Communication Management Plan, Risk Management, Progress Payments & Project Costing

Communication Management Plan

Discuss about the Construction Site Operations Professional Liability.

• Communication Management Plan

Three parties, the Client, the Consultant and the Contractor are involved in a project. A Communication Management Plan is the communication platform between these three and is used for communicating, sharing and implementing the specifically required information. The format of the communication channel may consist of meetings, intranet calls or emails depending on the information to be shared and people involved. The table below is the communication plan which shall be followed in this project, assert Barnes & Doidge, (2010).

Communication Management Plan
Communication	Format Save Time On Research and Writing Hire a Pro to Write You a 100% Plagiarism-Free Paper. Get My Paper	Objective	Frequency	Conveyor	Distributed To
Team Briefing	Conference calling on Restricted Intranet	Ø Reviewing aims, scope and objectives of the project Ø Launching the project	At the beginning of the project	Project Manager	Ø Team managing the site Ø Client team Ø Stakeholders
Meetings of the Project Team	Conference calling on Restricted Intranet	Ø Assigning Weekly Duties Ø Checking Project status Ø Discussing & Solving problems	First working Day of the Week	Project Manager	Team managing the site
Meetings of the Technical Team	Conference calling on Restricted Intranet	Ø Discussing & Planning changes Ø Clearing Doubts, if any	As per Need	Technical Manager	Ø Team managing the site Ø Client team Ø Stakeholders
Meetings for Project Status	Conference calling on Restricted Intranet          By e-mail	Ø Reviewing progress of the project	First Week of the month	Project Manager	Ø Team managing the site Ø Client team Ø Stakeholders
Report Submission	By e-mail	Monthly Report	First Week of the month	Project Manager	Ø Team managing the site Ø Client team Ø Stakeholders

• Project Risk Matrix

Any Project can be adversely affected by the risk factors, which vary from project to project. The areas most affected are completion time, project cost, construction quality and worker’s safety. AS/NZS ISO 31000:2009 specifies guidelines to be followed for risk management in a project. Mitigation of the risks in a project can be done by identifying the risk, followed by analysis and finally controlling the risk through an affective methodology, as per Gruis & Nieboer (ed), (2013).

Project Risk Matrix
Risk Factor	Probability	Consequences	Mitigation
Responsibilities of Client and the Stakeholder: Lack of Interest	Low	Moderate	Through effective communication skills between stakeholders and client
Budget: Possibilities of contingencies	Moderate	High	Adequate provision for contingencies in the budget combined with strict monitoring of expenditure
Schedule: Project overrun due to contingencies	Low	High	Allowing extra time for contingencies in the project schedule
Labour: skilled, semi-skilled and non-skilled workers availability	Low	High	By providing adequate remuneration as per stipulated standards
Quality: Unforeseen errors in design or practical implementation	Low	High	Regular monitoring of quality control through Reports and sharing of information
Weather Conditions: Unsuitable or unpredictable situations	Low	High	By continuous monitoring of weather updates and planning according to it
Safety: Accidents or health issues concerning workers	Moderate	High	Strictly implementing safety rules and insurance standards

• Progress Payments

Clause 37.1 of AS4000 is the relevant clause for monitoring of Progress Payments. The percentage of work completed has to be notified in each Progress Payment and the Superintendent is responsible for submitting the details which should be as stated in the Terms and Conditions of the Contract, says Emerald Gems (ed), (2015).

Clause 37.2 of AS4000 is the relevant clause for issuing of relevant certificates. The Superintendent is responsible for issuing certificates to this effect to the contractor and the City of Whittlesea within 14 days of receiving the progress claim, as per Kaganova & McKellar (ed), (2006).

Clause 37.4 of AS4000 is the relevant clause for issuing Final Payment Claim and Certificate by the superintendent within 28 days of ending of defect liability period. A written ‘final payment claim’ has to be endorsed by the contractor to the superintendent. Within 42 days of ending of the defect liability period, the Superintendent is required to issue a final certificate to the contractor and City of Whittlesea mentioning the amount due and payable as per the terms of the contract, say Mathew (ed) et al, (2012).

Clause 41.1 of AS4000 is the relevant clause for issuing Communication of Claims. Once a party endorses any claims in connection with the contract, it has to give in writing a prescribed notice to the superintendent and other concerned parties, says Parker, (2012).

This Act applies when a payment claim is to be made by the contractor and they must know their rights for getting the payment for the work completed on the construction project, details Marsden, (2011).

Risk Management in a project

This Act states and I quote “The Building and Construction Industry Security of Payment Act, 2002’ act assures that any individual who completes construction work or supplies related products under a construction work contract gets paid. It is useful to give a quick as well as economical process to recover payments under the construction contract, without the requirement for legal advisors such as lawyers (Victorian Building Authority, 2017).” Unquote.

• Ambiguities and Errors – Certificates

Clause 8 of AS4000 is the relevant clause for reporting Ambiguities and Errors which often occur in a construction project. Our company faced the following issues and dealt with them under relevant clauses of AS4000 as stated below, as per Spoehr (ed), (2009).

Clause 8.1 – Discrepancies

Under this clause our company shall submit a written notice to the Superintendent with respect to the ambiguities found in the documents presented to us for execution of work.

Clause 8.2 refers to documents supplied by the City of Whittlesea and Clause 8.3 refers to documents supplied by the Contractor. As per the terms of the contract, our company has the responsibility to send the documents to the superintendent for rectification of any ambiguities and errors found in the documents received, asserts Haidar, (2012).

• Claims for Variations

Variations notified to us were as noted below –

• In the third month, the client changed the material for seating in the pavilion. We had already ordered for the material specified in the original specifications and drawings. The additional cost for this change will be $100,000. We have quoted this as per the relevant clauses of AS4000 as below –
• Clause 36.1 – Direction for Variations

We shall not change the WUC unless we are directed to do so in writing. The superintendent can issue directions under this clause prior to the date of completion.

• Clause 36.2 – Proposed Variations

Under this clause we should be issued a notice of the proposed variation by the Superintendent. Our company shall then inform the Superintendent when and how we can bring about the proposed variation.

• Clause 36.4 – Pricing

We shall, under this clause, quote the price of the variation to the Superintendent at the earliest, as per Gruis & Nieboer (ed), (2013).

• Object of Antiquity

Referring to Clause 24.3 of AS4000 which defines ‘minerals, fossil and relics’, we shall take all precautions for safety of any antiquity object discovered and loss or damage to it during removal from the site after giving a written notice to the Superintendent. It is for the superintendent to assess our additional cost and add it to the contract amount.

• Material Changes

The relevant clause for this is 36.3 of AS4000, which deals with ‘variations for convenience of contractor’. We have requested for variation of the bolts to the Superintendent, from galvanized iron bolts to use of stainless steel bolts. The Superintendent is to grant us permission for this variation with extra cost, says Haidar, (2012).

Guidelines for monitoring Progress Payments

• Earned Value Analysis
• Planned Value (PV) = A$50,000 + A$100,000 + A$120,000 + A$120,000 + A$120,000 + A$130,000 = A$640,000.
• Actual Cost (AC) = A$60,000+ A$150,000 + A$250,000 + A$120,000 + A$130,000 + A$130,000 = A$840,000.
• Earned Value (EV) = (Total planned value) x (Percentage complete of project) = A$1,290,000 x 40% = A$516,000.
• Cost Variance (CV) = (Earned value) – (Actual cost) = A$516,000 – A$840,000 = (-) A$324,000.

(The Cost Variance is negative, because it is over-planned cost)

• Schedule Variance (SV) = (Earned value) – (Planned value) = A$516,000 – A$640,000 = (-) A$124,000.

(Schedule Variance is negative and this means the project is behind schedule)

• Cost Performance Index (CPI) = (Earned value) / (Actual cost)

            = A$516,000 / A$840,000 = 0.6143

(The result is less than 1, showing that costing is over planned)

• Schedule Performance Index (SPI) = (Earned value) / (Planned value)

= A$516,000 / A$640,000 = 0.8063

(The result is less than 1, showing that the project is behind schedule)

• Budget at Completion (BAC)

= The sum of all planned value for entire project duration of 12 months

= A$50,000 + A$100,000 + A$120,000 + A$120,000 + A$120,000 + A$130,000 + A$130,000 + A$130,000 + A$120,000 + A$120,000 + A$100,000 + A$50,000

= A$1,290,000.

Estimate Cost of Completion (EAC)

• When CPI is same

If the CPI is to remain the same for the remainder duration of the project, then

EAC    = (Budget at completion) / (Cost performance index)

= A$1,290,000/0.6143 = A$2,099,951.20

In this method, the project will incur an extra cost of A$2,099,951.20 – A$1,290,000.00 =A$809,951.20.

• At the Planned Rate

In case the future work is to be completed at the planned rate, then

EAC = (Actual cost) + (Budget at completion) – (Earned value)

= A$840,000 + A$1,290,000 – A$516,000 = A$1,614,000.

In this method, the project will incur an extra cost of A$1,614,000 – A$1,290,000 = A$324,000.

• When CPI and SPI both Influence

If both CPI and SPI influence the balance work, then

EAC = (Actual cost) + {[(Budget at completion) – (Earned value)] / [(Cost performance index) x (schedule performance index)]}

= A$840,000 + {(A$1,290,000 – A$516,000) / (0.6143 x 0.8063)} = A$2,402,689.28.

In this method, the project will incur an extra cost of A$2,402,689.28-A$1,290,000                   = A$1,112,689.28.

In summary when all the above methods are compared, it is noticed that method-III shall add the maximum extra cost to the project, assert Kaganova & McKellar (ed), (2006).

• Draft Monthly Report

In the first month there were many errors in the plans given by the client which were notified to the Superintendent. To complete the work, significant redesigning was required and this duly notified under AS4000 for submission of claims for dealing with the relevant issues. An additional cost of A$10,000 was added to the contract sum.

In the second month, an object of antiquity was found while working in the tennis pavilion. It was safely removed and handed over to the client as stated under clause 24.3 of AS4000. This additional work, incurring an additional cost of A$10,000 was notified to the client to cover the cost of additional 14 days spent for this additional work.

Issuing relevant certificates as per AS4000

In the third month, a decision by the client was taken to change the material for seating in the pavilion. The Superintendent, under the guidelines of clause 36 of AS4000, gave directions for this changes. We incurred an additional cost of A$10,000 which was added to the contract sum, assert Emerald Gems (ed), (2015).

There were no other incidents of change/alterations during the fourth, fifth and sixth month. On the basis of the previous weather record of the site area, we had allocated an additional 10% of time. Since the weather was ideal throughout these six months of construction activity, no claim was filed by us for Extension of Time (EOT) on account of adverse weather conditions, as per Barnes & Doidge, (2010).

• Estimate the VOWD
• 40% of pipes have been delivered at the end of 4^th month of the contract and are accepted by the Superintendent as complying with the given specifications.

Quantity delivered: 3,000 nos. at US$300 each for total amount of US$900,000.

Value of Work done (VOWD) = 40% x 3,000nos. x US$300

= US$360,000.

• 20% of the pipes have been laid by the contractor.

Quantity: 3,000 nos. at Rate of A$120.

Value of Work done (VOWD) = 20% x 3,000nos. x A$120

= A$72,000.

• 50% of the 20% laid pipes have been tested.

Quantity: 3,000nos. at Rate of A$30.

Value of Work done (VOWD) = 10% x 3000nos. x A$30

= A$9,000.

• Exchange rate to be considered for the paid invoice amount at the end of 3^rd month is 1A$ = 0.75 US$.

Paid invoice amount (30% of total amount of US$900,000) at the end of 3^rd month = US$270,000 = US$270,000 x 1/ 0.75

= A$360,000.

Exchange rate to be considered for the paid invoice amount at the end of 4^th month is 1A$ = 0.80 US$.

Paid invoice amount (10% of total amount of US$900,000) at the end of 4^th month = US90,000 = US$90,000 x 1/ 0.80

= A$112,500.

• Estimation of VOWD at end of 4^th month in A$

= (Cost of 20% of pipes laid by the contractor) + (Cost of 50% of the 20% pipes tested) + (Paid invoice amount at end of 3^rd month) + (Paid invoice amount at end of 4^th month)

= A$72,000 + A$9,000 + A$360,000 + A$112,500

= A$553,500.

Accrual (accounting) in A$ at the end of 4^th month of the pipeline project is –

Value of Work Done (VOWD) only in the 4^th month in A$

= (10% of paid invoice from total amount of US$900,000 at exchange rate of 1A$ = 0.80US$) + (Cost of 25% of 20% of the pipes laid by the contractor) + (Cost of 50% of the 20% pipes tested)

= (10% x 3000nos. x US$300/ 0.80) + (5% x 3000nos. x A$120) + (10% x 3000nos. x A$30)

= A$112,500 + A$18000 + A$9000

= A$139,500

List Of References

Barnes, R. and Doidge, G. 2010, Managing Your Investment Property: The Essential Guide to Property Management in Australia and New Zealand. John Wiley & Sons, Milton, QLD.

Christensen, S. and Duncan, W.D. 2004, Professional Liability and Property Transactions. Federation Press, Annandale, NSW.

Emerald Gems (ed). 2015, Built Environment and Property Management: A Focus on Australia. Emerald Group Publishing Limited, Bingley.

Gruis, V. and Nieboer, N. (ed). 2013, Asset Management in the Social Rented Sector: Policy and Practice in Europe and Australia. Springer Science & Business Media, Berlin.

Haidar, A. 2012, Information Systems for Engineering and Infrastructure Asset Management. Springer Science & Business Media, Berlin.

Kaganova, O. and McKellar, J. (ed). 2006, Managing Government Property Assets: International Experiences. The Urban Institute, Washington DC.

Marsden, S. 2011, Business, Charity and Sentiment: The South Australian Housing Trust 1987-2011. Part two. Wakefield Press, Kent Town.

Mathew, J., Ma, L., Tan, A., Weijnen, M. and Lee, J. (ed). 2012, Engineering Asset Management and Infrastructure Sustainability. Springer Science & Business Media, Berlin.

Parker, D. 2012, Global Real Estate Investment Trusts: People, Process and Management

Real Estate Issues. John Wiley & Sons, West Sussex.

Spoehr, J. (ed). 2009, State of South Australia: From Crisis to Prosperity? Wakefield Press, Kent Town.