Applied Project Management Program (APMP) for Professionals

What is Change Control?

The Chartered Institute of Building (CIOB) ‘Code of practice for project management’ (4th edition), defines change control as a process that ensures potential changes to the deliverables of a project or the sequence of work in a project, are recorded, evaluated, authorized and managed.

Engineering and construction projects require several tasks to be carried out within pre-defined scope, quality, time and cost. These tasks are expedited in multiple stages including engineering design, tender evaluation, planning, contracting, execution and close-out. Though most information is usually available at the beginning of a project, certain elements of such as wall dimensions, service route and equipment orientation may change according to requirements at site. In some rare instances, the client may even opt for a different design during execution. This is where change control (also known as change management) plays a crucial role in project management.

If the changes are not identified, recorded and notified to the respective stakeholder, the company executing the change will incur additional cost and may not meet milestone/ schedule dates. The client may also subsequently impose penalty which adds to the commercial burden on the engineering consultant/ contractor.

What causes Change?

Some of the most common causes of change are:

• Inadequate design parameters
• Missing information in the contract documents
• Differing site conditions
• Regulatory changes
• Statutory changes 
• Additional interface requirements;

Change Control Procedure

Some of the common change procedures are provided below:

a) Identify the change/ deviation from original scope

Change/ deviation is usually identified at a working level. For example, in the case of an EPC contractor, the site engineer may not be able to install an equipment in a room due to small room size.

b) Explore whether mitigation is possible

The site engineer must explore all possibilities whether it is possible to install the equipment despite the room size constraint. His project manager may consult with equipment manufacture and check for alternate solutions to install the equipment within the constrains.

c) Notify the engineering consultant/ client

If mitigation is not possible, the contract administrator/ quantity surveyor/ project manager/ design manager must immediately raise a formal notification to the engineering consultant/ client. This must be done with a certain number of days as mentioned in the contract agreement. The notification must briefly explain the cause of change, mitigation efforts undertaken and possible effect. For example, if the equipment in not installed, then the facility cannot be used.

d) Submit detailed claim

Within certain number of days after notifying the engineer consultant/ client, a detailed claim may be submitted along with details on additional cost and time required to rectify the change.

e) Claim Evaluation

Within certain number of days after receiving the claim, client may engage a cost consultant to scrutinize the claim. The cost consultant may request the contractor for further details and clarifications. The contractor must provide all details for the cost consultant to conclude his evaluation of the claim.

f) Issuance of Change Order

Once the cost consultant has verified the claim and client contract administrator has ensured that the change/ deviation is outside the contractor’s scope, the client may issue a formal change order with instruction on cost & time.

g) Expedite the Change

Once the contractor receives the formal change order, he may proceed with procurement and execution of the work.

Conclusion

Changes are inevitable in construction projects, although the size, scope, and complexity of projects may differ from project to project. Changes are a major cause of project delay, cost overruns, defects, or even project failure. Hence a robust change management system is a critical component of the construction industry.

Claims management

Claim Identification

The identification of a claim starts with sufficient knowledge of the scope and responsibilities stated in contract terms, when some activity appears to be a change in scope or terms requiring a contract adjustment. Proper identification involves not only an interpretation of what the contract requires, but also a documented description of the activity viewed as extra to that required by the contract.

The necessary Inputs to Claim Identification are:

• Contract scope. The baseline scope of work as approved in the contract.
• Contract terms. The responsibility for work to perform, especial terms relating to changes, changed conditions, schedule preparation, submittal and notices given.
• Extra work description. Description of work believed to be extra to the contract, where and when it took place. Statement of why it is not covered in the contract scope and reference to the section of the contract that supports the contention.
• Description of extra time requested. Record of the extra work and delays. Time extension claims resulted due to events such as unusual weather, strikes or other force majeure items outside the contractor’s control may be valid while they may not be compensable. The contract and local law decisions often state which are compensable.
• Hold-ups and Delays. Record of hold-ups and delays caused by events beyond control of a party but responsible for management under the contract.

Claim quantification

The necessary Inputs to Claim Quantification are:

• Statement of claim. The outcome of Claim Identification
• Other Work Affected by claimed activity. In the event that there is additional effect on the balance of the contract work caused by the claimed activity. These effects are treated in the same manner and data collected as for the claimed activity itself.
• Return on Resources. Details where party have lost return on resources for delays of a project.
• Opportunity Lost. Details where party have lost other opportunity for delays in completion of a project.
• Loss of Profit. Detail estimation or an Agreed basis for working out profits.

The Tools and techniques required for claim quantification:

• Quantity measurement. Develop actual quantities of the claimed item/work. When disagreement arises the first place to look for agreement is the BOQ involved.
• Cost estimation. Develop activity base costing (ABC) of the resources involved in the claimed work. The cost records provide the basis of the estimate or prepare estimate using current applicable rates. Overhead cost and profit are proper as the claim is treated at this stage as a change. In case claimed work has an effect on other work of project that causes additional cost, it is estimated for cause and effect relationship.
• Contract law precedents. It is helpful to cite previous cases that act to support the claim in those more complex situations where the contract does not provide a solution. Such cases may give guidance as to what may or may not be included in the claim or how the claim may be evaluated.
• Schedule analysis. Compare the “as planned” schedule with the “as built” schedule to support the time extension requested not only for the claimed activity, but also for the effect (if any) on the balance of the project. Schedule analysis with the aid of today’s sophisticated computer programs can help, but also can make this analysis very complicated. The ultimate deciding factor is the effect on the critical path; it can become difficult to separate these because of all of the other factors that can and do affect construction schedules.
• Business History of Party. Opportunity loss for delays is complicated assessment that requires toestablish the capabilities, market conditions and history of business approach.

Outcomes achieved from Claim Quantification are:

• Direct and indirect costs. Statement of the cost or damages resulting from the claimed activity is developed with full support of the factors used in the calculation. Also, the cost, when justified, of the effects of the claimed activity on other aspects of the project calculated in the same manner as the direct costs.
• Time extension. The result from the schedule analysis
• Documentation. Backup of quantity calculations, time cards showing the extent of labor involved and machine usage, wage rates, equipment rates and invoices for material that are included in the claim are the kinds of documents needed for support of the quantification.
• Opportunity Loss. Assessment based on factual grounds, is established.

Claim Resolution

Even with all effort to prevent claims, they may still arise for a justifiable disagreement as to whether the claim in question is a change to the contract or not or whether the claimed amount of compensation or time requested is correct. When this situation arises there begins a step-by-step process to resolve these questions. It is axiomatic that the longer this process takes, the more expensive and disruptive it is to both parties. Therefore, the goal is to settle these issues as soon and at the lowest point in the organization as practicable. The process begins with negotiation, perhaps at more than one level, before moving on to mediation, arbitration and litigation depending on the remedies afforded by the contract. Because of the proliferation of claims in construction and the expense of litigation, alternate methods of resolution have been increasingly used. Called ADR for Alternate Dispute Resolution, they include mediation, arbitration and mini-trails.

Necessary Inputs to Claim Resolution are:

• Statement of claim. Established through identification
• Claim quantification. Established through quantification
• Contract. The agreed terms of contract that provides the ultimate baseline and means for resolution
• Correspondence. Record of correspondence on the matter are initiated at a relevant point in time.

Tools and Techniques for Claim Resolution:

• Negotiation. The foremost and best step for resolution. Sometimes the negotiation needs to be elevated to a higher level, but it still is a negotiation between parties trying to find an equable solution.
• Alternate Disputes Resolution (ADR). These include mediation, arbitration and mini-trials.
• Litigation. The eventual result when all attempts have failed. Construction lawsuits are commonly complex for a jury to understand and often take a longer time to present. This is the “last resort” and more expensive in terms of cost and outcomes that may upset the organizations involved. Parties in litigation really need to ensure that this is the only way for resolution.
• Cost Estimated for resolution. When the initial attempts at negotiation fail it is prudent for each party to estimate the cost of carrying the dispute further. Mediators are costly (but can be cost effective) and some arbitration cases can approach the expense of litigation due to the amount of discovery involved. An estimate of these costs can help in deciding just how beneficial it is to pursue a claim.

Outputs from Claim Resolution

• Claim resolved. One way or the other.
• Contract closed. In cases where the contract cannot be closed because of a pending dispute, resolution of that dispute enables the contract to be closed.