Management

Fundamentals of Project Management

Introduction

This report is based on fundamentals of project management and has divided into two sections. First section has supported to describe the case study of Katanga Bay and has supported towards offering the project management consultancy report. This section is structured based and has discussed the series of sections based on the Katanga Bay NGL.

For this purpose, researcher has discussed the project business case while giving concern towards risk assessments. In like manner, project plan has applied on the basis of Gantt chart. Additionally, resource histogram and human resources budget has supported to give in-depth knowledge regarding the case. At the same time, other section has supported to explain the reflective report. In this section, researcher has critically analyze the key differences between the traditional CPA-based project management approach which has adopted in the Katanga Bay NGL case scenario and the critical chain approach to project management. Moreover, the major advantages and disadvantages of each approach are discussed in this report while focusing towards different project environments.

This report is based on secondary data analysis and has supported to explain the case on the basis of various past findings. Researcher has referenced the research topic on the basis of various past findings and has critically analyzed the study which has supported towards offering deep understanding regarding the research topic (Kerzner, 2013). Moreover, to increase the reliability of the study, researcher has only included the reliable data sources.

Section A: Katanga Bay case study

Background of the Case Study

Katanga Bay is an undeveloped small port of an African country. So, this site has selected for Natural Gas Liquids (NGL) for the new process plant for offshore production platforms (Larson and Gray, 2013). The Government of Africa was not expertise to build and operate the plant. Government has the vision of creating the long term sustainable plant while utilizing foreign know-how and capital. At the same time, government wanted to concentrate over the long term benefits for their own citizens. According to this case, when the opportunity was publicized then the government has invited all the interested parties to visit and assess the opportunity for the purpose of developing the necessary infrastructure at the site. So, after negotiations the exclusive rights to the Katanga Bay project were secured by Nevada Petroleum Inc (NPI) which was an American oil company. It has paid the government a one-off fee, i.e. US$10m for the purpose of site development license. In this project, the overall work scope has included construction of processing plant, roads as well as port improvements to accommodate deep water freight vessels. Additionally government has demanded the special tax representing 25% of the annual operating profits which was generated by the plant when the site commenced production (Mir and Pinnington, 2014). NPI has shown agreement to pay this tax, however it has put the terms in the written format that the license agreement would only be payable after the recoup of all license, capital and operating costs so it would be only payable in the situation of project surplus.

Project Business Case

NPI economists have carried out intensive analysis during the time of license negotiations. Under the analysis, it is identified that the Katanga Bay plant was designed to produce the total capacity of approximately 600 tonnes per day through using a single process module. Moreover, it was expected that the plant production will take place 250 days per year and the remaining days will be utilized to design the format of planned maintenance, repairs and upgrades (Heldman, 2015). In like manner, the anticipated operational life of the plant would be five years before the Government assumed ownership. It was estimated that allover infrastructure design, construction and commissioning work prior to production start will take not more than 12 months and it is expected that NPI will achieve a (profit) of at least $740 per tonne. Economists have analyzed that the overall construction cost of the project should not be more than $160m additionally 10% for contingency (Hwang and Ng, 2013). Moreover, the evaluated overall total operating cost of all the facilities, once commissioned, was to be $15.5m per year for the purpose of five life of the plant and the marine transportation costs were expected to approx. $2.25m per year during the production stage of the plant.

After this suitable tender process, NPI has received five major contracts:

Contract KB1 – This contract was of the sum amount of $4m and it has flexible provision for up to another $1m for the supplementary design work.

Contract KB2 – In this, construction and commissioning has done in three parts.  All the three elements were awarded to MacKenzie Engineering & Construction (MEC). It was the largest engineering and construction companies in the region. The KB2 contracts were:

NGL Plant construction – Fixed cost contract was $48m

Ethylene Cracker construction – Fixed cost contract was $30m

Commissioning (for NGL Plant and Ethylene Cracker) –Not more than $0.5m

Contract KB3 – This contract was given for port development of the marine terminal at Katanga Bay and it was awarded to KPP Marine Construction SA and the cost of the contract was $25m.

Contract KB4 – This contract was given for the development of social infrastructure such as housing, schools, medical centre etc. and it was awarded to Okavo Building Co. The cost of the contract was approx. $20m.

Contract KB5 – This tender was to develop the Road network and it was also awarded to Okavo Building Co. in $12m.

KB4 and KB5 were finalized in the local currency, i.e. kwagga (kw) when the exchange rate was 14.4 kw = $1.00.

NPI Project Team

It is identified that NPI has appointed two key staff for this project. One was Joe Beane, who was experienced American engineer and had agreed to offer his services for 12 months as the project construction stage was going to last for 12 months. The other was Jan de Vries, who was an experienced South African operations manager and was hired in Katanga Bay as a permanent operations manager to manage the entire complex situations. During the construction of the site, de Vries needed to report to Beane until the plant was constructed, commissioned and declared operational. After that he got the take over and after that he needed to manage all the operational process. The major team members of this project are contract manager, finance manager, planning manager, QA manager, commissioning manager and deputy project manager. All these managers report under Joe Beane (Riol and Thuillier, 2015).

Project Planning and Cost

This project plan was developed by the senior staff from MEC, Beane and Larmer. It has designed to support the development of a high level project in seven stages.

Risk Assessments

Sr. No.Description of Risk & ImpactRisk OwnerProbability ScoreImpact ScoreComposite IndexMitigation StrategyContingency Actions
1According to the project schedule a small amount of developing road network around the area will going to be undertaken until April. During this time span, the Katanga Bay project site will not become really busy with construction work. However, after April MEC will start work on the NGL plant and Ethylene Cracker. By this time, KPP will also work over the development of the port. Due to this reason, the resources will not be utilized in an adequate manner as before April it will remain less busy but after April it will become more busy which can affect the productivity of the project.Project Manager5420There is a need of scheduling the project in a manner so that overall project move in a smooth manner where it does not remain less or excess busy at any point of time.There is a need of involving all 12 team members and to schedule the project while giving concern towards all the five main contracts.
2It is identified that during April and June, the weather remains reasonably good so the project contractors can make good progress, although there is a strong rumors that on this time span the project will experience serious difficulties.  So, MEC will face the challenge towards ground and civil works for the Ethylene Cracker. Due to this reason, there is a risk of delay in the completion of the task assigned to MEC.Commissioning Manager & Contract Manager4312There is a need of forecasting the weather as well as employ the techniques to control the challenges that can take place due to climatic changeManager should use effective system to forecast the weather while taking the assistance from the weather forecaster
3It is anticipated that MEC will show poor performance towards the progress on the Ethylene CrackerProject Manager & Contract Manager4416There is a need of meetingProject Manager needs to consider all tactical options to accelerate the progress  on the Ethylene Cracker
4It is anticipated that there is a risk of increase in the global price of NGL which can create the risk towards overall project.Finance Manager & Planning Manager4520There is a need of accomplishing the project on scheduled time and start productionFinance manager needs to check the expenditure of every task as well as planning manager needs to check that each and every action should be accomplished according to the plan
5There may be risk related to the quality parameters (Svejvig and Andersen, 2015)QA Manager4416QA manger needs to review the quality check time to timeManager needs to check the raw material as well as the process used by the labours to assure the quality
6There is a risk of attrition of the projectteam membersProject Manager155Project manager needs to handle the team members in an adequate mannerThere is a need of creating healthy relationship with the team members so that they can discuss their issues as well as there is a need of encouraging and appraising the employees for their performance
7Delay in a single activity can create delay for the overall project and will create risk towards the accomplishment of the project4520There is a need of accomplishing each and every activity on timeWhile planning the project, there is a need of including effective acceleration options to save on original estimation
8It is a big project, so there is a chances of conflicts between the team members which can create the risk towards the accomplishment of the project on timeProject Manager5315There is a need of creating healthy relationship between the team membersTeam members will need to use negotiation strategy during the situation of conflict

From the above table, it can be identified that there are different types of risk involved towards the accomplishment of the project. So, there is a need of focusing over the risk before starting the project as these risks can hinder the project performance. From the above table, it can be understood that the major risk is related towards scheduling the effective project plan so that the site will never remain too busy or idle. Moreover, there is a risk of delay in a single activity can create delay for the overall project, which can create the risk towards the accomplishment of the overall project on time (Svejvig and Andersen, 2015). So, there is a need of proper planning the project while including few extra days so that if any uncertain issues take place then also the assign work will accomplish on time by utilizing effective acceleration options to save on original estimation. Accept this, there is risk identified related to weather, poor performance, increase in price, quality, attrition rate and conflicts between the team members (Todorović, et al., 2015). In this context, this risk register will remain highly assistive to identify the composite index, mitigation strategy and contingency actions which will support towards doing pre-planning to overcome from various risk and challenges that NPI is going to face with a project of this nature.

Project Plan (Gantt chart)

Above Gantt chart has supported to understand the seven stages of commissioning stage on the basis of a professional standard. From this Gantt chart, it can be analyzed that this project will start on Monday 8/1/18 and will accomplish on 16/2/18.

Resource Histogram

From the above case, it is identified that the overall organizational tasks have divided into seven tasks under the Commissioning stage. According to this, it can be identified that following stages were accomplished under the commissioning stage:

  • NGL Process system
  • NGL Control system
  • NGL Fire safety system
  • Cracker Process system
  • Cracker Control system
  • Cracker Fire safety system
  • Commissioning entire plant

From the above table, it can be understood that NGL control system and cracker process system were the first activity which were remained continued for 2w and 3w. After that NGL fire safety system and cracker control system has taken place which was accomplished within 1w. Then commissioning entire plant has taken place under CM3 and CM4. After that cracker fire safety system has taken place which last for 1w and then again commissioning entire plant task has taken place. To accomplish the every stage of commissioning, Commissioning Engineers required (Pemsel and Wiewiora, 2013). The maximum number of employees required for the accomplishment of every stage on week by week basis is represented by the histogram.

From the above mentioned graph, it can be understood that the overall process was accomplished in 3 weeks. At the same time, 39 commissioning engineers required in the first week, 17 are required in the second week and 11 are required in the third week.

Human Resources Budget

Under the contract strategy, Beane has designed small project management team at Katanga Bay. This team was limited to six managers who directly report to him. The detail of these managers is as follow:

Below mentioned chart will support to understand the hierarchical order of the human resource:

The remuneration of business expenses over the human resource of per month is as follow:

Job PositionRemuneration per month (in $)Business expenses per month (in $)
Project Manager10,0001,500
All other managers7,0001,000
Assistant managers4,000500
Project co-ordinators2,500500

Sr. No.Job DesignationEmployeesRemuneration per month (in $)Business expenses per month (in $)
1Contracts managerJerry Weinberg70001000
2Finance managerBarbara Welsh70001000
3Planning managerTom Larmer70001000
4QA managerGeorge Muller70001000
5Commissioning managerPete Patten70001000
6Deputy Project ManagerJan de Vries70001000
7Assistant ManagerFirst Assistant4000500
8Assistant ManagerSecond Assistant4000500
9Assistant ManagerThird Assistant4000500
10Contract EngineerJoe Beane100001500
11Project Co-OrdinatorsFirst Project Coordinator2500500
12Project Co-OrdinatorsSecond Project Coordinator2500500
Total12 Team Members 6900010000

From the above table, it can be understood that this project has the team the entire project team was of twelve members. In which there is 1 project manager, 3 assistant managers, 6 managers and 2 project coordinators. At the same time, total remuneration per month for these 12 team members was 69,000$ and business expenses per month was 10,000 $.

At the same time, it was identified that there are housing costs and flight costs is also involved. The expenses of this amount differ from single status to accompanied status (Hornstein, 2015). However, other team members had chosen single status. The expenses of single and accompanied status are as follow:

Expat expenses Accommodation per month (in $)Flights each trip home(in $)
Single status2,5002,000
Accompanied status4,0007,500

Sr. No.Job DesignationEmployeesSingle Status/Accompanied StatusAccommodation per month (in $)Flights each trip home(in $)
1Contracts managerJerry WeinbergSingle status25002000
2Finance managerBarbara WelshAccompanied status40007500
3Planning managerTom LarmerSingle status25002000
4QA managerGeorge MullerSingle status25002000
5Commissioning managerPete PattenSingle status25002000
6Deputy Project ManagerJan de VriesSingle status25002000
7Assistant ManagerFirst AssistantSingle status25002000
8Assistant ManagerSecond AssistantSingle status25002000
9Assistant ManagerThird AssistantSingle status25002000
10Contract EngineerJoe BeaneAccompanied status40007500
11Project Co-OrdinatorsFirst Project Co-OrdinatorsSingle status25002000
12Project Co-OrdinatorsSecond Project Co-OrdinatorsSingle status25002000
Total3300035000

From the above table, it can be evaluated that the total expenditure of the accommodation per month was 33000$ and the expenditure of the flights per trip was 35000$.

Earned Value Analysis

Above Gantt chart has supported to analyze the progress of the overall project. At end of June 2018, 25 weeks will be completed of the project. After this time span, sweetening system as well as system testing have taken place. Sweetening system has taken the time span of 7 weeks, whereas system testing has taken the time span of 3 weeks. From the above Gantt chart, it can be identified that the project will start on 8/1/18 and will accomplish on 27/7/18. So, the project will remain for 201 days. Till the end of June the project will run for 174 days. Additionally, this Gantt chart has supported to identify that overall project will remain for approx. 28 weeks and the working days will be 150 days.

Above table has supported to analyze the budget of different activity of the project.

According to Ahern, Leavy and Byrne (2014), EVA will be evaluated by multiplying the total project budget by the % complete of the project. So, according to EVA, the final costs of the project till the end June is below calculated:

EVA = Budget total for project * Percentage completed of the Project

Katanga BayActual expenditure to date ($m)Budget total for project ($m)Percent of Complete projectEVA
Design work4.251.190476195.952381
NGL plant22.1502.262443439113.1222
Ethylene cracker16603.75225
Port development14.7251.70068027242.51701
Social infrastructure6.6203.0303030360.60606
Road network5.7122.10526315825.26316
Commissioning00.5

From the above table, it can be understood that social infrastructure according to EVA the overall actual % progress of ethylene cracker will be highest till the end of the June. However, the overall actual % progress of NG plant will remain second. At the same time, after that social infrastructure will show the progress additionally, port development, road network and design work will take place (Bresnen, 2016). However, commissioning will not show any progress, till this time span. EVA has supported to offer clear and concise explanation of the analysis

Acceleration options

Process of Ethylene Cracker Plant

Network Diagram

Above network diagram has supported to analyze the process of ethylene cracker plant in an effective manner. It has supported to analyze the predecessors in an effective manner.

Acceleration Options

From the analysis of network diagram and financial implications all the acceleration options are evaluated. This evaluation has supported to interpret that which option should be adopted and which should be avoided (Beringer, Jonas and Kock, 2013). According to Klute, implementation of the options will create the chances of amendments in contract of NPI in the context of MEC and NPI would need to pay for all the extra costs. During the analysis, it is identified that it including subcontract plumbing, cabling and electrical services for the office accommodation can be eliminated as this acceleration option will increase the extra total cost of 100000$ and will support to save only 2 weeks on original estimation. However in the contrast, commence work on chilling system before completion of electrical systems will support to save 3 weeks on original estimation and will also charge less, i.e. 50000$. So, adopting this option will remain more beneficial. Moreover, revise specification of the Fractionation system to simplify the design and accelerate production will although charge extra total cost of 175000$ but at the same time, it will support to save 1 month on original estimation (Martinsuo, 2013). At the same time, recruiting two additional engineers for the system testing work will only support to save 1 week on original estimation however, charge extra total cost of 50000$ so option should be eliminated. Instead of this, selecting the option of additional labor/subcontractors for the sweetening system will remain adequate as it will enable to save 3 weeks on original estimation while charging extra total cost of 80000$.

Section B: Reflective Essay

The project management in current business environment is facing tremendous growth in the field of management to implement unique ideas in the conceptual framework for maximizing the profit margin. There are two approaches for project management such as critical path based approach (CPA) and critical chain approach, which are used by project manager to accomplish the work on time. It has been evaluated by me that the traditional CPA based project management approach is adopted in the Katanga Bay NGL case scenario because it is based on the simple ideas and formulation of steps. The CPA is an effective technique, which follows step by step process of the project management in order to accomplish planning. It helps in representing different activities in a diagram or flowchart that supports in establishing the relationship with other activities in the particular project. The network diagram helps in demonstrating the connection with the preceding activity and the start and finish point is a path and the longest path determines the critical path of the project.

The completion date of the project is calculated with the assistance of critical path, which shows the earliest date for completing the work on time without optimum utilization of available resources. At the same time, delay in a particular task will affect the project because it increases the total days for completing the work on time. It was noticed that there are various advantages of critical path method, which can be used by the project manager for maximizing the profit margin. The critical path method encourages in mangers in ascertaining effective planning, scheduling, controlling and measuring the effectiveness of different tasks. The long range, detail planning, in-depth overview, evaluation etc is done with the help of critical path approach. But, at the same time, it was observed by me that there are various limitations associated with critical path method that creates problems for the manager to accomplish the work on time. The critical path method assumes that there will be a particular time frame, when the activity in the project will occur but in real scenario it does not take place at a predetermined time framework. It is because there is no statistical analysis for estimation the time. Moreover, the critical path method cannot be used for controlling the activities under the dynamic business environment. In addition, the availability of resources and the time for using those resources are not assessed properly under this project management technique.

On the other hand, it was acknowledged by me that critical chain approach will be more effective for the project manager to accomplish the work under the predetermined time frame. It is because this approach will deal with the problems in a critical manner. The critical chain is a project management technique that will support the manager in planning and managing various activities through people, equipment, physical space etc. The resources will be required by the project manager for executing the project task on time for increasing the profit margin. The critical chain approach is associated with PERT algorithms and will assist in analyzing the risk in a significant manner. There is a rigid scheduling of the activities, which majorly emphasizes of task order and process.

At the same time, it was learned by me that critical chain will be helpful for Katanga Bay NGL case scenario. It is because the technique will support to identify and insertion of project buffer, feeding buffers and resource buffers. There will be large amount of safety measures undertaken in the critical chain approach. The safety time will be added to different tasks into the buffers for making the project successful in the coming scenario. There will be effective implementation of buffer management into the project for evaluating the effectiveness and performance of the project irrespective of earned value management. The earned value management will be not profitable for carrying out different activities of the project. It is because the earned value management technique will provide misleading results as it does not distinguish the progress of the project on the basis of constraints. But, at the same time, there will be numerous disadvantages of critical chain approach to the project management. The critical chain management requires the commitment level from the project team, project manager as well as project stakeholders for making the project successful and effective in the dynamic business environment. Thus, it was understood by me that it is essential for the project manager to evaluate the advantages and disadvantages of the project management techniques before executing it into real scenario on any project.

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