TCMFramework_SM.gif (5258 bytes)TCM Framework: An Integrated Approach to Portfolio, Program and Project Management
(Rev. 2012-01-09)
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III. PROJECT CONTROL PROCESS - CHAPTER 10 - PROJECT CONTROL PERFORMANCE ASSESSMENT

10.3 Change Management

10.3.1 Description

    Change management refers to the process of managing any change to the scope of work and/or any deviation, performance trend, or change to an approved or baseline project control plan. The change management process is used to approve or disapprove changes in the scope and baseline plans, thereby closing the project control cycle loop. The process includes the identification, definition, categorization, recording, tracking, analyzing, disposition (i.e., approval or disapproval for incorporation into approved or baseline project control plans), and reporting of deviations, trends, and changes.

    Change management imposes the required structure and discipline in the project control process by protecting the integrity of the control basis as a valid baseline (i.e., it represents a project plan in alignment with project objectives and requirements) for performance measurement. The process objective is not to limit or promote change, but to manage and report it. Change can be good or bad, but it must always be carefully evaluated, approved or rejected, and, upon approval, methodically incorporated into the revised baseline plan. Changes most often require the project manager’s approval; however, in any case, a formal process for how change progresses from identification through incorporation into the project must be understood by all project team members.

    Most project systems seek to limit changes during project execution because the difficulty of managing change increases with their number and extent (i.e., "analysis paralysis"), and change is a known project performance risk factor. Changes during project execution—particularly if they result in cost increases, drawdown on contingencies, delays, disputes, and/or rework—can be highly demoralizing. The best approach to limit change is to establish and use a strong scope development and integrated planning process (Chapter 7). Projects that begin execution with clear objectives and requirements, integrated project teams, and thoroughly defined scope and project execution plans will experience fewer deviations and less need for changes.

    With change management playing such a central role in the project control process, it is important that the procedure be well planned, disciplined, and documented, as well as formally communicated to all project team members. It is critical to change management that each project team member understand the process and roles and responsibilities for identifying, tracking, communicating, approving, and incorporating change as it will occur throughout the project lifecycle.

.1 Deviations, Variances, Trends, Changes, and Corrective Actions

    As used in this section, the terms deviations, trends, and changes have unique definitions. Changes are alterations or variations to the scope of work and/or any other approved or baseline project control plan (e.g., schedule, budget, resource plans, etc.). A deviation is a departure, intentional or otherwise, in a work product or deliverable from established requirements (e.g., nonconformance with contract documents, the design basis or specifications, an imperfection or defect in a material, etc.). A trend is a non-random variance of actual project performance from that which was planned. Variance analysis is a method used to determine if a variance is a trend by identifying the root cause of the difference from plan and categorizing the difference for tracking and final disposition. Trends are commonly the result of changing market prices of labor or material, or varying labor productivity rates. While deviations, variances, and trends could be considered "changes" in the general sense of a change in status or conditions or changing performance over time, discussion of changes in this section are in reference to changes in scope or plans. In fact, one objective of the process is to help ensure that deviations, variances, and trends do not result in "changes."

    In that respect, change management outputs include not only actions to incorporate changes in the scope and baseline plans, but corrective or improvement actions as well. Corrective actions are tasks or activities performed or directions given with the intent to mitigate or otherwise address a deviation in a work product, or a variance from planned project performance (i.e., to recover performance or improve or restore control). Improvement actions are tasks or activities performed or directions given with the intent to further improve upon an establish trend identified or to take advantage of new information, technology, market conditions, etc.

.2 Change Management and Associated Processes and Practices

    The forecasting process (Section 10.2) is closely allied with change management because forecasting is used to assess each applicable element of the project control plan that is affected by a deviation, trend, change request, or opportunity (the effects often resulting from corrective or improvement actions). The forecasting process is linked to change management at its beginning with identification of change and at its finish when change is approved or rejected and the impact of change is incorporated into the revised forecast.

    The risk management process (Section 7.6) is also closely allied with change management because not only is change a risk factor in itself, but the contingency cost control account (established in the risk management process to address risk impacts), which is typically the responsibility of the project manager, is managed through the change management process. Each non-scope change evaluated must be assessed within the context of the contingency allocated to the project. Furthermore, it is important to understand how the proposed change will impact the future risk profile of the project by introducing greater or less risk than considered in the baseline risk planning and contingency funds allocated.

    Managing contract change is a part of the change management process. As was discussed in the procurement planning section (7.7), contracts are legal agreements between project suppliers, contractors, and the owner. Change often requires that new or revised agreements be established through the procurement process. However, change increases the risk that there will be disputes and legal claims; these are generally detrimental to project performance. Therefore, developing plans and applying methods for resolving disputes and claims are part of the change management process.

10.3.2 Process Map for Change Management

    Figure 10.3-1 illustrates the process map for change management. As was mentioned, the change management process closes the project control cycle loop. It is largely a governing process that is characterized by extensive interaction between the forecasting (Section 10.2) and project control plan implementation (Chapter 8.1) processes.

Figure10.3-1.jpg (113115 bytes)

Figure 10.3-1 Process Map for Change Management
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    The following sections briefly describe the steps in the change management process.

.1 Plan for Change Management

    Change management starts with planning. Initial planning starts with development of the execution strategy and work packages during scope development (Section 7.1) and continues through development of control accounts during project control plan implementation (Section 8.1). It is critical that the basis of each aspect of the project control plan be thoroughly documented because all deviations, change requests, and trends are assessed relative to that basis. The change management plan itself should describe specific systems and approaches to be used in change management in alignment with the other project control planning, measurement, and assessment processes.

    Successful change management starts with good integrated project planning. Even the best planned and executed change management processes and systems (and project control as a whole) have been known to collapse under the burden of the avalanche of deviations, change requests, and trends that will result if initial project planning was poor.

    Planning also assigns specific roles and responsibilities for change management. It is often said that change management is the responsibility of everyone involved with the project because the success of the process depends on everyone actively watching for and notifying project management of any potential or actual deviation or change. However, once that notice is made, change management, like other aspects of performance assessment, is generally a function performed by cost engineers in a project control role supporting the project manager. However, those responsible for the work packages affected by change, and the project team as a whole, will be included in assessments as appropriate; this creates a significant communication challenge. Change management for a large project may be a full time job for one or more people during project execution.

    Another aspect to plan is the use of tools and systems for change management (e.g., deviation notice and change request forms, etc.). In addition, the interaction/interface of the owner, suppliers, and contractors in change management, including dispute and claims resolution processes, must be addressed in contracts and change management plans.

.2 Identify Deviations, Variances, and Change

    The change management process depends on everyone with project work package responsibilities actively watching for and notifying project management of any potential or actual deviation or change. In addition, the performance assessment process (10.1) identifies and notifies project management of performance variances.

    The initial notification should be immediate (e.g., verbal, e-mail, etc.), allowing the project manager to make immediate disposition (e.g., reject, direct an action, etc.) as appropriate. Immediate disposition may be appropriate if the correction action clearly has no significant impact on the project scope, plans, or performance of other activities. However, if the issue cannot be disposed of without further analysis of its nature and consequences, the notification is done in writing, usually using a previously established change notification form.

    Notification forms have many names (e.g., deviation notices, change requests, etc.) but all have the same purpose of providing project management with a basic description of the nature of the deviation or change, a quick assessment of its cause and general impact, and basic descriptive data (e.g., name, date, location, etc.).

    Once notified, project management records and begins tracking the deviations and change requests (i.e., using a change log or logs) to ensure that the change management process addresses each one appropriately. Notices should be categorized in the logs by source (e.g., business, engineering, etc.), engineering discipline/account category, cause (e.g., safety, environmental, constructability, etc.), and so on so that management can better understand the project change drivers. Applying greater levels of definition and categorization to notices during the logging process allows for improved analyses later in the process when root causes for change drivers are being sought and lessons learned are being determined. For contracted work, the contract will establish mechanisms for handling change requests.

    Notification of performance variances is typically part of regular project status reporting. However, project management must be notified of variances observed outside of the normal assessment and report cycle as well. As with deviations and change requests, immediate disposition may be appropriate if the performance correction action clearly has no significant impact on the project scope, plans, or performance of other activities.

    For those deviations, change requests, and variances for which disposition is not immediate, further definition and analysis is required before corrective actions can be taken.

.3 Analyze Variance

    Variance analysis is a process to determine if a variation is a trend or a random occurrence and whether the variation is acceptable. If the variation is not acceptable, variance analysis also determines the most likely cause of the variation (whether it is a trend or random) and identifies potential corrective actions that address the cause. Corrective action alternative development is integrated with the forecasting process (Section 10.2).

    Most project teams recognize that an unfavorable performance trend, being non-random, indicates that future performance is also likely to be similarly unfavorable unless corrective action is taken. However, the risk is less apparent, but no less in need of corrective action, when there is no bottom-line variance (e.g., cost is on budget), but the measure is unpredictable over time or between accounts. In other words, if the apparent good bottom-line performance is the result of luck, corrective action is needed to establish control.

.4 Define Deviation or Change Scope

    The scope of deviations and change requests for which disposition is not immediate must be defined. The cause must also be assessed. The individual notification should include a basic description of the nature of the deviation or change, a quick assessment of its cause and general impact, and basic descriptive data (e.g., name, date, location, etc.).

    After notification, it is usually a project control responsibility to further define the scope as needed to assess the change impact on overall project scope and plans. This scope definition step is integrated with the forecasting process (Section 10.2) that uses the methods of scope development (Section 7.1) as appropriate. At the same time, the most likely cause must be determined so that corrective actions can be developed that will both address the cause and mitigate impacts.

.5 Assess Impact

    Having defined the nature and cause of trends and the scope and cause of deviations and change requests, corrective action alternatives are developed and assessed using the forecasting process (Section 10.2). Forecasting applies the methods of integrated project planning (Chapter 7) in the context of a project that is progressing while demanding quick and effective change management decisions.

    The change management process may initially identify alternative actions to implement changes and to correct performance trends (including process improvements). These are generally simple action statements (e.g., "revise schedule logic"). The forecasting process develops the proposed action statements into actionable control plan alternatives for further assessment (e.g., "complete activity B before activity A"). Additional alternative actions may be identified in this process.

.6 Make and Track Disposition

    Based on the impact assessment, a correction action is decided upon and implemented as appropriate. Project management records and tracks the trends, deviations, and change requests (i.e., using a trend log, change log, etc.) to ensure that the change management process addresses each one appropriately. If the disposition affects a supplier or contractor, and/or requires additional costs, then several other change management steps apply as described in the following paragraphs.

.7 Manage Contingency and Reserves

    If an approved corrective action will cost more or less than the amount budgeted for the affected cost accounts, then budgeted funds, as approved, may be shifted from or to the contingency budget as appropriate. However, if the change represents a change of the project objectives and requirements, then additional or excess funding needs to be obtained or returned to the enterprise as appropriate. In some cases, the enterprise may have established a reserve account for such changes, and in that case, the funds may be obtained from that account with enterprise management approval.

    The contingency account should be regularly assessed as to the contingency required for the remaining work. This is done using the methods of the risk management process (Section 7.6). That process evaluates and quantifies the impact of any risk factors inherent to the revised scope and plans. After a corrective action is decided upon, the risk management plan is updated.

    The practices for assessing and managing the contingency cost account are sometimes called contingency drawdown methods. In some project systems, if the contingency required for the remaining work is less than the amount remaining in the contingency account, the excess contingency is returned to the enterprise so the strategic asset management process can use the funds for other investments. In other project systems, the excess funds, if any, are not returned until the project is closed out.

    The advantage of periodic drawdowns is that they efficiently manage the enterprise’s limited resources, and project teams are less likely to spend contingency funds on work outside of the current approved baseline project scope. The risk of periodic drawdowns is that if not prudently managed more contingency could be needed than available after drawdown. In this case, the project team may resort to risky control actions or inappropriately cutting scope rather than going through the process of replenishing contingency, which can by painful or problematic in organizations new to managing contingency in this manner .

.8 Resolve Disputes and Claims

    Managing contract change is a part of the change management process. The interactions/interfaces of the owner, suppliers, and contractors in change management are addressed in contract documents and change management plans. However, change sometimes results in disputes and claims if the parties cannot agree on some aspect of the change in relation to contract agreements (i.e., scope, compensation, relief, damages, delay, etc.). Disputes are generally best resolved by the project team using the established contract mechanisms (i.e., dispute clauses), which may include arbitration.

    However, if the dispute cannot be resolved by the project team, a claim may result. A claim is a written statement by one of the contracting parties seeking adjustment (e.g., additional time and/or money) or interpretation of an existing contract because of acts or omissions during the preparation of or performance of the contract. Unresolved claims are filed with the courts and from there the legal claims resolution process (which varies widely depending on the nature of the claim, jurisdictions, etc.) takes over. Claims resolution can become a project in itself, led by the legal function, often continuing well after the project from which it originated has been completed and otherwise closed out. Enterprises may establish objectives for the legal process that bear no relationship to the project from which the claim originated (e.g., establish legal precedence for the validity of a novel claim basis to be applied on current or future projects).

    Claims resolution uses many of the planning, measurement, and assessment methods in the project control process, but in a forensic context to achieve the objectives of the parties to the claim. Any aspect of the planned and actual performance may be subject to dispute, analysis, negotiation, and resolution.

.9 Revised Control Basis

    The change management process, in integration with the forecasting process (Section 10.2), results in a revised project control baseline against which performance will be measured and assessed (Section 8.1) for the remaining project. It is a project control responsibility to keep those responsible for work packages appraised of the approved control baselines.

    The approved changes should be incorporated into the control basis using work package and control account methods. For project control, each control account must represent a discrete package of work and set of activities that are measurable and for which responsibility is assigned. For example, consider an approved change titled "Install a spare (bypass) pumping system." Change management assessment determined that this change affects work packages for the pump system, as well as the electrical system (i.e., the motor control center), and affects labor and material costs and includes activities for several disciplines and trades (e.g., mechanical, electrical, etc.). In other words, it affects many control and cost accounts for which the budget, resources, and activities will be revised accordingly.

    Some projects incorporate changes in the control basis by establishing new control accounts for the entire change (e.g., "Install a spare (bypass) pumping system."). However, except for changes of the most limited nature, this approach violates project control principles (discrete packages of work and set of activities that are measurable and for which responsibility is assigned). If enough changes are implemented this way, the control basis will cease to be reliable (e.g., the electrical responsibility will no longer have a handle on the work they need to do).

    At the close of the change management process, historical project information, including experiences and lessons learned about change management practices, is used to improve change management tools such as notification forms, logs, procedures, etc.

10.3.3 Inputs to Change Management

.1 Project Implementation Basis. (See Section 4.1). This defines the basis asset scope, objectives, constraints, and assumptions, including basic assumptions about forecasting approaches. All changes must be evaluated with respect to their alignment with the project implementation basis.

.2 Project Control Plans. The project control plan (Section 8.1) describes specific systems, policies, procedures, and approaches to be used in project control, including change management.

.3 Deviation Notices and Change Requests. Anyone associated with the project may notify project management of a potential or actual deviation or change.

.4 Variances. Performance assessment (Section 10.1) identifies differences between actual and planned performance for any aspect of the project control plan for variance analysis in the change management process.

.5 Corrective Action Alternatives. Alternative designs, specifications, activities, activity logic, and so on are identified in concert with the forecasting process (Section 10.2).

.6 Alternative Forecasts. Forecasting (Section 10.2) provides expected plan and performance results for alternate corrective actions. Change management considers and decides upon the alternatives based in part on forecasting outcomes.

.7 Risk Management Information. Change management applies the methods of risk management (Section 7.6) to analyze risks of correction actions and to manage contingency.

.8 Procurement Information. Change management applies the methods of procurement planning (Section 7.7) to help avoid and resolve disputes and claims.

.9 Historical Project Information. Successful change management approaches are captured and applied as future planning references and to help improve change management methods and tools.

10.3.4 Outputs from Change Management

.1 Project Control Plans. Change management plans are considered in overall project control planning (and all other aspects of measurement and assessment planning).

.2 Trends. Trends, as identified through variance analysis, are considered in forecast analyses (Section 10.2).

.3 Scope Definition. (See Section 10.3.2.4) After identification of a deviation or change, it is usually a project control responsibility to further define the scope as needed to assess the change impact on overall project scope and plans. This scope definition step is integrated with the forecasting process (Section 10.2), which uses the methods of scope development (Section 7.1) as appropriate.

.4 Selected Corrective Actions and Approved Scope. The approved scope of changes and corrective actions is determined in the change management process and used in forecasting (10.2).

.5 Corrective Action Alternatives. The change management process initially identifies possible corrective actions. Forecasting (Section 10.2) may identify other alternative actions as well.

.6 Alternative Forecasts. The change management process considers and decides upon alternative actions based in part on forecasting results (Section 10.2).

.7 Project Control Basis. The revised scope of work and plans, including approved changes, becomes the revised project control baseline (Section 8.1).

.8 Historical Project Information. The project’s change management approaches are captured and applied as future planning references and to help improve change management methods and tools.

10.3.5 Key Concepts for Change Management

    The following concepts and terminology described in this and other chapters are particularly important to understanding the change management process of TCM:

.1 Change Management. (See Section 10.3.1).

.2 Change. (See Section 10.3.1.1).

.3 Claim. (See Section 10.3.2.8).

.4 Contingency. (See Section 7.6). Risk and uncertainty are quantified and incorporated in baseline cost, schedule, and other plans. The quantification is called contingency.

.5 Corrective Action. (See Section 10.3.1.1). Also improvement action.

.6 Deviation. (See Section 10.3.1.1).

.7 Dispute. (See Section 10.3.2.8).

.8 Forecast. (See Section 10.2). The project team’s estimate of the most likely outcome for a given element of the project plan (e.g., cost forecast, schedule forecast, etc.) Forecasts are a basis for selecting corrective actions.

.9 Reserves. (See Section 7.6). Funds included in an approved budget, but are not expected to be needed to address originally defined project baseline requirements. In general, reserves may only be released for expenditure by enterprise management.

.10 Trend. (See Section 10.3.1.1).

.11 Variance. (See Section 10.3.1.1).

.12 Variance Analysis. (See Section 10.3.1.1).

Further Readings and Sources

    The project control change management process is covered in most project management and control texts (i.e., see readings for Section 2.4). The following references provide basic information and will lead to more detailed treatments.

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