The jungle is dense and the river is deep

This little gem of advice was given to me some years back up in the farthest reaches of Kalimantan (Borneo as we used to call it). I was PM on my first resources project, building new infrastructure on a brand new open cut coal mine.

The team consisted of me,  my resident engineer, a contracts manager and 750 locals. The project included all buildings, plant maintenance facilities, barge loading, purchase of all mine plant, and a 45 Klm haul road. Total value about $US100m. All carried out through virgin rain forest with the only access by sea or helicopter. That was the construction side, but the other part of the project was to set up a cost structure for getting the coal out of the ground, taking it to the river, loading barges and delivering it to coal ships moored in deep water. A cost structure that would accurately manage costs and report/forecast on the profitability of the business.

The mine was Indonesian owned and the owners had a very simple philosophy. They knew how much they could sell a tonne of coal for, so they simply wanted to know the cost of getting it out of the ground and delivered to their clients’ ships.

The way it had been set up was haphazard with all subcontractors charging on a cost plus basis. One of my tasks was simply to stop this and get everyone working on fixed price lump sum term contracts. Maybe easy to do in sunny Brisbane but a bit more challenging in deepest Kalimantan. So I set about the task by working out what it was costing, the average selling price of coal project over the next three years, discounted cash flows, capital investment, the normal run of the mill spreadsheet heaven.

I called a meeting of about 100 subcontractors, all locals. They turned up in pretty much the same uniform of shorts, ripped off tee shirts, and many with ubiquitous parangs (you call that a knife, a parang is a big bloody knife). So with my interpreter I commence my spiel, being ultra careful not to point, raise my feet to expose the soles etc etc. After about twenty minutes of extolling the virtues of the certainties of fixed price arrangements, the win win relationship plus all sorts of similar management speak, a small figure at the back stood up. Not only did the audience go quite, my Indonesian interpreter went visibly pail. The interlocutor spoke firmly for ten seconds and the room if it were possible went even quieter. My interpreter was reluctant to speak but after physically prodding him for the translation, he whispered to me, a feat in itself as I was two foot taller than him, that the firm spoken speaker had said, “The rivers are deep and the jungle is dense”.

I was baffled and asked him what does he mean. My diminutive friend responded in his best interpretation of my scouse accent, “Er keep this up mate and you won’t be going home in a box ‘cos they won’t find yer body pal”

I ditched fixed price negotiations immediately and from that point on we were all friends. The infrastructure was completed, the price of coal to China went up, the subbies made money, the client smiled (or was it wind) and I flew home a year later business class.

Data Protection

Five months ago we had an addition to our family – Max. Of course he is the apple of my eye and has been showered with love and affection from his arrival. Yes there has been sleep disruption and lots of additional expense but that goes with the territory of expanding the family.

Last week my dear wife returned to work and as I am currently working from home, I was entrusted with looking after my beamish boy. This meant lists of tasks from by other half, one of which was to talk to the medical insurance company. It appeared that max’s health insurance premium had not been getting deducted from my credit card. So armed with all the relevant information ie dates, account numbers, policy details etc I proceeded to call the insurance company.

It should be noted that I do not normally deal with insurances, ban statement, or bills of any kind. They all fall under the purview of my wife. my philosophy being that as I deal with dollars, contracts, payments, claims and recalcitrant subcontractors all day, I can leave all the personal paperwork to my highly organised wife. ask me how much our rates are and I would not have a clue. as to who supplies the gas and electricity, I do not have the foggiest. How the household bills are paid is a mystery to me. but my wife, bless her, had written on the list that Max’s health insurance should come out of my MasterCard on the 20th of each month and to date not transactions had occurred.

So I call the enquiry line wich turns out to be somewhere in the environs of Bombay. A very pleasant lady took my details, the policy number, max’s date of birth, my credit card details etc. I explained that the money had not been leaving my account and could she help me,

She said no and could not discuss Max with me. The reason being the insurance policy had been arranged by my wife and due to “Data Protection” she could not discuss the policy, the payment or even Max with me. I explained that Max was ours, the money was to come from my account, but the lady was adamant. At this point Max, who had been soundly asleep, awoke. I explained that max could verify my identity but could not speak, after all he is only five months old.

So she could not help me send her my own money and my wife had to speak with them the next day. This will probably be the last time i foray into the household budget area. cash flow reporting and job cost forecasting on multi million dollar projects is much simpler.

By the way here is a picture of the beloved Max.

Project Controls

The first time I heard this term was a few years ago whilst working in the Middle East in Qatar. In Australia the role is usually described as Contract Administrator, but project controls much better describes the position.

The skills and experience that I have looked for in potential contract administrators can be broadly divided in to three:

  • contract management
  • financial management
  • schedule/programme management (on larger projects this becomes the role of project planner)

Unfortunately on some lesser size projects the contract administrator ends up being the dogsbody who has to manage the subcontractors, submit progress claims to the client, order the stationery and do the filing. So a lot of their time is spent carrying out tasks which they are grossly over paid for.

The concept of project controls ensures that the right people are doing the right job. Unfortunately if you have ever tried to hire an experienced planner who can use say Primavera you will know how difficult it is.

So far I have been talking about the construction industry, mining and infrastructure has even bigger problems. Many companies in this sector simply do not have the systems and expertise to run and deliver projects. There is a reluctance from the mining sector to bring in construction people, yet, here in Australia that is where the boom is taking place and that is where there is a desperate shortage of planners, contracts people and project managers.

Profit – percentage or dollars

If you were discussing a pay rise with the boss would you ask for a percentage increase or a dollar amount. When you organize your household budget do you ever use percentages?

Of course you don’t, dollars mean cash income, percentages are for government spin doctors and bean counters. If you apply for a car loan or a mortgage the prime question is about how much do you earn ie cash.

So how to change this way of financial reporting? and get away from margins to the real world of cash – dead easy – stop trying to make us all accountants.

Readers have seen my views previously regarding killing off spreadsheets which is aka accountancy current practices. But that is a completely separate discussion. However, it was the bean counter who first started using Lotus 123 and now the expectation of employers is that is how the project manager will report on the project’s financial performance.

When a tender is accepted we know what the client is going to pay and if the estimate is accurate we know our costs. At the financial wrap up we know what we have been paid and what it has cost. The skill in forecasting between these two points in time is aided by using good project management systems such as Jobpac or Cheops.

The margin percentage is just a result of a simple calculation. The cash profit is what shareholders want.

Down with spreadsheets

Illustration of subroutine in Microsoft Excel ...

When the automobile was invented, people put their horse carriage in the barn. When the personal computer came along, people put their typewriters in the closet. When the video recorder was invented, people put their Super 8 cameras away for good. Throughout history, the better tool replaces the more cumbersome one.

The same is true when it comes to budgeting. In today’s business world, companies can no longer afford to spend four or five months or more creating their budget with an obsolete tool, that is, through the cumbersome process of pulling together dozens and dozens of spreadsheets.

The reasons are clear:

1. Spreadsheets were never designed to process reams and reams of   information quickly and easily.

2.  Spreadsheets are cumbersome to change whenever there’s a budgeting revision, prolonging a protracted process even more.

3. Spreadsheets offer poor security, which compromises the integrity of the budgeting documents, enabling changes to the budget to be made surreptitiously and risking exposure of confidential information to outside parties.

4.  Spreadsheets are error-prone, so their accuracy is constantly in question.

Forward-thinking companies give their front line managers the tools they need to create their own budgets. The result: budgeting accuracy improves.

G A I N I N G   C O N T R O L

Ultimately, it all adds up to one thing: lack of control. Companies are seeking more control over the amount of time it takes to put the budget together, more control over how long it takes to make a change in the budget whenever it’s needed, more control over the accuracy of the data, and more control over who can access that data.

Fortunately, there’s a solution to these problems: budgeting and planning software applications. They enable you to:

1. Accelerate the budgeting cycle so you can complete it fast.

2. Increase confidence in the accuracy of the numbers.

3.  Change budgeted numbers without undue delay or tedium.

4.  Engage more users in the planning process.

5.  Help users become more efficient and productive.

6.  Gain dynamic control over business results.

7.  See immediate ‘snapshots’ of where the company stands in relation to the budget.

8.  Achieve implementation quickly and cost effectively.

Anyone who’s ever been saddled with the spreadsheet budgeting chore knows that it means long days and countless weeks of collecting information from different departments and business units, then checking the accuracy of each spreadsheet. Even simple changes to a spreadsheet result in a major undertaking.

Finance managers and budget analysts tend to spend as much time verifying that all of the spreadsheets are actually linked together properly or that formulas are pristine, as they do anything else in the budgeting process. That leaves little time for more value-added activities like analysing discrepancies, conducting what-if scenarios, and planning. With a budgeting application, finance managers are no longer bogged down with a morass of information that must be linked together. Those tasks are handled automatically. In addition, the amount of time spent checking and verifying the numbers is reduced substantially. That gives finance managers more time to assess what the numbers mean, gain greater visibility into the future health of the company, treat sore spots before they become major infections, and make strategic course corrections that keep the company focused on its goals.

D YN A M I C   B U D G E T I N G

Forward-thinking companies give their front line managers the tools they need to create their own budgets. The result: budgeting accuracy improves. It becomes a flexible, dynamic process that can be adjusted when external conditions warrant a change in direction or emphasis. Instead of a once-a-year event, budgeting becomes an ongoing, dynamic process that establishes a tighter connection between corporate strategy and operational activity. Spreadsheets, on the other hand, are inherently inflexible, making them incapable of serving as a living document that moves in tune with the business.

Anyone who’s ever been saddled with the spreadsheet budgeting chore knows that it means long days and countless weeks of collecting information. Suppose you needed to overhaul your budget because your company was adding a new sales division, requiring the infusion of investment to support the effort.

Or, perhaps your company decided to open a series of non-budgeted new branch offices over the next several months? What if you faced an unplanned expenditure that required financial impact analysis? How would you fund those unforeseen projects using a static, calendar-based budget that’s already earmarked where all the money will go over the next 12 months?

A budgeting and planning application can accommodate such major adjustments to the budget within a matter of minutes. A spreadsheet approach might take weeks, leaving funding for these new projects in limbo and opportunities at risk. In addition, there’s the ever-present concern that spreadsheet-generated data may be wrong, whereas applications for budgeting and planning have built-in controls that insure accurate, reliable results. They also help identify anyone who attempts to “sandbag” budget numbers with misleading information, since the data is now so much more transparent. Managers gain the ability to control the bottom line as never before.

With real-time information at your fingertips, you gain access to that longer window of opportunity in which to act. That gives you more control over correcting variances.

B E T T E R ,   M O R E   U P  – T O – D A T E   I N F O R M A T  I O N

Budgeting applications provide the controls that produce more accurate and reliable information. For example, let’s say sales of $30 million were budgeted for the upcoming year, but external conditions such as the economy, shifts in customer behaviour, or unusually poor weather conspires against your company, causing you to fall short of that goal. How valuable would it be to have that information a month earlier rather than a month later? If you had one extra month to work on correcting the shortfall, it would give you a longer window in which to solve the problem, perhaps by hiring more salespeople or opening up a customer hot line. With real-time information at your fingertips, you gain access to that longer window of opportunity in which to act. That gives you more control over correcting variances.

Gaining a higher degree of certainty about activities like future sales can send a positive ripple throughout the company. The marketing department, for instance, might react to a decline in sales performance by initiating a more robust promotional program that focuses on the company’s most promising new products. Or, let’s consider the reverse scenario: sales that are expected to be higher than originally anticipated. Operations might respond by considering outsourcing more activities to handle the additional workload. The accounting department might respond by making preparations to handle a larger number of invoices. The advantage: you can respond with the right amount of resources at the right time in the right place.

OV E R C O M I N G   I M P L E M E N TA T I O N   I S S U E S

Anything as comprehensive as a budgeting application may cause you to wonder about the complexity and time required to implement such a tool. However, implementation frequently does not require an undue amount of time or effort. One reason is that some budgeting applications provide access to your existing chart of accounts, making it easier to create a structure for your budgeting system.

In addition, easier access to historical data can reduce the need for IT resources and involvement and get you going more quickly. Easier access to historical data can reduce the need for IT resources and involvement and get you going more quickly.

OT H E R   W AY S   T O   S P E E D   U P   I M P L E M E N TA T  I O N   I N C L U D E :

• Hiring a consultant and conducting a planning session before starting   the implementation. During this planning session, consultants can walk through the current process and determine what changes or improvements the company would like to implement, as well as the requirements of the application from an IT perspective, so IT has the information they need to ensure the environment is set up properly.

• Determining what works well in your existing budgeting process and changing what doesn’t work well.

• Implementing the budgeting application in phases. As an example, you might start with your operational budget, then add more budgeting capabilities within other parts of the organization, such as human resources, over time. In addition, software installation can be completed ia the Web, which reduces implementation costs and time.

• Appointing an internal champion. The champion typically has a comprehensive understanding of the internal process and who does what.  Committees have the potential to slow implementation down.

• Training, available via traditional or virtual (Web) classroom. Quite often, managers can begin budgeting after a one-hour orientation.

R E C O U P I N G   T H E   C O S T   O F   Y O U R   I N V E S T M E N T

Using a budgeting application doesn’t automatically mean abandoning the investment you may have made in spread sheets. Some budgeting applications are designed to work with Excel, giving you the best of both worlds: the control of an application to simplify and streamline budgeting, along with the freedom of Excel for input, manipulation and presentation. Perhaps most importantly, the budgeting application is a solution that has the ability to pay for itself over time.

H O W ?

•  By automating many of the manual tasks, such as managing all the  spreadsheets (creating, populating, distributing, gathering), consolidating  the information, verifying formulas, formatting, adding accounts, and verifying and validating the data-the most time consuming chore of all.

• Eliminating human error. If managers forget to change one number in  the spreadsheet, they have to communicate that error with the budget  administrator and hope that the number gets changed. In a budgeting application, managers make their own changes.

• Reducing the amount of time spent in meetings by providing collaboration via e-mail memos, notes and attachments, so managers can understand  he rationale behind important numbers and assumptions.

• Letting people do their own jobs, instead of letting budget chores pull  them away from their jobs.

• Justifying use of the application throughout the year to facilitate better business execution, monitor business conditions and adjust plans, giving the organization the potential to take advantage of new business opportunities-opportunities that might have been missed using the old, traditional spreadsheet budgeting process.

• Increasing management’s ability to recognize inflated numbers and unrealistic assumptions.

• Giving users a simpler way to keep score of how they’re performing in relation to the budget, making the budgeting process more meaningful and relevant for them.

• Making it easier for more people to be involved in creating their own budgets and to understand the impact of other budgets on their own.

In short, what value do you put on a tool that gives your company the power to capitalize on more business opportunities than ever before?

Saving time and money, in many cases as much as 40% of the time it takes to do budgeting in a spreadsheet.


12 Microsoft SharePoint Sites - Winners of the...
Top Sharepoint Sites

For those of us who work in organisations that have a head office, regional offices and remote project sites, communicating across the business has always been an issue. Especially here in Australia where the expression “just down the road” can mean 500 klms.

OK we have the internet, mobile phones etc but transferring information from a coal mine site to head office is reliant on a “link” of some type. Too much data slows the link down, people get frustrated and resources are tied up. But now with cloud based computing we can change how communication can be speede up and with software like Sharepoint we can have a certain level of commonality within the company.

If you can log in to face book you can access Sharepoint. If you work in groups or project teams you can share information easily. If you manage groups or teams you can monitor what is going on no matter where it is taking place.

The biggest issue with Sharepoint is people taking it up and using it. Without adequate preparation and training staff assume it is “out of the box software” like Excel, when in fact it is a tool which can be easily developed to suit user requirements. So to implement it effectively we need to make it as essential as email. Interestingly, the “Facebook Generation” have no problems with this as it is just another site to surf. Some others who have not emraced the social network concept will need more assistance

Microsoft Dynamics 2012 AX Launch

Microsoft Dynamics AX

This launch is a must for anyone who is involved in managing business processes. The future of inter linked business management, linked MS programs such as Sharepoint, could be Microsoft Dynamics

You can register for this upcoming event at this site:

The New Black Gold

Dragline at the Curragh Coal Mine
Go Curragh

Construction in Australia was affected by the GFA but not as badly as the rest of the world. However, contractor’s order books did reduce and is unlikely to return to the levels of pre GFA for some years. In the meantime the resources sector is booming. Nowhere more so than in coal mining.  So yours truley has moved from construcyion into mining. Farewell Brisbane and hello Mackay.

Our biggest issue in providing construction, maintenance and engineering services to the coal mining companies is people. We cannot get enough of them. Engineers, planners, project managers, contract administrators/project controllers, electrical engineers, mechanical engineers and site operational workers. The rewards are exceptional and the future workload is guaranteed.

So if you want to move from tower cranes to draglines get in touch with me.

We know we are making money ….. aren’t we?

Robert Bernard Reich, American politician, aca...
Robert Reich come back all is forgiven

Some people confuse increased company activity with increased profits. When in fact they are just going broke quicker.  Now before we start I am not rambling about Keynesian economics, the Galbraith hypothesis or even Robert Reich‘s analysis of the Global Financial Crisis (the most recent not the one that will hit before Christmas). This missive is about the nuts and bolts of how we manage our dollars in straightforward construction and engineering contracting.

If you are not in construction/resources/engineering in Australia you assume that those of us who are get paid in gold bars and all the companies for whom we work are making gazillions. As I find it hard to be objective from within all I will say is we work hard and booms don’t last forever. But what is a given is that we do not maximize our profits because our thinking is out dated. So what has Robert Reich got to do with construction/engineering in Queensland Australia in 2011? The answer is simple: his analysis of complex US/global economic problems is rational and succinct; and we don’t analyse our projects well enough. He understands: the complexities and his precis is in lay mans’ language; we don’t appreciate the complexities and summarize without fact or maybe with linked spreadsheets or proprietary software which is not fully understood by not only the people using it, but less so by the people relying on it.

Most organisations know where they stand financially as an overall business but have difficulty in being up to speed at a project level. They rely too much on the verbal reassurances from Project Managers, and glossy monthly reports full of nice pictures, colourful graphs and the ubiquitous spreadsheets. All of which the site cadet has spent a week preparing and the project manager’s cursory glance.

The simple fact is the senior management want to know two things: what are the risks; and what are the opportunities. And they need t have confidence in the person giving them that information. That is why the financial status of the project MUST come from the finance department, and the project team provide the forecast of what will it cost to get the job to the finishing post and how much above/below the contract sum will we be paid. That does not sound difficult because it isn’t.

Next time when the blog is on this subject I will look at making sure it is not difficult whilst ensuring accuracy and confidence.