W21 – ABM – Best methods to communicate schedule information to Field Teams

Problem Definition

Whilst developing a schedule is critical for delivering projects on time, making sure people understand the schedule can be equally important.

To many programmes have been lost to the trash can due to complexity or poor presentation particularly when issued to field staff for implementation.

In this weeks blog, we will explore the various methods and tools available for presenting schedule information to field staff so they can clearly understand the work scope and planning aspects.

We will determine which are the best tools using an example construction project – SPJ jetty works (Container Berth Works) Which includes elements of unique sequence critical works as well as large sections of highly repetitious work activities.

Feasible Alternatives

We will consider the following options

1. Bar/Gantt Charts
2. Time Scaled Diagram
3. Velocity Chart / Line of Balance
4. Time – Location Diagrams

Development of the alternatives

1. Bar chart/ Gantt Chart

A Bar Chart or Gantt Chart does not show logic links, only the bars. This is often used to compare actual progress against a baseline and is often used for management reporting, in particular to compare planned starts and finishes vs actual start and finishes.

Figure 1 above is taken from the “master or construction programme” broken down to level 4. Typically, the construction team will break this down further and develop a level 5 or 6 working schedule referred to as a 3 or 2 week look ahead. The programme is normally developed using a bar chart format and will attempt to co ordinate the works at a site level. It provides site engineers and supervisors with the flexibility to make the necessary refinements to planning which may not have been possible to foresee by planners when developing the master or baseline programme. An example is provided under Figure 2 below.

1. Time Scaled Diagram

The diagram below indicates the same network but this time is presented in what is known as a Time Scaled Logic Diagram. Notice that the only change which has been made is to turn on the logic links. Otherwise, the durations, start and finish dates and critical path remain identical.

1. Velocity Diagram / Line of Balance

The concept of the Line of Balance (LOB) technique (also referred to as Velocity Diagram) is to have a greater understanding and control of production rates (outputs) between various trades such that resource levels can be balanced and wastage (such as „standing time‟ between trades) can be kept to a minimum.

It is also sometimes referred to as a „lean construction‟ technique and is useful when repetitive cycles of activities are required

Figure 4 below allows us to understand that the production rates relative to each other element or activity. It will also allow site teams to know exactly where they need to be by a certain date and get a better feel for which activities are achieving higher than planned production and potential delays if a mis balance in activity productions are left to run without action.

1. Time – Location Diagrams

The activities of a linear project are plotted on a grid where one axis is the time-scale and the other axis is the distance-scale and diagrams of the project (scans of maps, landscape cross-sections, etc.) are often included across the distance axis of the diagram to help orientate the reader to where physical attributes are located.

Figure 4 above provides similar information to the Velocity diagram however it allows the site teams to understand better the time (start and Finish) blocks which work must be completed as well as general rate of production. It summarises or rolls up multiple tasks

Selection Criteria

Each method shall be assessed based on the following

1. Ease of Interpretation
2. Definition of work scope at working level
3. Definition of Activity and resource relationships
4. Assessment of production targets / requirements

To help assess which method/s provide may be regarded as the most suitable for field staff to plan and execute works we will use the above criteria within a Non-compensatory decision model.

Comparison of Alternatives

Results are as follows

The time scaled chart fails to provide a clear and easily interpreted discerption of the works due to the presence of the

Time bar charts at either level 4 offer the site team the best opportunity to describe the works and short term working bar charts provide a format where adjustments and more tailored solutions can be made to reflect the field teams own sequence preferences.

Line of balance or velocity diagrams can be useful and easy to understand for understanding “where we need to be” by a certain date. Plotting the actual production and location data obviously gives field teams the ability to assess ongoing rates and predict delays or stoppages if crews are moving too fast or slow.

Selection of the preferred Alternative

Through the application of the Lexicograph analysis, the Gantt chart has been determined to be the best method of communicating schedule information to field teams.

Performance Monitoring

The use of the bar chart to provide supervisors and engineers with an full understanding of the programme drivers and constraints can be greatly enhanced when accompanied with a Line of balance diagram to show the inter relationships between crews and resources as well as providing a high level indication of what average productions rates are required.

Further assessment and understanding of Time location diagrams need to be carried out. Software programmes such as TILOS can bridge the gaps identifited above with resource planning, works sequence and activity definition however it remains to be seen if the clarity and presentation will allow for distribution to field staff for implementation.

References

1. Sullivan, G. W., Wicks, M. E., & Koelling, C. P.(2014). Engineering economy 16th Edition. Chapter 3 – DEcision making Considering Multiattributes., pp604-606.
2. Chapter  7.1 – Introduction to Managing Planning & Scheduling – Guild of project controls compendium and reference (CaR) | Project Controls – planning, scheduling, cost management and forensic analysis (Planning Planet).  Retrieved from http://www.planningplanet.com
3. TILOS, Schedule with confidence retrieved 20 December 2017 from  from https://www.tilos.org/sites/default/files/2017-04/022482-3430_TILOS_Bro_033016.pdf

W20.1 – Offshore Electrical Substation Planning – Part 1 WBS development

Problem Definition

Within the SPJ project, the offshore / Jetty scope requires construction of an electrical Substation comprising of a 2 storey building using precast concrete frame, masonry external and internal walls, various flooring and ceiling finishes, external handrail and escape ladders as well as usual building services (plumbing, electrical, HVAC, etc).

The current programme and budgets only consider this work package at a higher level (Level 2) and we now need to develop a detailed programme and verify budget adequacy as it is now expected that the work package will become time critical and possibly over budget.

To commence this “re-planning” exercise, we will first develop a suitable WBS. Substation Equipment will be ignored.

Feasible Alternatives

1. Non Standard WBS
2. Omniclass table 21
3. Omniclass table 22

Development of the Alternatives

1. Non Standard WBS

The  WBS is based on an Activity Breakdown Structure where the project phases are identified at 1st Level including Project Management / Engineering, procurement, Construction and Commissioning. Tasks and work packages are then defined under each Phase. For clarity, the WBS has been reduced to level 3 only.

2. Omniclass Tables

In developing options 2 and 3, it should be noted that the Omni class tables are not program work breakdown structures however at all levels, the element in the structures are candidates for WBS element descriptors, including work packages.

Table 21 – Elements

An Element fulfils a characteristic predominant function, either by itself, or in combination with other elements; Table 21 is organized by elements’ implied functions. Major elements may be composed of several sub-elements. For example, a shell enclosure might be composed of superstructure, exterior closure, and roofing.

Using table 21, the works would be described as follows

Note that breakdown does not consider the phases of a project such as design, project management, procurement, etc and only considers the work scope based on function. If we used table 21 as a reference for describing the physical works and introduced phases at level 2, the complete WBS look something like this;

Table 22 – Products

Using table 22 on the other hand (Work Results), the breakdown of phycial works would be as follows;

Again, table 22 does not consider the various phases of works but  represents a completed entity that exists after all required raw materials, human or machine effort, and processes have been provided to achieve a completed condition.

As such table 22 cannot be used in isolation and must be incorporated into the overall project structure as follows;

Selection Criteria

The following criteria will be used to assess the preferred WBS structure;

• Covers all aspects of the works to a suitable level of detail
• System or Product Orientated and supports a breakdown of work activities into a logical sequence or work flow
• Includes major procurement, project management and design phases
• Supports current project Code of Accounts structure which is split into 3 categories; 1. Building Structures 2. Building Archi works 3. Building MEP

Analysis of the Alternatives

Each WBS will be compared using a Non compensatory Lexicography model. Results are as follows

Selection of the preferred Alternative

From the table 3 above, Omniclass Table 21 is considered the most suitable WBS when combined with

This is due to its superior accuracy compared the non standard WBS as well as its superior work flow compared to table 22 (work results)

By decomposing the work scope using table 21, a methodical sequence can be created within the WBS which should allow for more accurate activity relationship and dependencies.

Performance Monitoring

The above WBS will be further detailed to level 4 and 5 to increase accuracy and definition of work scope – using Omniclass table 21. This may include further physical breakdown of the Building by area or level.

Next blog will use the developed WBS within a PDM analysis for estimation of work duration.

References

1. Sullivan, G. W., Wicks, M. E., & Koelling, C. P.(2014). Engineering economy 16th Edition. Chapter 14 , pp.603
2. GAO Cost Estimating and Assessment Guide, March 2009, Appendix IX
3. Omniclass Edition 1.0, May 2, 2006, Table 21 & Table 22

W12_AI_Offshore Regasification Project Economical Evaluation – Part 3

1. Problem Definition

The previous chapter, economical evaluation offshore regasification facilities project has been calculated by using Interest Rate Return (IRR) and External Rate Return (ERR), henceforth this chapter the feasibility project will be analyze by using Payback Period Method. The result of economical evaluation modelling is providing useful information for Board of Direction as evaluation substance to get the best decision.

1. Identify the Possible Alternative

The calculation still using 2 (two) business scheme, as follow:

• Owning

Company purchase newbuilt offshore regasification facility at shipyard or to shipowner

• Leasing

Company leasing the offshore regasification facility to ship management or shipowner

The assumption for offshore regasification capacity is 100 MMSCFD.

1. Development of The Outcome for Alternative

Refer to Sullivan 16th edition chapter 5, there is 3 (three) alternative method to determine feasibility of the project, as follow:

• IRR (Interest Rate of Return) Method – Part 1
• ERR (External Rate of Return) Method – Part 2
• Payback Period Method – Part 3

Payback period method has been used as a measure of liquidity project, this method shows how fast an investment can be recovered. Low value payback period is considered desirable.

1. Selection Criteria
• Owning

The assumption for this calculation, as follow:

Table 1. Assumption

According to the assumption above, the model calculation by using discount factor as follow:

Table 2. Owning Scheme Cash Flow

Here is the cash flow of the owning scheme project profile, as follow:

Picture 1. Discounted Payback Period

• Leasing

The assumption for this calculation, as follow:

Table 3. Assumption

According to the assumption above, the model calculation by using discount factor as follow:

Table 4. Leasing Scheme Cash Flow

Here is the cash flow of the leasing scheme project profile, as follow:

Picture 2. Project Net Cash Flow

1. Analysis & Comparison of Alternative
• Owning Scheme

Berdasarkan Payback Period Method, didapatkan dengan menggunakan owning scheme dalam waktu 9 years the investment can be recovered.

• Leasing Scheme

Berdasarkan Payback Period Method, didapatkan dengan menggunakan leasing scheme dalam waktu 11 years the investment can be recovered.

1. Selection of the Preferred Alternative

Based on the calculation of both business scheme which is owning and leasing, found that by using owning scheme the investment can be recovered much faster than leasing scheme.

1. Performance Monitoring and The Post Evaluation of Result

In economical evaluation, based on calculation using IRR method, ERR method and Payback Period Method resulted that owning scheme more profitable than leasing scheme. The number of IRR and ERR higher and faster to get the investment payback period as well. Furthermore, based on the scheme that has been selected, sensitivity analysis will be done to see the most influencing factor on IRR value.

References:

1. Sullivan, G. W., Wicks, M. E., & Koelling, C. P. (2014). Engineering economy 16th Edition Chapter 5 – Evaluating a single project., pp.239-246.
2. Paska, H. M. I. (2015). W12_HMIP_Prioritization Project Portofolio using IRR, ERR and Payback Period Method

https://garudaaace2015.wordpress.com/2015/05/18/w12_hmip_prioritization-project-portfolio-using-irr-err-and-payback-period-method/

1. Setyo, U. D. (2017). W8_UDS_Evaluation in Choosing Best Supply Pattern Part 1

https://emeraldaace2017.com/2017/09/23/w8_uds_-evaluation-in-choosing-best-supply-pattern-part-1/

W11_AI_Offshore Regasification Project Economical Evaluation – Part 2

1. Problem Definition

In the previous chapter we have calculated the economical evaluation of offshore regasification facilities project by using Interest Rate Return (IRR), furthermore this week the analysis of project feasibility will be conducted using External Rate of Return (ERR). The result of this economic modeling is useful for the company as an evaluation material and assist the Board of Direction in decision making.

1. Identify the Possible Alternative

Calculations still use 2 business schemes as follows

• Owning

Company purchase newbuilt offshore regasification facility at shipyard or to shipowner

• Leasing

Company leasing the offshore regasification facility to ship management or shipowner

The assumption for offshore regasification capacity is 100 MMSCFD.

1. Development of The Outcome for Alternative

Based on Sullivan 16th edition chapter 5, there are 3 (three) alternative methods to determine whether a project is feasible or not, ie

• IRR (Interest Rate of Return) Method – Part 1
• ERR (External Rate of Return) Method – Part 2

The ERR method using the net cash flow generated to be reinvested or borrowed with using external interest rate (€) to get the economical calculation evaluation. At the end, the ERR method produces result identical as same as IRR method.

Step 1 : All of the outflows are discounted to time zero (PW) at €%

Step 2 : All of the inflows are compounded to end period (FW) at €%

Step 3 : Equation the inflows and outflows will be generated the ERR

• Payback Period Method – Part 3
1. Selection Criteria
• Owning

The assumption used in this calculation is

Table 1. Assumption

Table 2. Owning Scheme Cash FlowBased on the above calculation assumption, we get the calculation model as follows

Table 2. Owning Scheme Cash Flow

The following is shown economical project profile based on cash flow above:

Picture 1. Project Net Cash Flow

The table above shows the total outflows and inflows. Next to get the ERR, then both outcomes will be equalized.

Picture 2. ERR Cash Flow

• Leasing

The assumption used in this calculation is

Table 3. Assumption

Based on the above calculation assumption, we get the calculation model as follows

Table 4. Leasing Scheme Cash Flow

The following is shown economical project profile based on cash flow above:

Picture 3. Project Net Cash Flow

The table above shows the total outflows and inflows. Next to get the ERR, then both outcomes will be equalized.

Picture 4. ERR Cash Flow

1. Analysis & Comparison of Alternative

The rule of thumb to justify this project feasibility by using ERR method, ERR Decision rule: If ERR ≥ MARR.

• Owning Scheme

ERR generated is 31.68%, then ERR (31.68%) MARR (10%). Sehingga dapat disimpulkan bahwa berdasarkan perhitungan menggunakan ERR method, the project is economically feasible to being reinvestment.

• Leasing Scheme

IRR generated is 20.14%, then IRR (20.14%) MARR (10%). So it can be concluded that based on calculation using ERR method, the project is economically feasible to being reinvestment.

1. Selection of the Preferred Alternative

Based on the calculation of the two business schemes which is owning and leasing, it is found that by using both schemes the project can allocate its profits to other projects with interest at (€) 3%.

However, by looking at the generated ERR value, that is ERR owning scheme IRR leasing scheme, then it can be concluded that ERR with owning scheme or purchase newbuilt offshore regasification facility is more profitable for company compared with leasing scheme.

1. Performance Monitoring and The Post Evaluation of Result

In economical evaluation, besides using IRR and ERR method, then will be done the study of calculations using Pay Back Period (PBP) to get more complete economic adjustment in choosing between the two schemes.

References:

1. Sullivan, G. W., Wicks, M. E., & Koelling, C. P. (2014). Engineering economy 16th Edition Chapter 5 – Evaluating a single project., pp.237-239.
2. Paska, H. M. I. (2015). W12_HMIP_Prioritization Project Portofolio using IRR, ERR and Payback Period Method

https://garudaaace2015.wordpress.com/2015/05/18/w12_hmip_prioritization-project-portfolio-using-irr-err-and-payback-period-method/

1. Setyo, U. D. (2017). W8_UDS_Evaluation in Choosing Best Suplly Pattern Part 1

https://emeraldaace2017.com/2017/09/23/w8_uds_-evaluation-in-choosing-best-supply-pattern-part-1/

W10_AI_Offshore Regasification Project Economical Evaluation – Part 1

1. Problem Definition

In the previous chapter the calculation of the capex and opex offshore regasification facilities project has been calculated, so that this week an analysis of the feasibility of the project will be conducted to determine whether or not this project is going forward. The results of the financial economic modeling of this project are useful to the company as an evaluation material and assist the Board of Direction in decision making. So this week the calculation of IRR Project will be applied.

1. Identify the Possible Alternative

The calculation of project evaluation will be conducted with 2 business schemes, as follows :

• Owning

Company purchase newbuilt offshore regasification facility at shipyard or to shipowner

• Leasing

Company leasing the offshore regasification facility to ship management or shipowner

The assumption for offshore regasification capacity is 100 MMSCFD.

1. Development of The Outcome for Alternative

Based on Sullivan 16th edition chapter 5, there is 3 (three) alternative method to determine whether a project is feasible or not, in example :

• IRR (Interest Rate of Return) Method – Part 1

The project IRR will be calculated using several assumptions that will be explained at a later stage. The IRR represent the internal earning rate of the project. For this calculation the interest is being calculated on the beginning of year investment through the life of this project.

• ERR (External Rate of Return) Method – Part 2
• Payback Period Method – Part 3
1. Selection Criteria

Refer to Sullivan chapter 5.6 The Internal Rate of Return Method, the IRR was defined by the present value of net cash flow.

• Owning

The assumption used in this calculation is

Table 1. Assumption

Table 2. Owning Scheme Cash FlowBased on the above calculation assumptions, calculation model is obtained as follows

Table 2. Owning Scheme Cash Flow

The following shows an economical project profile based on cash flow:

Picture 1. Project Net Cash Flow

• Leasing

The assumption used in this calculation is

Table 3. Assumption

Table 4. Leasing Scheme Cash FlowBased on the above calculation assumptions, calculation model is obtained as follows

Table 4. Leasing Scheme Cash Flow

Picture 2. Project Net Cash Flow

1. Analysis & Comparison of Alternative

The rule of thumb to justify this project feasibility by using IRR method, IRR Decision rule: If IRR ≥ MARR.

• Owning Scheme

IRR generated is 16.31%, then IRR (16.31%) MARR (10%). So it can be concluded that based on calculation using IRR method, the project is economically feasible.

• Leasing Scheme

IRR generated is 12.70%, then IRR (12.70%) MARR (10%). So it can be concluded that based on calculation using IRR method, the project is economically feasible.

1. Selection of the Preferred Alternative

Based on the calculation of the two business schemes which is owning and leasing, it is found that both schemes are feasilble and workable.

However by looking at the generated IRR value,yaitu IRR owning scheme IRR leasing scheme it can be concluded that IRR with owning scheme or purchase newbuilt offshore regasification facility is more profitable for the company compared with leasing scheme.

1. Performance Monitoring and The Post Evaluation of Result

In economical evaluation, other than using IRR method, then a calculation study will be conducted using External Rate of Return (ERR) and Pay Back Period (PBP) so that the company get a more complete economic adjustment in choosing between the two schemes.

References:

1. Sullivan, G. W., Wicks, M. E., & Koelling, C. P. (2014). Engineering economy 16th Edition Chapter 5 – Evaluating a single project., pp.210-237.
2. Prasetio, H. (2013). W7.1_HPO_Determining The Contractor’s IRR in Production Sharing Contract.

https://simatupangaace2014.wordpress.com/2013/11/17/w7-1_determining-the-contractors-irr-in-production-sharing-contract/#more-1975

1. Setyo, U. D. (2017). W8_UDS_Evaluation in Choosing Best Suplly Pattern Part 1

https://emeraldaace2017.com/2017/09/23/w8_uds_-evaluation-in-choosing-best-supply-pattern-part-1/

W17_TH_LNG ISOTank Feasibility Study: Best Depreciation Method

1. Problem Evaluation

Continue LNG ISOTank evaluation in blog posting W13, this time author want to research what the best depreciation is. The best mean give more benefit of Author Company such as minimize income tax and also give financial projection of LNG ISOTank operational cash flow.

2. Development of Feasible Alternatives

There are four depreciation models that will compare to get best method:

• Straight Line Method
• Declining Balance Method
• Declining with switchover to Straight Line Method
• MACRS Method
3. Development the Outcome for Each Alternative

Those four method depreciation are choose to compare two group method, commonly use method such as  Straight Line Method and Declining Balance Method, and not commonly use such as Declining with switchover to Straight Line Method and MACRS Method. All method will be compare by depreciation value; bigger depreciation value will get lower income tax.

4. Selection of Criteria

The best method is the method that has the biggest depreciation value. Depreciation value is get from sum present worth of all year depreciation result of each method.

5. Analysis and Comparison of the Alternative

To simulate this depreciation comparison author will use LNG ISOTank 20 feet data. Those data is in table below.

Table 1. LNG ISOTank 20 feet Data

Next step is data calculating of each depreciation method, according to straight line method:

dk = (B – SVN) / N

dk* = k. dk for 1 ≤ k ≤ N

BVk = B – dk*

According to Declining Balance method:

d1 = B(R)

dk = B (1 – R)k-1 (R)

dk* = B (1 – (1 – R)k)

BVk = B (1-R)k

Where:

N               = depreciable life of the asset in years

B                = cost basis, including allowable adjustments

Dk             = annual depreciation deduction in year k (1 ≤ k ≤ N)

BVk           = book value at end of year k

SVN          = estimated salvage value at end of year N

dk*             = cumulative depreciation through year k

The calculation results of four depreciation methods are in table below:

Table 2. Straight Line Method

To demonstrate Declining Balance method, the author use 300% DB equations and result of calculation based on above equation is

Table 3. 300% Declining Balance Method

Method of Declining Balance Method Switchover to Straight Line Depreciation, in this method the first step is the asset would be depreciated by the 300% DB Method (R =3/N). Because the DB method never reaches a zero BV, suppose that author further specify that at switchover to SL depreciation to will be made to ensure a BV of zero (determined salvage value).

Table 4. DB Method Switchover to SL Method

To determine the MACRS (GDS) with half year convention assumption and period of analysis in 6 years based on GDS property class.

Table 5. MACRS (GDS) Method, using Half Year Convention

Table 6. PW(14) Comparison

Figure 1. BV Comparison for Selected Methods of Depreciation

6. Alternative Selection

As can be seen above DB Method Switchover to SL Method have the largest PW(14) than other. We can conclude DB Method Switchover to SL Method is the best alternative that more attractive to profitable companies.

7. Performance Monitoring & Post Evaluation Result

To get the best result of method we have to find most appropriate model of depreciation. We should calculate PW of depreciation value of each method, because bigger PW of depreciation value will get lower income tax and more profit of our company.

References

1. Sullivan, G. W. (2014). Engineering Economy 16th Chapter 7 – Depreciation and Income Tax, pp. 332-391
2. Utomo, Dhanu. (2017). W14_UDS_Fuel Tank Truck Feasibility |EMERALD AACE 2017. Retrieved from: http://emeraldaace2017.com/2017/11/21/w14_uds_fuel-tank-truck-feasibility-study-part-2-best-depreciation-method/
3. Planning Planet. (2017). Acquiring Equipment for The Project. Retrieved from http://www.planningplanet.com/guild/gpccar/acquiring-equipment-for-the-project