TREND & CHANGE MANAGEmENt

MaPros take on

Authors: inn Albertsson, MPM Christian Honisch, M.Sc.

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Contents
Introduction Project Changes Changes during the Project Life Cycle Trends vs. Changes Trend & Change awareness The Trend & Change Management process Changes and Risks Conclusion 3 4 5 6 7 8 10 11

Introduction
Mannvit has developed a suite of project management tools, collectively referred to as MaPro. The components of MaPro rest on pillars of time-proven management techniques and tools combined in a module based system which is fully scalable to the size and complexity of projects or programs. The following paper describes and discusses the Trend and Change Management methods within the framework of MaPro.

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Project Changes
Dealing with Project Changes is a challenge that all project managers will face at one time or another during a project. In fact, it is a reasonable expectation that original scope definitions and established plans for any project are subject to changes due to various uncertainties in the project environment and changes in project prerequisites or owners requirements. One of the most critical threats to a successful execution of any project is commonly referred to as the Scope Creep. This term refers to uncontrolled changes, mainly increase, to a projects scope, functionality and battery limits. Scope Creep typically occurs when the scope of a project, or a project component is not properly defined and documented, or when team members are not trained and disciplined to work within the boundaries of a predefined work package. A scope change will almost without exception lead to an associated change to the defined project constraints and thereby put the accepted budget, schedule and quality of output in jeopardy. One manifestation of scope creep is when technically oriented team members are motivated not only to meet the required specification of the project output or deliverables, but to exceed them. This tendency can become quite costly, and does not necessarily benefit the project delivery or the owners business case. Another common cause of a creeping scope is when a project owner introduces various nice to have specifications when discussing project requirements, and these are casually added to the project teams work, without proper control and approval processes. Even scope or quality reductions, suggested with the intension to reduce cost, can be quite costly if they are introduced in an untimely manner, due to additional design requirements and secondary changes to related processes.

Another type of project change is design development, where changes in design are introduced to improve the likelihood of the project succeeding as planned. Such design changes are usually resulting from improved engineering definition made possible as the project evolves. Again this type of change may lead to an associated increase in the work performed by the project team, and needs to be treated appropriately. Finally, schedule delays, quality and cost variations caused by external factors and third parties represent common types of project changes. Such changes will predictably result in an increase in the project teams work scope that needs to be addressed. Scope creep, delays and cost variations caused by third parties are significant risks to any project. By omitting a systematic control of changes, the project team will risk using resources and time on tasks the owner is not expecting to pay for. The owners interests are also highly at stake here; lack of change management may add unnecessary and unexpected direct or indirect cost to the project, cause delays of delivery and jeopardize milestones critical to the project success. Unresolved change issues have often led to disputes and conflicts over cost, delays of delivery and/or exceptions in the quality, performance or functionality of the project output. It is therefore of utmost importance to both the owner and the project team to agree upon and implement processes to manage project changes in a responsible and traceable manner. One of the key features of the MaPro project management approach is a time proven method of pro-active Trend and Change Management, where the factors which may lead to project changes are controlled to ensure that changes, once approved, are beneficial to the project and the owners business case.

Changes during the Project Life Cycle

The term Project Life Cycle as used within the framework of MaPro refers to the systematic breakdown of project development into project phases, from a concept study to execution and start of operation. For further information on the MaPro life cycle approach refer to a separate paper titled MaPros take on The Project Life Cycle. Good practices of project control require the Project Manager to constantly monitor the status and progress of two distinct but closely related processes throughout the project life cycle. These are namely:
The project, i.e. the delivery of the actual facility

On the other hand, the definition and accuracy of the scope and constraints of the project teams work, is not subject to any such development. The scope, budget and schedule of the project teams work and the quality requirements of its deliverables are established and bound in the service contract between the owner and the project team and need to be constantly monitored and controlled for any variations.

that is the subject of the project and will be operated to realize the values of the owners business case.

The work performed by the project team within

the framework of the ongoing service contract. Usually, the framework of a service contract for the work is synchronous to one of the defined project life cycle phases.

As the execution phase emerges the two processes merge in the sense that the subject of the ongoing work becomes the immediate delivery of the project, i.e. the planned facility. The Trend and Change Management practices apply to both processes during the whole project life-cycle. During the pre-execution project phases, the scope and constraints of a project are subject to continuous development where various options are studied and the level of definition and accuracy for scope, cost, schedule and quality increase as the work advances. It should be noted that this development, which may be considered as changes to the original concept or suggested approach, is not subject to the Trend and Change Management process. Only variations or change suggestion that may result in altering the project objectives or a previously established base case of a preceding phase shall be processed as a potential change.

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Trends vs. Changes

MaPros proactive approach to change control requires making a distinction between a trend and a change. A trend is an actual or projected deviation from the established baseline regarding scope, quality, cost and/or schedule. Trends are generally as following:
Design development resulting from improved

It should be noted that even if a change is inevitable and outside the control of the project team, it needs to be processed as a trend before it is treated as an approved change in order to identify and track any secondary impact of the change and secure the owners approval of the updated forecasts of cost and schedule. Such unavoidable changes are, in most cases, schedule or cost variations triggered by third parties, such as contractors or vendors.

Trend & Change awareness

The key prerequisites for conducting successful Trend and Change Management are always accurate definition of the projects objectives and precise planning of the work at hand. Experience has shown repeatedly that poor initial definition and documentation of scope, quality requirements, cost or schedule will almost certainly lead to uncontrolled changes and unnecessary cost and/ or delays sooner or later in the project. The scope definition and related plans must be formally approved by the owner in order to be established as the project teams baselines, i.e. the reference for the upcoming work. A crucial principle to be followed by all team members and owners representatives is that once the baselines for a project, work or a work package have been defined, established and approved, no change may be implemented without the appropriate approvals obtained via the Trend and Change Management process. Scope awareness is therefore an essential requirement for all parties involved; any deviation from the established baseline or opportunity for improvements shall immediately be reported to the appropriate management level. It should be noted that trends that can be resolved within the authority and mandate of the project team do not need attention of the owner. These are usually minor variation to the existing course of the work that does not interfere with the established baselines. This principle, often referred to as management by exception, applies to any project issues that need to be resolved by escalation to the necessary management level. MaPros approach for Trend & Change management places a high priority on raising awareness of potential or occurring changes to approved baselines. Promoting and supporting this high level of awareness is the responsibility of all relevant project stakeholders, both on the project team and on the owners side and requires potential changes to be brought forward as trends on project meetings. Particular attention should be paid to the causes of potential changes in order to control those to the benefit of the projects outcome.

The system requires that the owner commits to the accepted Trend and Change Management procedures and presents any projected or actual changes to the business case, project environment or his requirements to the project manager in the appropriate form and without delay. The project manager must be constantly on guard to identify and manage imminent changes. Any trend forwarded to the project manager needs to be prepared, analyzed and processed according to the Trend and Change Management procedures. Team members, responsible for a section of the ongoing assignment, i.e. a work package, must carefully plan and conduct their work within the battery limits of the already defined scope and according to the established quality, cost and schedule constraints. Any prospected variation to these that cannot be corrected by the responsible team member must be immediately escalated to the appropriate management level as a trend. Functional or discipline managers, responsible for parts of the project team must be alert to any trends emerging within their area, particularly those escalated from team members. Any trend that cannot be fully processed at this level must be forwarded to the project manager. Risk managers and appointed risk owners must be particularly aware of risks that may lead to scope, quality, schedule or cost changes. The project control manager is responsible for the Trend and Change Management process and must therefore keep a global perspective and understanding of the scope, quality, cost and schedule development of the project.

engineering definition,

Pricing variances resulting from bid quotations. Quality variances of procured material or

equipment.

Scope change, i.e. addition or deletion from the

approved scope.

A deviation from the project baseline schedule. A requirement for budget reallocation.

A change is a trend that has been processed, analyzed and accepted by the owner as an alternation to the established baselines regarding scope, quality, cost, and/or schedule. Thereby a scope change will for instance become a part of an updated baseline, against which the project teams continuing progress, performance and project outputs will be measured. The dual classification of factors that may, or may not, result in alterations, reductions or additions, to the project constraints makes it plausible to address the causes of and need for changes before they actually occur. The value of this is that it saves the owner and project team time and resources that would otherwise have been spent on assessing and/or implementing unwanted, untimely or unnecessary changes. Processing trends caused by internal or external factors is an important method of identifying the direction the project is heading, in order to forecast the outcome of the project and improve the prospect of success.

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The Trend & Change Management process

MaPros Trend and Change Management process is aimed towards identifying, tracking, assessing and processing variations in the project that may lead to changes in the previously defined and accepted scope, direct or indirect cost, the schedule and/or the quality requirements of the projects output. At the outset of the project, a trend register and a corresponding change register are initiated for tracking and documenting trends and changes and any related resolutions and decisions. The trend and change registers are maintained for the duration of the ongoing project phase and becomes a part of the issued project documentation. Any project team member, including the project owner, can initiate a potential trend by bringing forward an issue or an idea that may lead to a change to the project. All potential trends are listed in the trend register and processed by roughly estimating, on an order-of-magnitude basis the influence on the project outcome regarding scope, quality, cost and schedule. The results of this rough estimate are recorded in the trend register. Trends that require attention on behalf of the owner are discussed in a meeting between the project manager and the owners representative. Although the project manager may forward his recommendations on the subject, it is the owners responsibility to decide which potential trends are valid and shall be evaluated further by the project team. Rejected trends are retained and archived for the duration of the project. Each trend that has been approved as valid by the owner is given a price tag to cover the additional work effort needed for the project team to complete the analysis of the trend and prepare a trend report. The trend report describes the detailed forecasted impact of the trend to the project should it be processed and approved as an actual change. Scope additions or reductions are defined with as much

accuracy and level of detail as the current status of the project allows. Changes to quality requirements of the project output are accordingly defined in the appropriate detail. Changes to the schedule baseline shall be defined by the same accuracy level as represented in the current schedule. The estimated direct cost is in the same way presented with the level of detail matching the current budget. Indirect cost is broken down to the relevant project functions or even work-packages. Risks associated with the potential change are also identified and assessed, and suitable risk response actions are listed. Once the trend report is prepared, it is submitted to the owner for approval. If the trend report is rejected, the owner is invoiced for the preparation of the report and the trend is archived during the remaining project work. The trend register is updated accordingly. When the trend report has been approved, the subject is no longer referred to as a trend. It has now evolved into a change that shall be presented to the owner for approval. All changes are listed and maintained in the projects change register. A Memorandum of Change (MOC) is prepared to formalize the owners approval of the change and acceptance of its consequences for the scope, schedule, cost and quality requirements. The MOC includes or refers to the results of the trend report, along with additional conditions or requirements that may be negotiated between owner and the project team. The MOC is presented to the owner for a formal approval and signing followed by an invoice for the project teams work effort for preparing the trend report and carrying out the approved project change. An approved scope change requires an update of the current approved project baselines. All continuing project work will be measured against these until a new baseline change is approved. Other types of changes, e.g. design development or schedule variations due to third party delays do not call for any modifications of the project baselines, but require an update of the current forecasts for project cost and schedule and will be monitored as variations from the existing baselines.

It should be noted that all additional work resulting from a change is defined and planned within new work packages allocated to responsible team members for implementation and completion.

Identify and register trend Prepare order of magnitude estimate Escalate to owner? YES Report and discuss trend with owner NO Valid trend YES Prepare trend report Trend report approved YES Prepare memorandum of change (MOC) YES MOC approved NO

TrEND prOcESSiNG

Resolve within project team

ArcHiVE AND mAiNtAiN

NO

CHANGE prOcESSiNG

iNVOicE trEND/ cHANGE

NO

YES

Scope change?

Update current scope and baselines

Update forecasts for cost and schedule

Figure 1 - The Trend & Change Management Process

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Changes and Risks

The Trend and Change Management process interacts closely with risk management. It has been stated above that uncontrolled changes to a projects scope and constraints are some of the most significant risks any project is confronted with regarding performance, cost and schedule. One of the objectives of operating an effective Trend and Change Management process is to mitigate negative effects of such changes, or even eliminate the source or need for a change, which may otherwise place the successful outcome of the project in jeopardy. When planning risk response activities it should always be considered if the implemented actions account for or cause changes to the established baselines and should therefore be treated as trends. Any trend that is identified or introduced to the project may contain elements of risks that need to be handled according to the risk management processes, where all primary or secondary risks associated with the potential change are assessed and the appropriate risk response actions are recommended. The result of this risk assessment is included in the trend report. For further information on Mannvits approach to Risk Management refer to a separate paper named MaPros take on Pro-Active Risk Management.

Conclusion
Uncontrolled changes can and often do lead to project failure. Project Managers are constantly battling with scope creep, cost increases and extended timelines that put the planned project outcome at risk and may cause disputes and misalignment between the owner and the project team. The project team must be constantly on guard to identify and manage trends and changes that may be hidden within or surrounding the project. It is safe to conclude that all project changes have the potential to lead to increase in cost and/or delays that need to be determined and accounted for. If the changes are controlled, the project manager has the advantage of being able to plan for their consequences and to minimize any unwanted and negative effects. At the outset of a project, the owner and project team must agree upon and establish a procedure for controlling changes and variations. A formal proactive change management procedure that anticipates the need for change is always preferable to a process that reacts only after the need for change is obvious or if it already has occurred. It is important that all trends and changes in a project are processed by the same procedure, providing not only control over potential and occurring changes, but also providing a formal entry point though which change-related questions and suggestions can be raised and answered. MaPros approach to Trend and Change Management provides the advantage of a pro-active method of managing trends and changes, where the sources and need for change are addressed before they are established within the updated and approved project forecasts and baselines. All identified variations are treated as trends before they are processed and accepted as changes. The Trend Management process provides a platform to discuss and decide if a change suggestion is valid, needed and adds value to the project. Change suggestions that are deemed unnecessary or wasteful are put aside and archived without using time or resources to treat them further. Cost and schedule impact of approved trends are assessed

and estimated along with any associated risks before they are presented to the owner for approval. Project and work plans are updated only when a scope change suggestion has been formally approved by the owner. All changes to the project or work scope are planned and implemented within the framework of work packages to be performed and delegated to responsible team members. Cost or schedule variations caused by third parties, such as vendors, contractors or authorities are, once processed and approved, accounted for in the updated forecasts for cost and/or schedule while any affiliated changes to the project work, i.e. work initiated to reduce negative impact of cost increase or schedule delays, are included in additional work packages that are implemented and controlled. With MaPros Trend and Change Management method, Mannvit has assembled a system of known and proven principles and techniques to control scope and project variations. The system focuses on proactive identification and processing of imminent deviations and changes, change opportunities and related risks. The system is also a tool that provides the owner with increased visibility to forecast where the project is heading, and the opportunity to decide if the project team should go along the predicted path or if measures should be taken to direct the project back towards the established plans, or even if an alternative route will provide improvements and benefits to the existing baselines, and thereby contribute to the success of the owners original business case. MaPros approach to Trend and Change Management is cost-effective and provides the project owner with the opportunity to stay up to speed on scope, schedule and cost development without wasting time and resources on unwanted changes that may risk a successful project outcome.

MANAGEmENt

TREND & CHANGE

Mannvit is an international consultancy firm providing services in the fields of engineering, consulting, management, operations and EPCm project delivery. Since 1963, the company has provided engineering, technical and project management services for a wide range of public and private projects including; industry, processing, infrastructure and transport, buildings, environmental and renewable energy, power transmission, IT and telecommunications. All Mannvits operations are certified under international quality, environmental and safety management standards: ISO 9001:2008, ISO 14001:2004 and OHSAS 18001:2007.

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August 2012