Benefit of Employing an Independent Project Manager - Essay Example

Management Report Background: A client, an established entrepreneur in the construction industry and is based Europe, hasdeveloped a new business initiative and is keen that you provide independent project management services.  He has run many projects but recently two of his schemes have been delivered late and over budgeted. Last year [2011/2012 financial year April to April] he ran 8 projects ranging between €250,000 and €5,000,000 with a total expenditure of >€30M; he expects that total projects will be similar this year and next year. (a)   Produce a report for the client outlining the benefit of employing an independent project manager.  In particular the client seeks advice about: Procurement; and Having the right project managers in place is very vital in undertaking every project to ensure successful completion and within time limits. Procurement is fundamental to every project manager in order to advice the company on the right partners to work with, the rights and obligations of every party in a project, and how well the parties can work together. Contracts need strategy in order to succeed and that is why, it paramount to know who will supply what and how the payments of the supplies will be met. A contract to supply raw material, personnel or any other service, should give assurance to the do so for the duration for which the contract runs and under the terms and conditions agreed upon. So that, if the contract is financed on interim basis, the supplier of whichever service or raw material should be able to do so until when payment has been processed (BARNES, 2007). Procurement services should also be subjected to competitive vetting to ensure that the right supplier is awarded the tender to supply raw materials whether all the metallic raw materials or part of that, and that will be the case for all procurements. The project manager will advise the contractor on what elements to look for in tendering a supply of any raw material. Just to highlight, cost of raw material, transport cost; whether it is lumped and gathered for to the site, and the capacity to deliver them in time. The contractor then will have a host of service providers to choose from after which the suitable supplier will commence the supply of the procured materials (MARSH, 2000). 1. Standard forms of contract. i.    In particular removing (“sacking”) contractors who perform poorly in terms of: 1.     Programme [they cause delay]; Just like any other contract programme, what is binding, has to be backed by evidence and that is the time that has been set out for completion of a project. When a project is completed within the stipulated time, the contractor is entitled to a bonus of the whole cost however, when the project is completed outside this time, the contractor is liable to a penalty. As a matter of fact, the entire project under the watch of a project manager should be subdivided in stages to give an insight into the exact time of completion. For instant, if it is a power plant being constructed, the project manager should know by when any work on the foundation should be over and any other subsequent stages. In that manner it will be easier to know whether a project manager is delaying or moving faster. If the project manager is found to be delaying the project, it will be in the best interest of the project and the business to find a better replacement for that position (CHAPPELL, & PARRIS, 2002). Under such circumstance, an independent project manager has the ability to conduct all the estimates relating to the project since he or she has some expertise following several successful projects. The first advantage with an independent project manager is the advisory role. An independent project manager is able to work out the time that the project will take before is completed and the cost involved with marginal subsequent errors. Sometimes, especially when the project is a high cost project, time allocation may compromise the quality of work to be done, and in that case, it is only the ability of the project manager to express the concern of the contractor as a shared interest in achieving the fine quality eventually. 2. Cost [they seek more money]; Contracts are designed in such a way that, there is an offer and acceptance made between two parties, and those two conditions are legally binding. Under such a case a projects manager is always sought after to help in leading the way. A project manager will first look into the agreement and fast track the progress of any business the client is engaging in. once this chapter is done, the time to advice the client comes about. Independent project managers are preferred because they don’t need to consult before they make any decision, and unlike project managers who are dependant, their advice to the board is always taken seriously (HUSE, 2001). Managing a project has cost implications and that I where a project manager will have to justify their worth to the employer. The cost involved in a project is a compromise between the quality of work and the time it will take to deliver it (LOOTS, & CHARRETT, 2009). Cost escalation may result from poor management of time so that before a project is completed productive time wasted is not gathered for. A prudent project manager should be able to estimate the amount of money and any other resource needed before the project is completed in order to plan for it in advance. In most cases, where a project manager over estimates or underestimates the resources needed, he project may run late in completion time and that would mean that the contractor will be subject to penalty though it is not his intention to run late (COLLINS, 2008). There is also the need not to compromise the quality at the expense of cost but whichever direction taken, when a good layout of the whole project is set up in time, neither quality nor time will be affected. When a project manager is not able to establish the scope of the project, here is a likelihood of the project running out of time and that can be punitive to the contractor in terms of more resources being used on top of what was planned for the entire project. To avoid such scenarios, if the project manager is not meeting such obligations at the early stages, the contract of that person is good to be terminated (COLLINS, 2008). A project manager should be able to tell whether the contract is consuming money for the right reasons or not so that, any extra amount sought is justifiable otherwise if the project manager is calling the shots without being in a position to account for the funds, then the whole project is in a dead bed. A project manager with the right skills is able to break down the expenditure and even anticipate in figures whether or not the project will need more money. Again, if a project manager is not able to show why more money is needed, the best that can be done is to replace with a competent person (SLEVIN, PINTO, & CLELAND, 2002). 3.  Quality [their work is poor quality]. 15 marks The quality of work in any project must be within the required standards otherwise, the position of the project manager will not be serving the employer the primary reason for having it. When a project manager is not aware of the right steps that will ensure the right quality of services are delivered, then he or she is bound to produce poor quality work in his or her watch. In a contract, quality matters irrespective of whether a contract is completed within the stipulated time or later than that (FLORIO, 2007). Any contractor knows that quality speaks beyond borders and if the nature of the project manager is the one to compromise on quality, it is in the wisdom of the contractor to get a replacement as soon as possible. A project manager should be able to articulate the fundamental requirements a contract must satisfy before it is commence in order to meet the desired quality (COOK, 2007). For instance, if the services sought after can be outsourced and cut down the cost as opposed to having them done by the contractor and still have quality of the work not compromised, the projector manager should advise the contractor to do so. Since the work is a racing with time, the project manager should be able to come up with schedules that shows the work that can be done in parallel with the main construction work and hence cover the whole work within the time required to complete the work in the right quality (TREBILCOCK, 1993). To guarantee quality work, the project manager must first give advice the contractor ion the right products to use to deliver the desired quality in the final project. For instance, if it is a building project, the project manager should where to get the right quality materials within the right prices and alternative ways of cutting cost without compromising the quality. For instance, the possibility of procuring supplies for raw material in bulk forms and pay for them in instalments. As a contractor, the project manager should be able to establish anything that compromise with the quality of the project within the current system in place and advice on what to replace with to attain the right quality (FEDERAL FACILITIES COUNCIL, 1996). For instance, replace single sourcing with competitive tendering process to ensure that the right people have the tender to do the job and deliver the right quality of work. As a contractor, when one realizes that the project manager in his work, is nowhere near what has been highlighted above, it is expected to get a better person with the right skills for that post (WOLF, YEH, ZYCHER, EBERSTADT, & LEE, 2003).  (b) Propose and justify a contractual arrangement between the client and you for your services. 2½ marks The contractual agreement that I propose between me and my client will be a target cost contract agreement. Under target cost contract, the client and I will be subject to a gain or pain share so that if the contract will be delivered early in time and with all the other parameters being satisfied, the client will be able to pay a gain to the contractor. In this manner, the contractor will pay due diligence to the contract knowing that the pain or gain may go either way and if the pain goes his direction, he will be liable to pay unnecessary penalty. The other reason is the fact that, the contractor needs to have the right people for the job and by entering into a target cost contract, he contractor will be forced to employ the competent and expert people who have proven and tested skills for the job of project managers (INSTITUTION OF CHEMICAL ENGINEERS, 2001). (c)  Compare and Contrast the provisions in standard form contracts for payment of the contractor [e.g. payment when complete; or stage/interim etc.] 2½ marks Complete payment and interim payment of contracts are similar in the sense that, interim payments are based on how far the project is especially the main section of the project. Similarly, complete payments can be subdivided into complete completion, practical completion and substantial completion which is representative of completion at certain level of the whole project. For instance, when the entire foundation of a building is completed, it represents certain percentage of completion, similarly, when a building is remaining with window panes and painting, PM can talk of substantial completion and at that point, some payment can be processed (PLUNKETT, 2008). In contrast, in standard form contracts payment when the project is complete discourages inefficiency in the sense that, if the project is not complete in time, the contractor is liable to a penalty which means the contractor will run at a relative loss. However, interim payments may stall the project since the contractor may have some other projects which are paying better and therefore will want to concentrate on those ones. The project may also become expensive to manage since the contractor may not secure the manpower at constant cost (MCINNIS, 2001). Work Cited BARNES, P. (2007). JCT 05 Standard Building Sub-Contract. Oxford, John Wiley & Sons. http://public.eblib.com/EBLPublic/PublicView.do?ptiID=284220. CHAPPELL, D., & PARRIS, J. (2002). Parriss standard form of building contract JCT 98. Oxford, Blackwell Science. http://search.ebscohost.com/login.aspx?direct=true&scope=site&db=nlebk&db=nlabk&AN=139423. COOK, M. (2007). The design quality manual improving building performance. Oxford, Blackwell Pub. http://site.ebrary.com/id/10232724. COLLINS, H. (2008). Standard contract terms in Europe: a basis for and a challenge to European contract law. Alphen Aan Den Rijn, Kluwer Law International. FEDERAL FACILITIES COUNCIL. (1996). Survey on the use of standard forms 254 and 255 for architect-engineer qualifications. Washington, D.C., National Academy Press. FLORIO, M. (2007). Cost-benefit analysis and incentives in evaluation: the structural funds of the European Union. Cheltenham, UK, Edward Elgar. HUSE, J. A. (2001). Understanding and negotiating turnkey and EPC contracts. London, Sweet & Maxwell. INSTITUTION OF CHEMICAL ENGINEERS (GREAT BRITAIN). (2001). Form of contract: lump sum contracts, the red book. Rugby, England, Institution of Chemical Engineers. LOOTS, P., & CHARRETT, D. (2009). Practical guide to engineering and construction contracts. Sydney, N.S.W., CCH Australia. MARSH, P. D. V. (2000). Contracting for engineering and construction projects. Burlington, VT, Gower. MCINNIS, A. (2001). The new engineering contract: a legal commentary. London, Thomas Telford. PLUNKETT, J. W. (2008). Plunketts energy industry almanac 2009: the only comprehensive guide to the energy & utilities industry. Houston, Tex, Plunkett Research. PMI RESEARCH CONFERENCE, SLEVIN, D. P., PINTO, J. K., & CLELAND, D. I. (2002). The frontiers of project management research. Newtown Square, Pa, Project Management Institute. TREBILCOCK, M. J. (1993). The limits of freedom of contract. Cambridge, MA. ; London, Harvard University Press. WOLF JR., C., YEH, K. C., ZYCHER, B., EBERSTADT, N., & LEE, S.-H. (2003). Fault Lines in Chinas Economic Terrain. Santa Monica, RAND Corp. http://public.eblib.com/EBLPublic/PublicView.do?ptiID=197476. Read More