Quantifying the Cumulative Quantifying the Cumulative

Impact of Change OrdersImpact of Change Orders

Rich CamlicRich CamlicChairChair

Cumulative Change Order Cumulative Change Order Impacts Research TeamImpacts Research Team

2000 CII Annual Conference2000 CII Annual ConferenceNashville, TennesseeNashville, Tennessee

Quantifying the Cumulative Quantifying the Cumulative

Impact of Change OrdersImpact of Change Orders

Cumulative Change Order Impacts Research TeamCumulative Change Order Impacts Research Team

RT 158RT 158

Cumulative Change Order Impacts Cumulative Change Order Impacts Research TeamResearch Team

Tripp AhernTripp Ahern J. F. Ahern CompanyJ. F. Ahern CompanyGeorge ArmenioGeorge Armenio General Motors CorporationGeneral Motors CorporationRich CamlicRich Camlic U.S. Steel, ChairU.S. Steel, ChairEdward GibbleEdward Gibble McClure CompanyMcClure CompanyBrian GriffithsBrian Griffiths Electrical Corp. of AmericaElectrical Corp. of AmericaHanford GrossHanford Gross Gross Mechanical ContractorsGross Mechanical ContractorsAwad HannaAwad Hanna University of Wisconsin-University of Wisconsin-

MadisonMadisonKevin HughesKevin Hughes FPL EnergyFPL EnergyKam KamathKam Kamath Black & VeatchBlack & VeatchChris Lloyd-JonesChris Lloyd-Jones BechtelBechtelJoe Loftus Sr.Joe Loftus Sr. Terminal-Andrae Inc.Terminal-Andrae Inc.Wayne MontgomeryWayne Montgomery Kvaerner ProcessKvaerner ProcessGreg ThomasGreg Thomas Fisk Electric CompanyFisk Electric Company

Problem StatementProblem Statement

• Administration boards and courts Administration boards and courts recognize that effects of cumulative recognize that effects of cumulative impact can go beyond the initial impact can go beyond the initial change itself.change itself.

• It is difficult for owners and It is difficult for owners and contractors to agree that cumulative contractors to agree that cumulative impact exists, let alone come to an impact exists, let alone come to an equitable adjustment for it.equitable adjustment for it.

Research Objectives Research Objectives

1.1. Investigate how change orders impact Investigate how change orders impact productivity over entire project.productivity over entire project.

2.2. Isolate specific, measurable Isolate specific, measurable characteristics of impacted projects.characteristics of impacted projects.

3.3. Develop a model capable of Develop a model capable of identifying projects impacted by identifying projects impacted by cumulative change.cumulative change.

4.4. Develop a model to predict the Develop a model to predict the magnitude of cumulative impact with magnitude of cumulative impact with a reasonable level confidence.a reasonable level confidence.

Results of Research Results of Research

• Two models (tools) developedTwo models (tools) developed

– Determine the probability of impact Determine the probability of impact within a range of possible outcomes.within a range of possible outcomes.

– Predict the probable magnitude of Predict the probable magnitude of impact within a range of possible impact within a range of possible outcomes.outcomes.

• Strong correlation found between Strong correlation found between the number of change items and the number of change items and some loss of labor productivity.some loss of labor productivity.

Recommendations to OwnersRecommendations to Owners

• The most common reasons for change The most common reasons for change orders are Additions, Design Changes orders are Additions, Design Changes and Design Errors, therefore you and Design Errors, therefore you should should do more up-front engineeringdo more up-front engineering..

•Reduce change order processing timeReduce change order processing time to decrease the likelihood of impact.to decrease the likelihood of impact.

•RequireRequire contractors to submit a contractors to submit a manpower loading curvemanpower loading curve with with proposal.proposal.

Recommendations to Recommendations to ContractorsContractors

• Integrate any changes into the work Integrate any changes into the work flow as efficiently as possible.flow as efficiently as possible.

• Use project software to track Use project software to track productivity:productivity:

– % complete by earned value% complete by earned value

– % complete by actual earned work-hours% complete by actual earned work-hours

– % complete by actual installed % complete by actual installed quantities quantities

Recommendations to Recommendations to ContractorsContractors

•Resource loading relationships Resource loading relationships (ratios):(ratios):

– Actual peak over actual average Actual peak over actual average manpowermanpower

– Estimated peak over actual peak Estimated peak over actual peak manpowermanpower

– Actual manpower loading curve versus Actual manpower loading curve versus estimated manpower loading curveestimated manpower loading curve

MethodologyMethodology

• Developed a comprehensive Developed a comprehensive

questionnaire based on “influencing questionnaire based on “influencing

factors” that we felt could cause change factors” that we felt could cause change

on a project.on a project.

• Used a pilot study to gather data, to Used a pilot study to gather data, to

determine how easily the questionnaire determine how easily the questionnaire

could be answered, and if it would be could be answered, and if it would be

useful in achieving our objectives.useful in achieving our objectives.

• The study was based on work-hours.The study was based on work-hours.

Contractor DataContractor Data

•57 projects57 projects were solicited from were solicited from 33 mechanical contractors.33 mechanical contractors.

•59 projects59 projects were solicited from were solicited from 35 electrical contractors.35 electrical contractors.

•116116 projectsprojects in database. in database.

• Industrial and institutional Industrial and institutional projects make up majority of projects make up majority of database.database.

Evolution of the Impact ModelEvolution of the Impact Model

Need to develop a definition for Need to develop a definition for “DELTA” (productivity loss/gain) “DELTA” (productivity loss/gain) associated with change orders.associated with change orders.

Total Actual Total Actual Labor HoursLabor Hours

(Estimated Hours (Estimated Hours + Change Order + Change Order Hours)Hours)

Total Actual Labor HoursTotal Actual Labor HoursX 100X 100

Hypothesis DevelopmentHypothesis Development

• 75 variables were investigated using 75 variables were investigated using hypothesis testing and analysis of hypothesis testing and analysis of variance techniques to determine if variance techniques to determine if they had an impact on projects. All they had an impact on projects. All 116 projects were tested.116 projects were tested.

• Logistic regression techniques then Logistic regression techniques then identified the eight most significant identified the eight most significant variables that impact a project.variables that impact a project.

Significant Impact VariablesSignificant Impact Variables

•Mechanical or electrical projectMechanical or electrical project

•Percent changePercent change

•Estimated/actual peak laborEstimated/actual peak labor

•Change order processing timeChange order processing time

•OvermanningOvermanning

•OvertimeOvertime

•Peak/average work-hoursPeak/average work-hours

•Percent change orders related to Percent change orders related to design issuesdesign issues

where X is the sum of the eight significant where X is the sum of the eight significant

“influencing factors” (variables) times “influencing factors” (variables) times

their coefficients plus a constanttheir coefficients plus a constant

The Impact Model The Impact Model (Simplified logistic regression)(Simplified logistic regression)

eexx

Probability Y = Probability Y = 1 1

+ e+ exx

Confidence of Impacted Confidence of Impacted ProjectProject

.5 does not indicate 50% chance of impact.5 does not indicate 50% chance of impact

0.0 0.25 0.5 0.75 1.0

No Eviden

ce

Some Evidenc

e

Good Evidence

Strong Evidence

Significant Variables for Significant Variables for Magnitude of ImpactMagnitude of Impact

• Percent change order work-hoursPercent change order work-hours

• Project Manager percent time on Project Manager percent time on projectproject

• Percent owner-initiated change itemsPercent owner-initiated change items

• Productivity (tracked or not tracked)Productivity (tracked or not tracked)

• OvermanningOvermanning

• Change order processing timeChange order processing time

The Quantification ModelThe Quantification Model

% Delta% Delta ==0.36866 + 0.11957 0.36866 + 0.11957 percent percent changechange

-- 0.08065 0.08065 PM % time on projectPM % time on project

-- 0.16723 0.16723 % owner-initiated CO% owner-initiated CO

-- 0.091470.09147 productivityproductivity

-- 0.052130.05213 overmanningovermanning

++0.022345 0.022345 CO processing timeCO processing time

This equation predicts the most likely % Delta This equation predicts the most likely % Delta

(loss/gain of productivity) within a range of (loss/gain of productivity) within a range of

possible outcomes.possible outcomes.

Additional Validation of ModelAdditional Validation of Model

Seven new projects were solicited after close of Seven new projects were solicited after close of research for additional validation of linear research for additional validation of linear regression model:regression model:

•All 7 within ± 15 percent of actual % DeltaAll 7 within ± 15 percent of actual % Delta

•5 of 7 within ± 10 percent of actual % Delta5 of 7 within ± 10 percent of actual % Delta

•4 of 7 within ± 5 percent of actual % Delta4 of 7 within ± 5 percent of actual % Delta

This is an indication that our model is a good This is an indication that our model is a good predictor of the magnitude of impact.predictor of the magnitude of impact.

What Does All This Mean?What Does All This Mean?

• Is this an exact science?Is this an exact science?

•Can you use these Can you use these models with confidence?models with confidence?

•What evidence do I have What evidence do I have to back this up?to back this up?

No Productivity Tracking & Poor No Productivity Tracking & Poor CO Process Time at 95% CO Process Time at 95%

Confidence LevelConfidence LevelPM %Time on Proj & %OwnerInitCO = AvePM %Time on Proj & %OwnerInitCO = Ave

Productivity=0, Overman=0, Processing=5

0%

10%

20%

30%

40%

50%

60%

70%

0% 50% 100% 150%

% Change

% D

elt

a

Data

Lower CI

Upper CI

0%

10%

20%

30%

40%

50%

60%

0% 50% 100% 150%

% Change

% D

elt

a

Data

Lower CI (95%)

Upper CI (95%)

Productivity Tracking & Poor CO Productivity Tracking & Poor CO Process Time at 95% Confidence Process Time at 95% Confidence

LevelLevelPM %Time on Proj & %OwnerInitCO = AvePM %Time on Proj & %OwnerInitCO = Ave

Productivity=1, Overman=0, Processing=5

0%5%

10%15%

20%

25%30%35%

40%45%

0% 50% 100% 150%

% Change

% D

elt

a

Data

Lower CI (95%)

Upper CI (95%)

Productivity Tracking & Good CO Productivity Tracking & Good CO Process Time at 95% Confidence Process Time at 95% Confidence

LevelLevelPM %Time on Proj & %OwnerInitCO = AvePM %Time on Proj & %OwnerInitCO = Ave

Productivity=1, Overman=0, Processing=1

Final CommentsFinal Comments•We do not claim, nor should you expect, We do not claim, nor should you expect,

the “absolute” correct answer, but the “absolute” correct answer, but rather a most likely answer that fits rather a most likely answer that fits within a range of possible outcomes within a range of possible outcomes both above and below our predicted both above and below our predicted value.value.

• Each project is unique and requires that Each project is unique and requires that project-specific data be used when project-specific data be used when applying these models.applying these models.

Final CommentsFinal Comments• We suggest the owner and contractor We suggest the owner and contractor

agree, before a contract is signed, to use agree, before a contract is signed, to use these models as a conflict resolution these models as a conflict resolution tool, should the need arise, at the end of tool, should the need arise, at the end of a project.a project.

• Owner and contractor should track Owner and contractor should track actual work-hours against estimated actual work-hours against estimated work-hours to detect negative trends work-hours to detect negative trends early so steps can be taken to correct early so steps can be taken to correct them before they become a major them before they become a major problem.problem.

Implementation SessionImplementation Session

•Find out how this project works Find out how this project works out.out.

•See a demonstration of the model.See a demonstration of the model.

•Research team members will Research team members will answer questions.answer questions.