Incentives & Restraints

in Transmission & substation projects

 

FEATURED PAPER

By Souvik Shil

SKEMA Business School

Paris, France

 


 

ABSTRACT

Contractor lives and dies for their cash flow. Incentives, the carrot that an Owner dangles before a Contractor when the project begins to float off track to bring things back in line. Regularly a framework is immediately cobbled together as a handy solution, often leaving the two arrangements of supervisory groups who are controlling it with varying perspectives with respects accomplishment of the money related reward. The US Department of Transportation’s report “Work Zone Road User Costs Concepts and Applications” addresses the ideas of incentives and disincentives for their traffic project. It is this idea that this paper addresses by substituting “Lost Opportunity costs” instead of the “Road User Costs Concept” and testing against an oversimplified reasonable Transmission & Substation project. It investigates the underlying idea, applies this to a comparable model grew explicitly for undertaking and touches base at an incentives/disincentive plan for acceleration or lost opportunities which can be implemented amid the contract improvement stage sketching out the “day by day rewards or punishments” to be connected.

Keywords:  Project Scheduling, Accuracy, Duration, Cost Estimation, Planning, Crash Cost[1], liquidated damages, Lost Opportunities, Opportunity cost[2].

INTRODUCTION

One of the key components to choose the accomplishment of a project is time or duration. Some Individuals say time is cash and this is certainly the situation with regards to project management. Diminishing both construction projects’ expense and time is critical in present market-driven economy. This relationship between construction projects’ time and the cost is called time cost trade-off[3] decisions which has been researched widely in the development administration writing.

The impact of delays on different types of costs

Firstly, indirect costs[4], which are otherwise called overheads. The settled expenses of general offices, administrations, convenience, organization, and management will happen each day, independent of whether the work is done or not. They just stop once the venture is finished.

Secondly, direct costs or variable expenditure, incorporate materials and manpower. These costs are time-related in various diverse ways.

A basic portrayal of the possible connection between the duration and its direct cost are:

  • Project acceleration requires additional labor, materials, and equipment and therefore, costs more money.
  • Delaying the project beyond the normal completion time results in increased costs due to inefficient allocation and utilization of resources.
  • The longer construction takes, the greater the road user costs and agency overhead costs will be.

This subject raised itself amid audit of the GPCCAR’s “Module 08-7 Validate the Time and Cost Trade-offs” and was quickly attracted to the fascinating representation which delineated the schedule vs time optimization, the wellspring of which originated from the US Department of Transportation (DoT), Federal Highway Agency’s archive “Work Zone Road User Costs Concepts and Applications”[5], Refer to figure 1. This model presents three cost curves: construction costs, road user expenses construction designing costs (consolidated for presentation purposes), and total project costs.

The construction cost curve illustrates to the contractor’s expense for finishing the project. For each construction project, the construction cost is the most minimal at the pattern term (point CL). Any deviation from this standard schedule will result in expanded construction costs. Work Speeding up requires extra contractor effort through the tighter schedule and extra time, additional resource mobilization and sending or potentially development, and causes extra expenses to the contractor. Expanding the project completion beyond the stipulated duration results in penalty and misallocation and underutilization of assets, and consequently brings about extra expenses to the contractor.

More…

To read entire paper, click here

 

Editor’s note: This paper was prepared for the course “International Contract Management” facilitated by Dr Paul D. Giammalvo of PT Mitratata Citragraha, Jakarta, Indonesia as an Adjunct Professor under contract to SKEMA Business School for the program Master of Science in Project and Programme Management and Business Development.  http://www.skema.edu/programmes/masters-of-science. For more information on this global program (Lille and Paris in France; Belo Horizonte in Brazil), contact Dr Paul Gardiner, Global Programme Director paul.gardiner@skema.edu.

How to cite this paper: Shil, S. (2019). Incentives & Restraints in Transmission & substation projects, PM World Journal, Vol. VIII, Issue IV (May).  Available online at https://pmworldlibrary.net/wp-content/uploads/2019/05/pmwj81-May2019-Shil-transmission-and-substation-projects.pdf

 


 

About the Author


Souvik Shil

SKEMA Business School
Paris, France

 

 

 

Souvik Shil is a multilingual project management professional, specialising in Transmission & Substation construction sector with more than 4 years of experience in project execution. Born in the eastern part of India, he holds a Bachelor of Technology majoring in Electrical Engineering in the India. Presently he is pursuing MSc in Project and Programme Management & Business Development from SKEMA Business School (a top tier school in France and globally). Also, Souvik is PRINCE2 and AgilePM Credentialed.

Souvik possesses international experiences by having worked as a Project Engineer of a Power transmission project in Rwanda, Africa and Assistant Project manager for high voltage power transmission project in India.

Souvik can be contacted at: Email: souvik.shil@skema.edu

LinkedIn: https://www.linkedin.com/in/souvik-shil-agilepm-prince2-368bb588/

 

[1] Project Crashing, and Time-Cost Trade-Off. (n.d.). Retrieved from http://www.prenhall.com/divisions/bp/app/russellcd/PROTECT/CHAPTERS/CHAP17/HEAD05.HTM

[2] Investopedia. (2017). Opportunity cost. Retrieved from http://www.investopedia.com/terms/o/opportunitycost.asp

[3] Elbeltagi, D. E. (n.d.). PROJECT TIME-COST TRADE-OFF, Chapter 8. Construction Management. Retrieved from http://osp.mans.edu.eg/elbeltagi/CM%20CH8%20Time-Cost.pdf

[4] Lord, J. (n.d.). Time/Cost Relationship in Project Management. Innovation enterprise channels. Retrieved from https://channels.theinnovationenterprise.com/articles/time-cost-relationship-in-project-management

[5] Mallela, J., & Sadasivam, S. (2011). Work zone road user costs: Concepts and applications: final report. U.S. Department of Transportation, Federal Highway Administration Office of Operations (HOP).