Change management is the backbone of project cost control. After all, if there was never any change or deviation from your original plan, and things went exactly as they should, there would be little need for project controls. Being that change will occur on each and every project, it is important a project team has all the necessary training and tools in place to identify, measure, and control the change. There is nothing more frustrating to a team, and a client, than an unorganized change management structure and process.
Defining & Identifying Change
Change Management can be defined as identifying and controlling any modification to an original scope of work and prime contract. This includes both cost and schedule. There are various forms of change, many of which impact both the cost and schedule. Such forms of change include but are not limited to:
- Change in execution strategy. This could be a transition from an EPCM to a LSTK, or even a change in subcontractors.
- Change in scope of work. Examples include the addition of a new piece of equipment, or an increase in quantities.
- A delay or suspension of work caused by a purchaser.
- Implementation of mitigation strategy defined by the project team.
There exist many forms of change, all of which are typically categorized into three defined types of change. It is important to recognize that there exist many names for the same type of change, but can vary depending on the company or industry. In addition, each type of change impacts one or more budget types including the original, current and forecast budgets. The following table represents the three common categories of change, the budgets they impact.
Understanding the various forms of change is one thing, but being able to identify changes throughout the project life cycle is another. During the project it is critical that communication between all departments remain active. Every member of a team is responsible for change management and the identification of changes. Consider the following example.
It has been determined that a new piece of equipment is required to complete a certain phase of a project that was not included in the original scope of work:
- Procurement team communicating the need to purchase the piece of equipment, and estimated purchase price including freight.
- Contracts team communicating a change to the subcontract in place required to install the piece of equipment.
- Engineering team communicating any design changes required to support the new equipment or modify the existing structure.
- Construction team communicating providing input as to any issues that may arise with installing the piece of equip and resulting cost. Construction is also actively engaged during the installation process, communicating any issues.
- All disciplines providing input as to any additional staffing resources required to support the efforts. This may include additional safety, quality, commissioning, or business services personnel.
It is the responsibility of the project controls team to make sure communication is active and information flow is not broken. This can be handled through such methods as having weekly change management meetings, a change management information system in place, or daily staff meetings.
The Change Management Process
Preparing for Change:
The initial phase of the change process includes establishing your strategy, preparing your change management team, putting into place your change management tools and generating your change management documents to be used. It is very important that all members of the project team understand the change management process, as well as the importance of each members contribution. Every person on the project is a part of the change management team!
Managing & Controlling Change:
Identifying change is only the first step in the change management process. Once you have captured the cost and schedule impact due to the resulting change, you must then track and manage it until completion. Telling your client the estimated price to implement the change is important, but keeping them informed of the actual cost is even more essential.
Things you can do to manage change effectively include:
- Assign each change a unique number that can be tracked against.
- Create and maintain a change management log and change management system that is updated and communicated routinely.
- Have any labor charges associated with the change be designated to the assigned number on timesheets
- Have any material or equipment purchased to support the change designated with the assigned number.
- Integrate your change management system with your cost and accounting systems.
- Assign one or more change management coordinators.
- Hold weekly change management meetings.
It is important that you continuously reconcile your change management log to your cost reports, contingency drawdown curves and any other supporting documents you maintain that may be impacted by changes.
This phase revolves around communicating the effectiveness of the change process you have in place. Throughout the project life cycle you may find it necessary to amend your procedures and adjust the process to better fit the project environment or client needs. Things you can do to reinforce change include:
- Provide detailed reports that compare your change estimates against your actual expenditures. This will allow your team to see if you are over or under estimating the impacts of change.
- Provide reports as to where the concentration of your change is occurring. It may be that the most change is in material quantities, which would allow your team to conduct more detailed reviews of required needs with engineering and procurement.
- Provide a change management summary report both weekly and monthly to your project leadership team for review. This will allow managers to make appropriate adjustments to strengthen the performance of their teams and manage the change accordingly.
All in all, the change management process is a simple concept, yet is often a point of concern on various projects. It is very easy for a rapidly changing project to overwhelm a project team. Often times a team becomes so engulfed with keeping the paperwork and approval process in line that they lack the analysis and path forward initiatives that help to reduce future change impacts. Make sure that you have an appropriate structure in place that is sound and tested well before you start.
Understand that changes will occur no matter what. Successfully managing and analyzing the change will ultimately help to prevent future impacts.