Keys to Better Project Cost Management

Fiona MacTavish:

Good afternoon and welcome to today’s AIPM panel discussion, “Keys to Better Project Cost Management.” Before we start, I would like to acknowledge the traditional owners of country throughout Australia and recognize their continuing connection to land, waters, and culture. We pay our respects to their elders, past, present, and emerging. My name is Fiona MacTavish and I’m the New South Wales Chapter President here at the AIPM. Today’s event is being recorded and in the unlikely event that technical issues arise, it’ll be available to view later on our demand platform.

Just a little about AIPM, the Australian Institute of Project Management is the premier, longest-serving body project management in Australia. Our role is to improve knowledge, skills and competence of project managers and advocate on their behalf to government and industry, about the project controls community practice. This community practice is for professionals and trainees engaged in the quantitative areas of project management.

Key disciplines within project controls include planning, scheduling, cost management, earned value management, performance management, forensics assessment, risk management, document control and project management methodologies that integrate the people, tools, systems and processes who use them. Before we go on, I would like to provide a big shout out and thank you to our sponsor InEight, for their support of this important event. Thank you very much InEight. We’re going to be having some audience polls throughout this session and we’d like to invite you to be part of that. The first poll, which will commence shortly, we’re going to ask people to look at and advise on what their role is, within projects that you are currently in. So that should appear on your screen shortly. Hoping that it’s popping up soon. There it is.

So, what’s your role in the projects that you currently work in? We’ll give, I think 5 to 10 seconds for people to select their role. All right. Hopefully, people have had a chance to pick one of these. And question two in our quick poll would be, what industry are you currently working in? We’ve got the results coming up there. So primarily project managers with some project directors, quite a few others, which is interesting. And several controls managers and planner schedulers. Great, thank you. There should be another poll coming up shortly around the industry that you currently work in. So we’ve got a few options for people to choose. Hopefully, people have had a chance to choose one of the options there.

And there we go. Primarily, infrastructure and defense with some construction, quite a lot of others, education, IT or healthcare, which is interesting, and some consulting. Thank you very much for letting us know your role and the industry you’re working in. Just a reminder, that we’ll be taking questions today, so please submit them through the console, just before I announce our speakers. So please put your questions in as we go and we’ll try and get to all of them. We aim to get to as many of them as time permits, but quite often we’re at capacity with questions as the time goes along. So please get your questions in early and we’ll try and get to all of them. So I would like to now introduce our panelists for today, Matthew, Evan, and Oliver, and I’ll ask each of them to give a brief introduction before we kick off today. So we will start with Matthew, who’s the first on my screen.

 

Matthew Macaras:

Great, thanks Fiona. Hi, everyone. My name is Matthew Macaras. I’m the Director of Solution Engineering for InEight, here in Asia Pacific. My background is industrial construction, working on power plants, L&G facilities, building iron ore mines and the like, where I’ve done everything from estimating, superintendent, field engineer, all the way through to project management. So I’ve got that hands-on experience in the field, building projects, working with construction teams, owners, engineers, to build those assets and then even help maintain those. I joined InEight about four years ago and have started working on the software side around construction software and making sure that the industry is able to leverage the data that it’s capturing to better their projects. Thanks, Fiona.

 

Fiona MacTavish: 

Great, thanks Matthew. Evan, can you tell us a few words about yourself?

 

Evan Hughes:

Yeah, sure. Thanks, Fiona. Yeah, my name is Evan Hughes. I’m the Project Controls Lead for KBR here in Melbourne. I got into this industry really as a Primavera planner. I did that for about 18 years and then I sort of pivoted into cost control and project controls management. I spent most of my time working for tier-one contractors and then I moved that into the design and engineering space. I’ve worked in the US, in Canada, the UK, multi-British and now in Australia. I joined KBR about five years ago and that’s where I’ve moved into the cost control space. My key interests actually, are in the development of new tools. So something I really enjoy doing, is building new tools that help people be more efficient and actually bring out the data from a project, to allow people to make the decisions that need to be made to make the project a success. I’m really pleased to be here and I’m looking forward to a good conversation.

 

Fiona MacTavish: 

Great. Thanks Evan and Oliver?

 

Oliver Greenwood:

Thanks, Fiona. Thanks guys. Yeah, again, thanks everyone for your time today. So I’m Oliver Greenwood. I originally started as a quantity developer in the UK, and I’m a partner then I did also, do a further L&M in construction laws and arbitration. So I come from a bit more commercial side but now looking at cost. I’ve been in Australia now, for about five or six years working for Systech, but previously before that, I was in the UK working predominantly for main contractors. During my time and more recently in Australia, I really supported particularly, main contractors and more recently, client organizations and looking at how they can implement effective commercial management and cost management, cost planning, et cetera, across their projects. For the past, about three years, I’ve been leading the team on a major infrastructure project down here in Melbourne and that’s where we’ve got basically, six packages of works and we’ve tried to standardize the approach to cost management and develop a framework to ensure that we get best work project outcomes. Thanks, Fiona.

 

Fiona MacTavish:

Great. All right. So with that, you’ve got a bit of a background of all our panelists and while we don’t have a presentation today, we’ll jump straight into some questions. I will direct the questions to each panelist, but of course the other panelists, if you would like to respond, please do and in that way we’ll get a broad answer to the questions that have been posed. All right, so Oliver, who do you suggest needs to monitor the costs on a project?

 

Oliver Greenwood:

I guess just firstly looking back on, so we’ve got 61% project management and 50% in infrastructure defense. So we’re all from that sort of background. So in terms from a cost management perspective, my view is that it’s a very collaborative process. In order for it to be effective, you really need buy-in from the organization, from the top, all the way down for it to be effective. And to Evan’s point earlier actually, which I like, is really to harvest that data that’s coming out of the project. You need involvement from superintendents on site, all way up to CEOs of these projects.

So in terms of, when I go into a project and look at strategic objectives of cost management and who should be appropriate to be in certain positions, I really focus on three areas. So, making sure the people and particularly, the people are able to undertake and do best practice, in terms of cost management. So really, enabling them through having clear and concise process and then also, feeding into that is the technology piece. So really having those three pillars in place and having that collaboration throughout the project, I believe is the key to having a good chance at having effective cost management.

 

Matthew Macaras:

Yeah, I agree with that Oliver. And really, I think the other thing that’s important about effective cost management, is the immediacy of information, as well. Capturing information from the field, in terms of progress, in terms of hours worked, processing subcontractor invoices or managing accruals as things are happening, so that you can bring that information in and you can start now looking at that as it’s coming in, instead of waiting for reporting periods to happen. So, I agree it’s a collaborative environment and a collaborative team that requires cost management but everyone in that team is to be providing that information as it’s happening, instead of waiting for things to happen or waiting for a scheduled time at the end of the week or the end of the month, to input their info.

 

Fiona MacTavish:

Great, thank you.

 

Evan Hughes:

Yeah, I think, sorry, just to add to that. I think the way that the information is presented is really important and the reason why you do cost management, one of the key reasons, is to be able to make decisions if things are going wrong and you only really know if things are going wrong, if you’ve got that information. So I think it’s imperative that obviously, the PM is really focused on what that data looks like and what it should look like. And they’re driving the quality of the data such that, if for example, one of your areas of the project starts to slip, in terms of the actual budget, then they can act quickly and do something about it because that’s the only way you’re really going to mitigate the effect of potential overrun. So I think really, it’s around shaping the data to fit the particular project and the people’s requirements, as well.

 

Fiona MacTavish:

So, Oliver, Evan just mentioned that you need to tailor what you’re capturing to the requirements of the project. So what would that include? Are there any general examples of what every project must capture, versus some that you consider out of scope by the particular project that you are doing? Interested in hearing more about that?

 

Oliver Greenwood: 

Yeah. Thanks, Fiona. I think from my perspective, I think we can sometimes over complicate certain things. So I always like to try and keep it simple and to me, I think to anyone that’s involved in cost management in the day-to-day job, there’s really three key components and each one of those components obviously has got its own nuances and further level of detail that you need to go down with. But as a starting point, we all as cost management professionals, need to establish and understand what our baseline, the budget, whatever your organization might refer to it as, but really understand what that baseline is and the level of detail that you need in that baseline, to be able to understand them. And ultimately, to Evans point, which I completely agree with is, to make timely decisions because ultimately, what we’re trying to do with effective cost management, is through the analysis, through the advice we give and through fit purpose reporting, give the data in a way that informed decisions can be made.

So step one to me, is always establish a clear baseline budget and that might be different to organizations, different to different projects, but it’s really to understand that and to understand from all your stakeholders at the outset, what’s going to be required from this baseline. So let’s assume you established a pretty robust baseline, understood at the right level of detail, et cetera. Then the next phase for me really is, then how do you monitor the actual costs against that baseline? So that’s one where you really need to understand what’s your cost system going to be, what’s your control system going to be, understand how the flow of data comes from maybe your ERP or your finance system, into your cost control for example. And really understand it and being really clear on that process because without understanding where you’re spending the money and when you’re spending the money in your actuals, it’s very difficult to then understand where you’re going to end up with a project. So that’s the second point.

The third point, and I think probably one of the most difficult ones out of the three, is if your forecast costs are complete. So we understand what we spent, what we got left to do, so that’s the forecasting piece. That’s really where the collaboration is key with the schedulers, with the engineers, with your project managers, to really understand that, “What we’ve achieved and we’ve spent this today, but what have we actually got left to do?” That’s the one where I think a lot of projects fall down. There’s a heap of reasons behind why, there might be certain drivers behind, doing certain things before your forecast costs are complete, but that’s really important to get that bit right.

And then once you bring all those three elements together, you can really understand how you’re performing as a project. So how are your total forecast costs, comparing to your baseline, how you spend comparing to what you thought you were going to spend and then how’s your forecast looking over the life of the project? And having those things together and keeping it simple, then allow you to do the analysis required and provide the advice and the reports to be able to make decisions throughout the project. So Fiona, I think that’s what I see as the three key things on cost management. I don’t know if the guys have got anything to follow up with on that?

 

Matthew Macaras:

Yeah, I’d probably add one more to that and as much as possible, it’s standardization. If you’ve got a large project and you’ve got multiple areas on the project or you’re an organization and you’ve got multiple projects running that maybe you’re estimating or you’re executing, the more you can standardize, maybe the project budget is unique, but having a standard coding structure that things are mapped to, standard ways of claiming progress on contracts, standard ways of claiming progress from direct work in the field. What that does is, it now informs you even more when you get into your earned value. Where are we actually sitting at, in terms of our cost per budget?

It informs us a little bit more, allows us to better predict where we’re going when we’re forecasting because we know 50% complete means exactly this, 75% means exactly that. So you can take that information and you can now get a better indication of exactly where the project is and then forecast out from there. That also allows you to, if we want to go full cycle, take your as-built information from that project and bring that back into your estimating, to make sure that you’ve got that budget structure, you’ve got the budget set and it’s at a reasonable value for what the project is. So it becomes a self-fulfilling cycle, where you can now take that as-built in information, benchmark your estimates to make sure your budget’s right for the next project and then you start those next three or four steps, as Oliver was mentioning.

 

Oliver Greenwood:

Absolutely.

 

Evan Hughes: 

Yeah. Actually, just pick it up a little bit on top of what Oliver just said. I completely agree, getting the forecast is probably one of the hardest things you can do in cost control, but I think there’s some things you can do to increase the quality of the data you get when you do that in a project. And one thing that jumps to mind is, really the integration of your cost and your schedule and having a structure of your schedule done as closely as possible in the WBS of that schedule, as closely as you link that with the cost breakdown structure.

And by doing that, you can see for example, if someone is forecasting that they’re 70% through the project and yet they look in the schedule, they can see that part of the project’s nearly finished, then it’s a sort of disconnect there and you can spot that very quickly, if you’ve got that similar structure and it acts as a bit of a check on the schedule and it also acts as a check on the cost. And I think that in itself though, is probably one of the hardest things to also do in a project, as it really relies on-

 

Fiona MacTavish: 

Just seem to be having a bit of delay with Evan’s feed.

 

Oliver Greenwood:  

I guess great comments from Matthew and Evan there. I guess once you do the basics, all that standardization, that code in the alignment of your CBS and the WBS and the RBS, they’re all fundamental across this. And what also, I think is key to have in mind at the start of the project, which is sometimes difficult, projects are live environments, stuff changes. So it is important that you also, when you’re considering all of those things, how do you manage change, if you decide to deliver things a certain way or change the way that we’re going to deliver, how do you keep the standardization, the coding structure alignment, all that stuff, how are you able to change that?

So having consideration of your change management, as well, I thinks vital to make sure that you continue to provide that advice. Because what can often happen on projects, and I’m sure a lot of people experience this, is you start on the outset with perfect alignment between your cost, your program, all your actuals, everything, all kind of structure, and then delivery happens and they start to drift apart. So it’s important to have at the outset, think how you’re going to manage that through effective change management, as well.

 

Matthew Macaras:

And that’s where systems can have a large play in that, where if you’ve got a system that’s providing governance to the project, you can manage those changes within the predetermined structures that have been set up at the beginning of the project, so as those changes happen, you know how it’s impacting your budget, the data you need to capture to do that, the data that you need to capture to adjust the schedule and those things remain within sync. I think the other piece of that as well, Oliver, is having masters of information. So your schedule will always need to be your master of time. Maybe your quantity library is your master of progress and those things are feeding each other, so we know that we’re 50% complete through our quantities or our progress. Let’s now, translate that detailed 50% complete that we’ve been capturing and have that update our schedule.

And then because now we know that, “Okay, well we’ve spent 75% of the time but we’ve done 50% of the progress, we can now update the schedule to a realistic duration based on our productivity factors.” But you need to maintain those masters and have that information connected. Otherwise, you’ll end up with a schedule that says you’re supposed to be complete in July, you now have your quantities at 25% complete in June, and nothing’s going to line up. It’s not going to allow you to have that accurate forecasting. It’s not going to give you a true view of earned value within your budget and you won’t be able to capture changes because you won’t know which one is the right one that the change is coming from. So I think having that information connected and then having those masters of information, allow you to manage everything and manage that change.

 

Fiona MacTavish:

We just had a question from the audience from Alex Badatis. He’s just joined the IT industry as a project manager, coming from defense as a cost schedule analyst. The question is, is Agile EVM a practical method to track progress and status of an Agile story-point based project? So how do we track and manage costs in Agile projects from the IT industry?

 

Matthew Macaras:

That’s a very interesting question, actually.

 

Fiona MacTavish: 

It’s a really good question because usually, we’re used to tracking costs for Waterfall, Prince2, anything where costs are predictive but Agile being an iterative process, how do we manage costs and is there software apart from Excel which can help?

 

Matthew Macaras:

Yeah, I think the fundamentals are still going to apply. Yes, Agile is iterative but you know what you’re trying to achieve at each iteration. So knowing that okay, we’ve got to get from 1 to 10, we know that the first sprint is going to take us to 3 and tracking what our costs and our expectation is, in terms of effort to get us to 0.3. And then when we get into the next sprint, we know maybe we’re going to go to 8 and what level of effort it should take you to get to 8. So you can track your effort, track your budget, based on what those sprints are. So those same rules still apply, you’re just going to break down your structures or you’re going to break down your schedule in a different way to allow you to see that progress and see that earned value over time.

 

Fiona MacTavish:

Another question from the audience, John Davies. What contract or commercial models do you consider effective in the current environment to share cost, risks and opportunities between buyers and suppliers? So contract and commercial models that are effective to share in the current environment, to share cost, risks and opportunities between buyers and suppliers? Anyone want to have a go at that one?

 

Oliver Greenwood:  

I can cover this one with I guess, my more commercial background. Sorry, let’s just define buyers and suppliers at the moment. So if we take it at the top, the highest level, let’s say the buyer is a government agency and the supplier is the main contractor. My personal preference, and this is something that I’ve not previously worked on until I came to Australia, but I’ve seen it work very well in cost management, which has been adopted quite heavily in Melbourne in particular, alliance contract models. What I see is, they are open book, cost reimbursable contract model. I think that’s the one that gives all parties the best opportunity to be as transparent as possible and being in effective cost management, it is about being transparent.

I think historically, hard dollar DNC’s form of contracts, where it’s very much a fixed price, fixed time, obviously there’s the alignment of both the owner and the contractors. They are not always aligned. There’s a bit of a mismatch there between those two things, which makes it quite difficult to get reliable, transparent, cost risk sharing and earn value and all the other good things that come with that. So my personal opinion and from what I’ve seen in the environment having worked in the current project I’m on at the moment, we’ve got a PPP and we’ve got alliance and you can really see the differences between the two. I think the collaboration which we’ve mentioned earlier, which is enabled through the contract, such as an alliance agreement, is where that really, really helps with effective cost management.

 

Matthew Macaras:

Another one that I’ve seen that worked quite well Oliver, is a pain share, gain share, type of arrangement. Where you’ve got, the project needs to be delivered and if you come in under budget there is that sharing of information, maybe not to the same level of an alliance but there is a sharing of information, in terms of cost versus budget and if you go over budget then the owner and the contractor each wear a piece of that, come in under budget, each one gets a bit of benefit. So that helps drive collaboration between the organizations because there is a pain for each one if something goes wrong, as well as a benefit for each one if the project goes according to plan or better than plan. So that one is another option that provides a bit of incentive, if you want to have a little bit of an incentivized model.

 

Oliver Greenwood: 

Which is incorporated into the alliance model, exactly, pain, gain. So the other element that does work well from a commercial point as well, is having KRA regimes or KPI regimes, when actually, the contractors in the scenario I’m talking about, are actually incentivized to perform certain things. They could be incentivized to make sure that they’ve got accurate reporting and that side of things, as well. So actually, a financial incentive as well, which is also common in alliance contracts too, to make sure that if the contractor knows there’s potential dollars to be had there, you soon see them put some effort behind it.

 

Evan Hughes:

… yeah. Sorry, can you hear me okay? I’m not sure?

 

Fiona MacTavish:

Yeah, we can Evan.

 

Evan Hughes:

Yeah. And just actually, to kind of riff on top of what you’re saying, Oliver and bring it back to what I said before around from my planning background. Sometimes those carries link to milestones. It can be quite good because you’ve kind of got that cost control, is also about schedule control because if you allow your schedule to blow out then that’s going to cost you a lot more money. So incentivizing within the contract, that focus on getting things achieved in a timely manner is also what I’ve seen to be quite a good way of managing risk and it sort of changes the dynamic of how an organization who’s delivering the project, really thinks about the project. You don’t want your contractor to considering it an open-ended time thing, even if it’s limited on cost. You want that focus to be on particular, maybe obviously, the practical completion’s key, but why not have milestones around certain deliverables along the way as well, just to keep that contract tight from a time perspective and hence, also in the cost, as well.

 

Fiona MacTavish:

Great, thank you very much. Just a question from the audience, Sam Bacara, I hope I’ve pronounced that correctly, Sam. Can the panel just quickly talk through any software they may have used in the past to manage costs? We obviously can’t seek recommendations but maybe you could share your experiences on what software you’ve used in the past to help manage costs? I’ll start with Matthew.

 

Matthew Macaras:

Yep. I’ll take that one to start with Fiona. So I’m going to be a little bit selfish in this one, as well as talk a little bit about history. So I’ve used Excel to manage costs in the past. I think that’s probably the common denominator for everyone, at some point, they’ve used Excel. I currently work for InEight, we provide that end-to-end project management software that includes cost management, contract management, but I’ve also used the InEight solutions in the field. So that’s one of the reasons why I joined InEight, is because I was using our software in the field and it provided an effective way for me to manage costs, to manage progress and to automate some of those processes around forecasting and those types of things.

So that’s one solution that I’ve used in the field to quite a level of success, that also allows you to manage by exception instead of having to look at every single line item of everything that comes in. What systems now allow you to do, is start managing by exception. Let’s look at the items, the cost items that have the biggest blowout in our forecast or have the worst performance and productivity or gain, loss. And then you can take those high impact ones and then start going down the list of the ones that are on budget or just under budget and look at how things can improve from there.

 

Fiona MacTavish:

Great. Evan or Oliver?

 

Evan Hughes:

Well, it’s a little bit controversial because not only is InEight sponsoring this but also, I think in the industry, there’s a lot of arguments about whether you should use Excel to manage costs. I think you’re right Matthew, I think invariably, it becomes the default application. I’m a big fan of it, in terms of the fact that I’ve developed various different systems within it and I think it has improved over time. Certainly the integration with things like SharePoint to centralize a lot of the data that can often be in the wild, if it’s just spreadsheets being emailed all over the place. I think it’s a bit of a tension there because if you do have a tool that’s used, that’s Excel, then often people can break it, they can actually go in and add bits to it and all the rest.

And particularly, if you’ve used things like VBA to do algorithms in the background that pull data in and pushed data out, it’s very easy to break and I think a lot of people just don’t want to use it on that basis. But I think there’s that tension between customization that you can get with Excel and some of the additional features that you have within Excel that help you along your daily life as a cost engineer. Things like the goal seek algorithm or being able to just pull a pivot table to do some analysis, it becomes really, really useful to be able to do that ad hoc. And if you want to prepare a report that goes to a client they want in a particular way, you can just build that from Excel and it’s harder to do that with proprietary systems, but you then inherit this other problem, which is that you got to make sure that the forms actually add up.

So something like InEight, I’m sure you guys at InEight, you are constantly aware of the implications of every calculation that takes place. If you let a not a very experienced user use Excel, then it might well be the case that maybe they break the formula and it doesn’t actually add up and therefore the quality of your data becomes important. So I think it’s a really interesting tension. I think that we need to up-skill people if they aren’t using it correctly and also develop spreadsheets that put in controls, for example, block things down with protection, passwords and stuff, to force that sort of control but then also, do some integrity checks of your data. So what often will calculate the data in multiple ways and by doing that and comparing the ways we’re calculating that data, we can then see if there is a break in the actual thing. So I think it’s just about putting some safeguards in if you are going to use Excel.

 

Oliver Greenwood:  

I think, I’ll just add to that. I think I’ll use a real-world example. So over the past four years we’ve been implementing various software on a major government project and it’s sometimes easy to say, there is a software that you can just pick off a shelf and implement. But I think what you underestimate all the time, it’s not just plug and play, there’s a lot of work that it takes to implement software sustainably that’s going to last and actually be fit for purpose. I’ve seen it in organizations, where you’ve got to do it in a very methodical way, there’s never just one option or one solution. We all work in organizations or support organizations that might have software they’ve had in the business for a long time and there’s a financial impact of implementing the new software. There’s also cultural change, changing people to move from the software, it’s very difficult. It’s very challenging to do.

So sometimes, rather than just jumping straight to the software, in a lot of places, it’s to take a bit of a rain check and understand what software you’ve got at the moment, what your systems architecture looks like. And it might not be an option to plug in a new software and there probably isn’t in all our organizations I’ve worked in, an opportunity to remove redundancy, increase the efficiency of what you’ve got there, as well. So software is great and I love software and there’s a lot of good software out there and InEight, I’ve used and it’s great, it’s good software. But I really think it’s also important as an organization, to understand where you’re currently at, where your people are at, at the current moment. How much training do you need to do to get those people to where they need to be to operate the software? How would you process it? Is the process working, that you’ve got at the moment, is it fit for purpose?

And then how, from proprietary software, can we maybe incorporate that to streamline certain things? But there’s a full timeline and from the project director who is on the line as well, it’s really about having that conversation at the top of an organization, to appreciate that journey’s required. You can’t just go out and have a solution and it works tomorrow. There’s got to be an appreciation, there’s a journey to go on to get to where you need to get to and it’s important sometimes, to take small steps along the way to get to where you need to be. Because I’ve seen in the past, if you jump to a solution, it can often fail without that progressive change management and manage that through the whole organization, as well.

 

Matthew Macaras:

I think you just hit on the key piece with software. Software implementation Oliver, is change management. Actually implementing software is easy, turning it on, configuring it, whatever it is, that’s easy. But it’s the training of the people in the organization. It is getting them up to speed, as to how the business processes work within the software. Maybe changing the business processes to meet the software, whatever those things are, it’s that change management piece that takes time. And it’s one of the largest issues that we face and that our customers face, is how do they manage that change? From small teams, it’s quite easy to do but the larger the project, the larger the organization, that change management just kind of grows with it. And so what we say is and what we recommend when organizations are implementing new software, is as you said, take baby steps.

Let’s say you need document control and you need cost control. “Well, what’s the one you need first? Let’s get that one. Maybe it’s document control, so let’s implement document control and make sure that’s working for the organization first. Then let’s take that next step and bring in cost control and then maybe the next step is, as a new field capture solution or whatever it may be.” But take those steps instead of going for that big bang approach because a lot of time that big bang approach, it just overwhelms the organization, it overwhelms the users and then the implementation does fall down because people just are not able to process or willing to process that amount of change.

But software I guess, also brings additional efficiencies as you mentioned Oliver and Evan, just as you did, as well. Is being able to have connected information. So instead of having those multiple spreadsheets, if you start going for a platform approach, being able to input information once and have that appear somewhere else, even if you’re going for multiple point solutions, if you’re spending the time and effort to integrate those, it’s the same thing. I’ll enter information in system A and have that available in system B. Disconnected point solutions is really not a whole lot better than having different Excel spreadsheets because you’re still creating silos. And where we’re seeing industry trend towards software, is that platform approach, the breaking down of those silos, so that you’ve got that single source of truth and information and you’re able to leverage everything. You’re just looking at the same data, depending your role, through a different lens or a different view.

 

Fiona MacTavish:

Great, thank you. Next question from our audience from Bruce Apen and I’m unsure if this is directed to InEight, but I’ll ask it more broadly about, what can you do if the project team is not meeting the project’s objectives and the project is running behind schedule and over budget? The question specifically asks, what can your service provide, which I think might be directed at InEight, if the project team is not meeting its objectives and the project is running behind schedule and over budget? So I think we might approach this question more broadly of, what can we do if that’s happening in your project?

 

Matthew Macaras:

It’s a really good question and honestly, it all revolves around visibility. So capturing the data on the project and looking at what it’s telling you, taking that cold eyes view and looking at, what’s the data telling you, where the problems are? Not going just with your gut feel but if the data’s telling you, “Okay it’s this area of the project or it’s this particular discipline or it has to do with productivity or it has to do with procurement.” Really, to be able to resolve those issues, you need to get to the root cause of them.

And the way to get to that root cause is through capturing of data and analyzing that data through the likes of Power BI, Tableau, even just capturing it and running pivot tables and that kind of stuff in Excel, as you mentioned Evan. But you need to understand the root cause of why those things aren’t happening, before you can then start to brainstorm a workshop. How do we improve those? Maybe it’s a personnel change, maybe it’s a methodology change, in terms of the construction methodology, whatever it is but you need to look at the data, to look at that to understand that root cause first.

 

Fiona MacTavish:

Oliver or Evan, any other comments on that?

 

Oliver Greenwood: 

I think it’s an all too common problem that a lot of us face as project professionals. I think we probably could speak for most people who’ve been on a project that ends up behind program and over budget. If you look at the statistics, it’s not uncommon. I think as project professionals, a lot of the time we do suffer from optimism bias. We installed five piles last week but we’ve got to install 15 to deliver the program. We’re very optimistic that next week that we’ll do 15. So I think in order to overcome that, there’s obviously difficult conversations that got to be had but from in this realm, what we’re talking about here, rather than going down a rabbit hole of psychology and everything else here. But it’s really using, to Matthew’s point, data to understand. Let’s take the gut feel, “This is what happened on the last job.” All that stuff is important and that’s professional, that’s what you bring to the table.

But in this process really and when we talk about this, really using the data to understand wrong as well, feed in more qualitative data but it’s really understanding the data because that’s a good way to help predict where the project’s going to end up. So you’ve got to have that difficult conversation and sometimes it’s not always easy to just going to get the some data. By the time it gets to certain people, it’s been manipulated that many times, by the time it gets up to the decision maker, it’s actually not reflective of what’s going on out at the site. So it’s got to have that robust conversation. I think you’ve got to instill as much as you can, the culture of sometimes things go wrong or not to plan, on a project but allowing people to actually have that conversation and bring that bad news and it’s not always a bad thing to bring bad news because without that news, people can’t make decisions.

So I think the data and all the stuff we’ve discussed before, at the start of a project, should help you in that project, that if it does go off piece or behind budget or behind program, you’ve got that information coming in that’ll allow you to make those decisions. But I think Bruce, to your question, it’s an all too common thing and there’s no silver bullet to that. It’s very much on a project by project basis. But understanding where you’re at, using data, having that difficult conversation and making sure you remove as much optimism bias as possible.

 

Matthew Macaras:

One of the things that I heard before is, it’s becoming a data-driven organization and that really will drive your decisions. That allows you to be proactive in your management. You start seeing that you’re straying a little bit to the left or to the right. If you’re a data-driven organization, you see that early and you can course correct before you become way off one direction or another. You might wiggle a little bit but you’re not having those wide swings and that’s what looking at that data and becoming a data-driven organization lets you do.

 

Oliver Greenwood:

Evan, do you want to add to that?

 

Evan Hughes:

Yeah, really it is wrapping up what everyone’s really saying, which is, I think that projects that succeed, along the way, certain decisions are made, normally by senior management, strategic decisions which have a tangible outcome on what happens. So if you’re work in the rail sector and there’s issues let’s say, with design or with preparation, you sometimes have to make a call, do you cancel the ACO, right? Or do you go for the ACO, you run the risk of going for the ACO and not being ready, you’ve got real problems. You never want to overrun a ACO. So therefore, you’ve got to make a decision. And I think what works well, is when the team is reactive to be able to, as you say, provide that information but also in cost control, we’re effectively building a cost model and with a schedule we’re effectively building a logistics plan of what potentially, will happen one day in, as we carry on this trajectory.

And I think we need to be able to adapt and say, “Okay, here you go project director, here are your two options for which way to go in this particular strategic decision and here’s the data to back those up.” And they can weigh up that information and then make a good decision on it. And I’ve seen some really, really good project directors make some really quite difficult decisions and sometimes, they’ll just pull the pin, “We’re not doing the ACO. I’m not comfortable.” And I think sometimes that’s the best decision because they’re mitigating risk. But our job is really to provide that really, really robust set of data to help them make that strategic decision.

 

Fiona MacTavish: 

Great, thank you. We’ve got a couple more questions and we’re very rapidly running out of time so we might try and get through these quickly. Question from Dean Brooks. How do you control spending at site level? We’ve talked a little bit about sites. I’ll invite any of the panelists to pop in, maybe give a quick answer and we’ll move to the next question.

 

Matthew Macaras:

I guess my default would be, delegations of authority. Set your delegations of authority to the appropriate levels based on the position. Now a superintendent may have the authority to go out and buy and approve a certain amount of small tools. A contract manager may be able to approve a contract and approve the spending for whatever the limit may be. But set your levels of authority to what makes sense for the project and the program and the organization.

 

Fiona MacTavish:

Great. Evan or Oliver?

 

Evan Hughes:

Just one point. Quick one around what they call in-code contingency, sometimes in our industry. This is when you have your strategic contingency budget that exists on a risk register and that’s to deal with big problems. What I’ve seen in the past is site level forecasts, pack their forecasts sometimes with what they call in-code contingency. And I think getting a handle of what actually is in the forecast, and this goes back to Oliver’s point, about how sometimes it’s quite hard to get that data. How much has that person who’s prepared that forecast, built in their own contingency to cover them for their own potential problems down the line? I think an organization needs to get a handle of that, so that they can then understand what that means. Because if you’ve not got control of that, you run the risk of it being spent or not managed properly and therefore, you can overrun on your costs on site.

 

Fiona MacTavish: 

Great, thank you. Next question from Mel Mark. How has cost control changed, if it has, during and post COVID? How has the COVID pandemic affected cost control practices? Who’d like to take a stab at that one?

 

Evan Hughes: 

I can jump in quickly because I think it’s something that’s maybe even changed more recently than after COVID and maybe this isn’t exactly what the questioner wanted. But I wanted to talk to this forum around some of the new developments around the large language models and how they have been introduced into probably everything but specifically, how that relates to what we are doing. I think we’ve started to use ChatGPT a little bit and I would encourage anybody who’s not seen it, to have a go with it. I’d start with a bit of a caveat there though. We deal with important financial sets of sensitive data, so I would never propose to use it, to be very careful really and not input that data into ChatGPT. But where I’ve seen a real change in the last probably, well maybe three months, is the use of that in helping us develop some of the tools that we have inside our industry.

And in particular, it can basically program for you, normally, fairly simple functions but it can really boost the productivity on the development side. And that’s true of things like Power BI, if you’re using DAX to do various different functions within Power BI, Excel, VBA, Excel Formula, like we’ve talked about already or even basically, any programming language. And I think what it does is, convert a junior programmer into someone with a lot more capability and anyone who’s reasonably good at programming, they can actually then increase their productivity, as well. So I think that’s a real change and it’s a real exciting change for the industry. I think I have to caveat that again by saying, that it does do its thing as they call in the pilots, hallucinate, it comes up with crazy ideas and it gives you code that just doesn’t work.

But I would suggest that whatever you use it for, you understand what the code is. But I think it’s quite an exciting change and I think probably it’s going to have impacts in other areas, for example, how we ask questions in reports particularly, and this is maybe more Oliver’s sort of domain, run the commercial side. I think it’s ability to read a contract and then answer questions that you would post to it when you’re thinking about the contract, might also be another application. So it’s an exciting change and I think it’s changing probably weekly, at the moment. So yeah, that’s what I’d say has changed recently.

 

Oliver Greenwood:  

I think to go to the COVID one, which I think we’re probably all trying to forget about a little bit. But I think a real benefit that’s come out of COVID, to be honest with you, if there is any. What a real world example is, I remember before COVID, on a monthly basis, we used to all be in a room, project directors during the monthly cost reviews in a meeting or going into the city and sitting there for a day, people coming in and out. Especially for maybe the people, who’ve been in the industry for quite some time, they’re being forced to come on online like this.

And what we’ve seen in the organization I’m working for at the moment is actually, that is a much more efficient way of doing it. It’s so much more efficient. We’re able to get through the same amount, in half the time. It took a lot of work to get it to where it needs to be, in terms of having the formatting, people understanding how we’re going to work through the reports in a virtual environment. But that’s something that, at the organization at the moment, I think is a real world example of where there’s been a real positive to come out of COVID, I think.

 

Matthew Macaras:   

Yeah. Sorry, Oliver. Yeah, I’d agree with that too. I think it’s become decentralized through an increased use of technology. And what that has done is, that has transformed the discussion from provide me your updates, to these are the outcomes of those updates, what do we need to do going forward? That was starting to happen pre-COVID, but I think COVID increased the use of technology and the adoption of technology that has allowed us to transform that discussion from, “Okay everyone get in a room, give me your updates.” To, “All right, here are all the updates, what are we going to do to make the decision? What decisions are we going to make to improve the project going forward?”

 

Oliver Greenwood:

Yeah.

 

Fiona MacTavish: 

Great. We’ve got time for one last question. We’ve already spoken about a number of ways to control costs, including delegations being one of them. Interested if each of you could provide another way to control costs, that are in the realm, that a project manager could use to control costs? So apart from delegations, is there any advice for a project manager and what else they can do to control costs? Just quickly, maybe 30 seconds from each of you.

 

Oliver Greenwood: 

Yeah, I can jump in first on that one. Well, first from a project manage perspective, when you say control costs, I think you need to understand it might be that you actually plan to and you need to spend that money. So I think it’s actually understanding when and where you’re going to spend the money and how that compares to what we talked about. All right, to start, you’re baselining and your budget. So I think as a project manager 101, understand your budget, understand when you need to spend your budget and quickly identify where you’re spending more or less on that and identify why are you doing that? And then take the course of action. It might that you need to spend money now because it’s going to save money later, there’s all sorts of things. But I think, understand your budget is your starting point and go from there. That’s my 30 seconds to any project manager.

 

Evan Hughes:

Can I just jump in there? I think we talked a lot about dollars here and the cost and the forecast. Sometimes I’ve seen great effect in particular, on construction projects, just zooming in one layer below that and just looking at straight productivity. For example, if you need to get a certain number of piles done per day to meet that budget, then if you’re not making that many piles per day, then you’re not meeting the budget. So I think having a trend of key metrics, independent of costs, can be a really useful way of zooming in further and saying, “Okay, how are we going to get our productivity up? What was yesterday? What can we do today? And what ways can we increase that productivity?” That then, will translate invariably to a cost saving. And some project reports I see, we do all the project stuff and then now I want to see my metrics. “How many meters of pipe are we getting in per day? Why didn’t we get in as many yesterday as we did the day before?” Those kind of questions really translate to real cost savings.

 

Matthew Macaras:

Yep, I would agree. It’s analyzing your budget, doing that financial plan and then diving into the areas that for some reason, you’re spending too much or you’re spending too quickly and getting to the root cause of it. And once you understand that root cause, you can then say, “Maybe it’s productivity, maybe the supply cost is too high? So do I need to look at other vendors?” Whatever it may be, so it’s the financial planning, setting those goals and then really looking at the details and diving into the areas that are over budget.

 

Fiona MacTavish:

Great, thank you. Well unfortunately, we’ve run out of time today. We had a few more questions but unfortunately, we’ve not been able to get to them. I just wanted to thank everyone for coming along today and especially our panelists and a big special thank you to InEight for sponsoring. Without sponsorship of these sessions, these could not be put on, so thank you very much InEight. We do appreciate your sponsorship very much. There is a survey that’ll be coming up in the chat link. So please, if you wouldn’t mind providing feedback on today’s session, we’d really appreciate it so we can improve and get some ideas for other sessions. Please connect with us on LinkedIn, if you would like to, you can find us there.

Also, there are many upcoming events. Just wanted to let you know about, there’s, Maximizing your project’s potential with generative AI, on the 9th of May between 12:00 and 1:00. We’ve got AIPM on demand, which is a recording of previous sessions. Please go and have a look at those for the members. We’ve got a South Australian event, the River Murray Flood Project Management, we’ve got Victorian event, The Fourth Bin, from opportunity to Reality and New South Wales is having a hybrid event on Cyber security fundamentals for project management, that’s coming up in May.

And again, concluding today’s webinar. Thank you so much for attending, very much, as I’ve said, Matthew, Oliver, and Evan, for providing their expertise in this area. And again, big thank you to InEight. And there will be three CPD points awarded for attending today for all those members. And of course, sorry, I haven’t mentioned the AIPM staff who are always here to make sure things run smoothly and to helping the speakers and the facilitators to make sure the event technically runs to time. Very much appreciate your support, even though we don’t get to see your lovely faces on screen. Thank you so much. Have a great rest of the day everyone, and I look forward to seeing you all soon. Thank you very much.