Dark Matter of Projects – Indirect Work and Costs

Happily, astrophysicists, from the University of Edinburgh and the University of British Columbia, recently presented evidence of dark matter in the universe. This dark matter’s mass is what helped them discover its presence.

Costs of projects often far exceed their estimated costs. What are the sources of the additional (dark) costs?

When dealing with costs of projects, plant turnarounds and routine maintenance programs, project controls teams jump to estimate the direct costs – based on the materials in the drawings and the work scope described in the plans. These costs are easy to visualize and, therefore, easy to estimate.

‘Indirect costs’ is the label that estimators use to describe the cost of overhead items such as supervision, project field facilities, associated services and rentals.

What often gets missed is the need to define the actual work that is done under the Indirect Cost label. This work includes:

  • Quality Control and Quality Assurance,
  • Inspection,
  • Testing,
  • Safety, Health and Environmental assurance and tracking,
  • Tracking compliance with statutory and regulatory standards,
  • Coordinators that need to sign-off at critical stages,
  • Discipline leads in Instrumentation, Electrical, Mechanical, Structural, Piping, Equipment, etc.,
  • Department Managers,
  • Supply Chain professionals, etc.

One site that we work with has 44 discrete Roles that contribute to getting ready for, and managing the execution the project. Each person in each of these Roles does work, and gets paid for that work, and thus adds significant (often un-estimated, and therefore, dark) costs to the project.

Furthermore, these 44 roles each are responsible for an average of 15 processes or tasks, amounting to a total of 44 x 15 = 660 actions. Additionally, each of these needs to be signed off by the primary responsible role (person), and by the primary accountable role (person) – which adds up to at least 1,320 sign-offs – not counting the inevitable 100s more sign-offs needed when real-time changes occur to the scope being executed and tracked.

Clearly, these indirect costs, for the indirect work being done, are more significant when focus is placed on the responsibilities of each role.

Yet Indirect Costs continue to be underestimated, and thus overrun, because few project controls systems are enabled to help teams to:

  1. Identify the roles and responsibilities for each deliverable required for each stage in a project, turnaround or program;
  2. Have the right people be notified that their sign off is required prior to progress on the work;
  3. Measure adherence to the business rules (strategy),including time to act, thus providing a tangible means to improve performance of this indirect work.

Without these abilities, project teams are continually playing ‘catch-up’ with required notifications and sign-offs, usually in time-consuming, large meetings involving the entire project management team – which may include most of the 44 roles.

So, get control of your Indirects, and, like those astrophysicists, you, too, can be happy that your projects and programs have fewer surprises to be discovered.