultants for design, project management and construction management services
• Disregarding expert judgment from consultants with valuable experience in the project, similar projects or intimate knowledge of the Owner’s requirements
• Committing to unrealistic and unreliable schedules that are clearly disconnected with historical data and industry processes
• Poorly managing expectations within established control documents

Roll-out of the new PMO centric approach was implemented with Owner’s Board acceptance and project governance support.   Expectations were high for turn-around of performance to critical dates leading to project realization.  Monitoring of performance metrics produced charts, dash boards, and heat maps that required constant attention to variances and management inquiries. 

Some of the missed opportunities included:

• Reinforcing organizational core values and professional standards for work quality and conduct
• Eliminating contract constraints preventing a Spirit De Corp with defined staff selected for solving problems and increasing project execution progress
• Providing the best and most experienced Owner’s staff on the project
• Dismissing expert judgment that is not aligned with political commitments or unrealistic organizational goals
• Ignoring risks and management actions identified by project professionals
• Expecting shorter process durations without implementing improvements or obtaining variances to organizational processes, funding partner processes or government statutory requirements. 
• Committing to critical path scheduling on complex projects without recognizing interdependencies of systems engineering and execution processes  

Reality A

Owner’s hire consultants for expertise that does not exist in-house or that is used to supplement staffing levels and to validate expertise and conclusions of in-house personnel accountable for the same services.   In organizations where institutional expertise has been drastically depleted, Owners also hire consultants to oversee other consultants.   Some organizations have demonstrated that hiring a consultant allows them to disrespect and bully other consultants.    As a result, Owner’s management of consultants must monitor the interactions with the organization to assure consultant staff is provided respect and professional courtesy that comes with professional ethics, contract requirements, and laws and statutory requirements.   If not, the consultants will expend scarce project funds on non-value added activities that displace funds allocated for the creation of project assets.

Reality B

The PMO, organization and consultants hired by the organization must insist on a code of respect that transcends contractual responsibilities.  Just as in-house staff are accountable for interactions between employees, it is equally important the organization’s consultants insist on respect in interaction between in-house staff and consultants, and between consultants.

Analytics at the Expenses of PM Overhead

Project Management Offices (PMO) establish and uniformly apply Key Performance Indicators (KPIs) for program and project managers to monitor performance on projects and programs of projects (Mega projects).   Typical KPIs on projects are Schedule Performance Index (SPI), Cost Performance Index (CPI) and Planned EVM verse Actual EVM.    Other KPIs for monitoring project cost and schedule goals can include forecasts of future efforts expressed in ratios including remaining duration, remaining EVM, Estimate To Complete, and pending project/contract changes.     

For projects that are not performing as expected, PMOs may need to conduct management reviews and implement additional monitoring measures to mitigate poor performance to cost and schedule.   As a result, more granular KPIs (Sub-KPIs) are created for work directly related to the performance of individual contributors with significant roles and responsibilities where the service quality was identified as a root cause affecting project performance. 

The purpose of the Sub-KPIs is to monitor, measure, assess and act on performance attributes and make decisions on critical activities in order to assure progress to meet project schedule milestones.  The goal is to improve processes and procedures, and to reduce schedule activity durations, which are identified as risk threats to critical project dates.   Each of the Sub-KPIs will capture historical data that will be used for identifying and resolving problems and for increasing confidence in future project decisions.  

This new level of monitoring will focus on analytics that PMO executives should establish through a defined breakdown structure of KPIs, which include metrics for activities that are driving durations of processes and procedures essential to quality performance to goals.    

Examples of Sub-KPIs include:

• Days for processing Contract Change Orders (CO)
• Days and manhours for reviewing Contractor Submittals
• Days and manhours for responding to Contractor RFIs
• Days for processing Project Changes (PC)
• Percentage CO Change Amount from Original Contract Award Amount
• Percentage PC Change Amount from the Original Project Budget.

In the example, the Sub-KPIs are all related to schedule progress as prioritized by the PMO.   A high percentage are outside the project teams control, and under the direct responsibility of the PMO’s management and the contracting office, which is usually an existing organizational asset within the Owner’s business structure.   As a result, monitoring of the related Sub-KPIs should have executive level buy-in and commitment that provides the PMO with the authority to improve processes and procedures.  

Creating new Sub-KPIs will require enhancement to existing reporting to incorporate color coded graphics such as dashboards, heat maps, histograms, and bar graphs, which provide conspicuous visual recognition of critical metrics for managing efforts across the project.   The color coding may indicate Red – Outside Tolerances - Action Required, Yellow – Near Tolerance Thresholds - Action Under Review, and Green – Within Tolerances - No Action  Required.   

Depending on the project domain, other Sub-KPIs may be created for monitoring and improving performance to intermediate milestones and EVM targets.    For rail-transit projects, there may be significant access restraints, production time limits, and promised on-site services by Owner to contractor.    In this case, Sub-KPIs might include ratios for:  1) Actual access days to site and planned access days.   2) Actual contact hours and planned production hours.   3) Actual crew days for work and planned crew days to support contractor.   4) Accrued liquidated damages and contract amount.   5) Accrued incentive payments verse contract budget.

Reality A

In theory, KPIs and Sub-KPIs increase management quality and improves project performance at the expense of added management overhead cost and staff levels.   However, each PMO needs to assess the benefits from the added managerial effort for implementing and monitoring the KPIs and Sub-KPIs.

Reality B

The number of KPIs will proportionally increase costs for Project Controls, management overhead and for added project analysts that are required for the collecting data, reporting data, explaining metric variances and implementing corrective actions.    

Reality C

At the expenses of other progress/performance report attributes and content, readers may overly focus on the red metrics while ignoring non-red items.  This may cause missed opportunities on schedule risk events that may actually be more significant to schedule performance and be more easily resolved to mitigate or avoid the events.

Reality D

Performance monitoring of Sub-KPIs without an improvement in schedule durations may indicate processes are not aligned with project expectations despite recognition of the impact to progress.    Executive management needs to ensure that the metrics identified as contributing to schedule risks can be mitigated.  Otherwise, the risks are just be accepted threats that need to be built into the schedule.     

Critical Components in Special Conditions/Supplemental Terms and Conditions  -  Part B

In most contracts, the Contract Terms and Conditions may be amplified using sections for Special Conditions (SC) or Supplemental  Terms and Conditions (STC).

This is the 12th in a series of discussions that is intended to prompt Project Teams to be aware of the entire contract document, including Information For Bidders (IFB), General Conditions/Terms and Conditions (GCs) and the Technical Requirements [Specifications and Drawings.] 

In the rail transit domain, there may be unique requirements that are created by work conditions, from implementation of alternative delivery methods, for multiple milestones with liquidated damages and for incentives to beat performance milestones.   By exception, these requirements are expressed in SC and STC.

INSURANCE :   Typically, insurance requirements cover General Liability, Workmen’s Compensation, automotive, and professional liability.  The scope and insured amounts are established by the Buyer’s legal and risk management groups.   In a railroad environment, the requirements are supplemented to include:

Railroad Protective:   This coverage applies to a contract work zone that requires the contractor to work under hazards such as moving passenger trains and on-track vehicles, high voltage third rail and overhead catenary systems.

Environmental:   This coverage applies to a contract work zone where there is known materials and risks of hazardous materials, such as contaminated soil, asbestos containing materials and cables, lead in paint and cable insulation, and hazardous materials in soils such as PCBs and mercury.

WARRANTY:   Generally, the standard contract form specifies the requirements for warranty of the products, including the period based on a defined date typically a contract milestones, such as Substantial Completion.    However depending on the complexity of systems, first time applications of technology or unique execution means and methods in an operations environment, trade standard warranty requirements may not be adequate.    In these cases, Buyer’s will supplement requirements with processes and metrics.

The SC and STC Warranty requirements such as:

• Seller’s time to respond to Buyer’s request
• Buyer’s right to perform repairs
• Seller’s time to complete repairs after Buyer’s request
• Seller’s inventory of spare parts
• Management of manufacturer’s warranties

TIP:    Warranty commercial requirements in the SC/STC should be coordinated with requirements that are identified in technical specifications.

MATERIALS PROVIDED BY BUYER:    Division of work on contract uniformly specify the contractor responsibilities for labor, materials, equipment and supervisory services to complete the work.   In unusual circumstances, the contract requirements stipulate the Buyer provides the Seller with materials for installation as part of the contract scope.    As a result, the contract will incorporate technical information in the Div 1 specifications, and commercial conditions for transfer of materials between Buyer and Seller and the responsibilities for accepting and storing materials for installation when required.   This may include warehousing requirements, bonding, insurance and processes for accepting materials.  

TIP:  Ensure the project risk management plan and the contract management plan includes the required resources and processes for executing and managing the work under this project requirement.

TIP:   Ensure a cost benefit justification is documented to support the decision for the division of work on the contract.

Critical Components in Special Conditions/Supplemental Terms and Conditions  -  Part A

In most contracts, the Contract Terms and Conditions may be amplified using sections for Special Conditions (SC) or Supplemental  Terms and Conditions (STC).

This is the 11th in a series of discussions that is intended to prompt Project Teams to be aware of the entire contract document, including Information For Bidders (IFB), General Conditions/Terms and Conditions (GCs) and the Technical Requirements [Specifications and Drawings.] 

In the rail transit domain, there may be unique requirements that are created by work conditions, from implementation of alternative delivery methods, for multiple milestones with liquidated damages and for incentives to beat performance milestones.   By exception, these requirements are expressed in SC and STC.

LIQUIDATED DAMAGES (LDs):    As discussed in Part 8 of this series, most contracts with liquidated damages are based solely on a performance milestone for substantial completion.    However, the Buyer can incorporate more milestones and different LD amounts depending on the contract delivery method and interdependencies with predecessor or successor contracts.    Contracts where these requirements may be applicable include design-build construction contracts, design-build system contracts, and bid-build construction contracts with Buyer furnished materials.    These contracts may incorporate milestones for delivery of major equipment, completion of design submittals, completion of construction submittals, and completion of construction corresponding to access constraints and work restrictions. 

INCENTIVES:   Incentive requirements are the exception to 99% of contracts.  For Buyer’s with a defined benefit for early completion of milestones, the opportunity to utilize the contract provision may off-set the premium cost for accelerated work.  In these cases, the contract may incorporate incentives for Seller payments tied to performance schedule milestones.  

Incentives are intended to encourage contractor creativity to accelerate completion of milestones while achieving the form, fit and function of products.     Similar to decisions on LDs, Buyer incorporation of incentives needs to be carefully considered.   Schedule benefits should be tabulated and quantified in the Buyer’s business case that justifies the incentives in a contract.  

While LDs reduce a contract amount for delays, incentives can increase the contract amount for completion of milestones ahead of the contracted dates.   As a result the Buyer’s project finances need to ear-marked funding to cover the liability for Seller’s success.   

The contract language is likely to be more extensive and include specific criteria for the Buyer confirming entitlement for the Seller achieving early completion of defined milestones.    The contract will also amplify the claims, remedy and resolution requirements regarding variances between Buyer and Seller interpretation of entitlement.

TIP:   LDs and Incentives should be carefully balanced with the administrative effort to monitor, manage, document and enforce.   

TIP:   Contract language should define the coordination between LD and incentive requirements to ensure Buyer and Seller clearly understand enforcement, conflict resolution and remedies.    

TIP:    The Buyer’s procurement/contractor acquisition should select either the LD or Incentive requirements to avoid conflicts in focus by the contractor during contract execution.   LDs and Incentives in a single contract will create distractions as the contractor makes internal decisions to capitalize on milestones tied to incentives while accepting delays and cost liabilities on milestones tied to LDs.   

TIP:   Incentive estimate should be vetted thoroughly to ensure the document can be defended by the Buyer in response to a claim from the Seller or subsequent litigation action by the Seller. 

Critical Components in Division 1 Specifications - Part B

This is the 10th in a series of discussions that is intended to prompt Project Teams to be aware of the entire contract document, including Information For Bidders (IFB), General Conditions/Terms and Conditions (GCs) and the Technical Requirements [Specifications and Drawings.] 

In the rail transit domain, construction contracts may include items that are executed under unique conditions.  The conditions include sharing property by multiple prime contractors, work progress while maintaining Buyer’s use of surrounding assets, restoring asset use after each work period, scheduling work within defined outages and service plan changes.  

Div 1 Railroad Operations:  This section contains the requirements for executing work in a work zone while the Buyer maintains full service for train operations.   The topics may include roadway worker protection, service changes, track/power outages, on-track vehicles, railroad provide services, work during operational emergencies, operating vehicles and vehicles on Right-Of-Way (ROW).

Div 1 Temporary Construction:  This section contains the requirements for constructing and removing temporary work to support work execution, and protecting railroad assets throughout the contract.  The topics may include supervision and employee facilities, parking and storage areas, facilities for railroad personnel, and customer flow through work areas. 

Div 1 Site Conditions Monitoring:   This section contains the requirements for monitoring site conditions  and railroad assets, and implementing corrective actions that may result from influences of passing vehicles on or adjacent to tracks, bridges, buildings, utility poles and equipment rooms and enclosures.     The topics may include soil grade and density, track bed and right of way slope, erosion at abutments and retaining walls.  

Div 1 Pre-Construction Planning and Controls:   This section contains the requirements for the startup, protection  and maintenance of work site conditions throughout the contract.   The topics may include relating the Safe Work Plan with the use of labor and equipment at site specific locations, and utility mapping, excavation monitoring, and mark-out of known subsurface utilities and infrastructure.

Div 1 Code Enforcement Coordination:  This section contains the requirements for coordination of progress on inspections and validation of compliance with the code requirements throughout the contract.   The topics may include a summary of the products in the contract requiring inspection, and the processes, procedures and records that are required for the Buyer to use the work completed under the contract.  

TIP:   Div 1 requirements should be correlated and consistent with the other Division specifications.

TIP:   Depending on circumstances and management requirements, additional Div 1 specifications can be created and incorporated into the contract.   However, more specifications mean more prescriptive requirements.  In turn, it means allocating more management resources to monitor and document compliance, and increase risk threats to progress and critical schedule dates.