Revised LCCE Case

______________________________________________________________________________________
This case was written by Dr Arif Iqbal Rana, Dr Abdur Rahman Malik and Ms. Ayesha Azhar at the Lahore
University of Management Sciences to serve as basis for class discussion rather than to illustrate either effective
or ineffective handling of an administrative situation. This material may not be quoted, photocopied or
reproduced in any form without the prior written consent of the Lahore University of Management Sciences.
This research was made possible through support provided by the United States Agency for International
Development. The opinions expressed herein are those of the author(s) and do not necessarily reflect the views
of the US Agency for International Development or the US Government.

2013 Lahore University of Management Sciences

REHABILITATION OF LOWER CHENAB CANAL EASTERN:
CHALLENGES IN PROJECT PERFORMANCE MANAGEMENT

On 9
th
September, 2004, Mr. Khalid Ahmed Khan, Head of the Project Management Unit
Planning and Development Department, Government of Punjab, was preparing for the
meeting of the Provincial Steering Committee for Project Management. This Committee
comprised of five Secretaries
1
of different departments. This meeting was planned the next
day, to review the progress of the Lower Chenab Canal Eastern (LCCE) project. At the time
of its initiation, the project was expected to be completed by 31
st
January, 2005. In a recent
meeting (which was held on 5
th
August, 2004 to review the status of the LCCE project),
Major (Retd.) Javed Majid, Secretary, Irrigation and Power (I&P) department, had indicated
that the project would be completed on time. However, in Khalids opinion, the project
would not be completed before the canal closure in October 2005.

Khalid had made a presentation to the Chief Minister (CM) of Punjab, Ch. Pervaiz Ellahi, in
June 2003 on the benefits of implementing the Earned Value for monitoring projects. The
presentation had been requested by the CM to seek advice from Khalid on improving
performance on government projects. The CM was particularly worried since the
development on public projects had increased almost 10 fold in his tenure. After the
presentation the CM decided to setup a Project Management Unit, and offered Khalid the job
to head it. LCCE was the first, and largest of the projects accepted by PMU for monitoring
for the CM to date.

1
Secretary is the designation for the senior most officer in the federal or provincial government in Pakistan.
[Type text] [Type text] 03-851-2013-1
-2-

As Khalid took a final look on his numbers, he recollected what he had learned during his
experiences with the public sector, on the pressures on the bearer of bad news. For example,
these were mistakes and delays on part of the government in finalizing and awarding
contracts; while there were contractors who based on their connections were too hot for
any corrective action. In fact one of the contractors, who had been awarded the contract for
two of the sectors on this project, was known to have close relationships with the President;
who in turn was politically aligned with the CM himself. But, Khalid wondered, if the
project was heading for delays, and no decisions are taken, who will lose eventually. Could
project monitoring data be used for a win-win situation for the different stakeholders.

MANAGEMENT OF PUBLIC SECTOR PROJECTS IN PUNJAB

Punjab was Pakistans largest province with a population of 72 million. The public sector
development budget for Punjab was approximately $ 4 billion (US) in 2003
2
. The major
development sector areas included civil infrastructure, irrigation system, education and
health. The Planning and Development Department, Government of Punjab, was the
custodian of all the public sector projects in Punjab. Public spending in Punjab had increased
by almost 30%, since 2002. This increase in public spending was challenging the present
capacity of the government to effectively plan and execute over 1200 projects in the public
sector portfolio. Keeping these challenges in mind, a review of existing project management
practices was carried out by the government of Punjab in July 2003. This exercise was
undertaken to identify bottlenecks in the development process. In response to the results of
the review, a set of recommendations were formulated into a plan called the Chief Ministers
Project Management Initiative (CMPMI). This initiative aimed at, reviewing the public
sector project management standards and setting up a Project Management Office (PMO) by
November, 2003. The PMO office was designed to cater to the planning, monitoring and
performance management needs of large public sector projects. It also acted as a reference
for provincial governments and public sector entities to foster improved efficiency and
performance in project execution. Two bodies were also created to implement the Chief
Ministers Project Management Initiatives:

2
A report authored by Khalid Ahmed Khan and co-authored by Rizwan Amin Sheikh, originally published as a
part of 2005 PMI Global Congress Proceedings- Singapore.
-3-

Provincial Steering Committee for Project Management (PSCPM)
This was planned to be the principal policy-making forum to guide the
implementation of new project management in the provincial government. This body
was headed by the Chief Secretary, Government of the Punjab, who was the senior
most bureaucrat of the province.

Project Management Unit (PMU)
This unit was planned to be the execution body. It was responsible for turning the
policy guidelines issued by the PSCPM into tangible deliverables (templates,
guidelines, best practices, trainings, etc.). The PMU was to be headed by a project
management professional who had hands on experience of managing projects. This
unit was incorporated into the Planning and Development Department.

Capacity building efforts by individual departments were guided by the PSCPM and PMU.
The physical implementation of the guidelines in terms of hiring of manpower, acquisition of
project management tools, and the development of the Project Management Offices was the
responsibility of the line departments. Internationally recognized PMI standards were used as
the base standard for project management. This was in line with the PSCPM policy of the
adoption of these standards.

Mr. Khalid Ahmed Khan joined PMU in November 2003, as its first head. He had worked on
projects in IT (National Database and Registration Authoritys Computerized National
Identity Card and Electoral Roles project, Machine Readable Passport project), Engineering
(Fertiliser, Process Plants), Infrastructure (Roads, Canals) and Policy (PM Capacity
Building). He had a bachelors degree in Chemical Engineering (1985) from the University
of Petroleum and Minerals, Saudi Arabia, and a Masters degree in Chemical Engineering
(1986) from Northwestern University, USA. Khalid had been actively involved in Project
Management for over 20 years. He was also the founding president of the Project
Management Institute (PMI), Lahore Chapter.

The Existing System for Project Performance Management
-4-

According to the Asian Development Bank (ADB)
3
review in 2002, cost overruns and project
implementation delays were a common feature of project portfolio management in Pakistan.
The data from the Monitoring and Evaluation (M&E) department, Government of the Punjab
verified this trend. The data suggested that on average, each large scale project was
completed at 155% of its planned cost (Exhibit 1). The data further suggested that against
the planned completion time of 30 months, an average large scale project took about 38
months to be completed, a delay of about 27% (Exhibit 2). Cost and schedule variance in
public sector projects resulted in several failed projects. According to the M&E departments
data, only 19% of the completed projects were characterized as successful projects, whereas
the rest of the 81% of the projects were declared as partially successful or failed projects
(Exhibit 3). This was not just true for a certain class of projects, but could be seen across the
board from major projects like Islamabad-Peshawar Motor Way (36 months behind
schedule), Ghazi Brotha Hydro Project (36 months behind schedule and Rs. 10 billion
4
over
budget), Lahore International Airport (12 months behind schedule) all the way down to small
projects like primary schools and health units.

The existing Performance Management Framework was based on the financial progress of
projects against the annual budget allocations. The Management Information Systems (MIS)
were either non-existent or too weak to provide the quantum or quality of information
required for efficient decision-making. A table taken from the Government of Punjabs
Annual Development Program 2000 report, issued by the Planning and Development Board,
exemplified the practical outcome of the Project Performance Management approach (see
Exhibit 4). The reporting format had five sections:

Scheme Information - Columns 1 to 6
5

Estimated Cost of the Project - Columns 7 & 8
Expenditure and Revision for the Current Year Columns 9 & 10
Provision for the Next Year Columns 11 to 13
Physical Progress - Columns 15 & 16

The indicators mentioned in the project performance management report were calculated
using the formulae given in Table 1, below.

3
ADB, Public Sector Performance in Pakistan, 2002
4
US$ 1 = Rs. 83 in 2003
5
Columns 1- 2 are not shown
-5-

Table 1
Calculation Method for Physical Progress of Projects

Parameter Calculation
Estimate Cost Col 7 + Col 8
Expenditure up to June 1999 Col 9 + Col 10
Physical progress up to June 1999 Expenditure up to June 1999/Estimated cost
Provision for 1999- 2000 Col 11 + Col 12
Physical progress expected during 1999-2000 Provision for 1999-2000/ Estimated Cost
Source: Project Management Office, Planning & Development Department.

THE LOWER CHENAB CANAL EASTERN (LCCE) PROJECT

The Lower Chenab Canal Eastern (LCCE) project was one of the main projects that was
under taken after the creation of the PMU, in November 2003. Thus, this project was
considered critical in terms of measuring the performance of the PMUs team and held a lot
of importance for Khalid. Previously Khalid had worked as a consultant for some of the
public sector projects (such as NADRA Electoral Roles project), but this was his first major
assignment as a civil service officer and the head of PMU. He was enthusiastic about
improving the performance management systems for large scale projects in the public sector.

The rehabilitation of the LCCE project consisted of 12 sectors - A through L. Of these, 10
sectors were awarded in Feb 2004 while two (A&E) were awarded in July 2004.

Physical Description of the LCCE Project
The project "Rehabilitating Lower Chenab Canal System (LCCE)" covered the area under
the command of, Lower Chenab Canal Main Line Upper, Main Line Lower and Upper
Gogera Branch Canal. There was an acute shortage of irrigation water in the command area
of the LCCE system. On account of the flow constraints in the LCCE system, as well as,
stagnancy in water allocations for the LCCE system at the 1968 level, it had become
impossible to feed tail
6
portions of the system. This was the case even during the season of

6
Tail portions are the ends of canals where water speed is lowest due to less water flow in seasons with water
shortage. Low water speed results in heavy sand and clay deposits in these portions. Because of these deposits,
water flow remains low in these portions, even when water availability is high.

-6-

ample availability of water in the rivers, i.e. summer season and could not be managed
without implementing a "Rotational Program"
7
. The LCCE complex was constructed in 1968
for the conveyance, regulation and control of 14,500 cusec in Qadirabad - Balloki Link canal
and 12,000 cusec in Lower Chenab Canal Upper, and for a diversion of 4,100 cusec through
the Lower Chenab Canal Feeder. It was expected that due to the rehabilitation of the LCCE
system, the water losses due to seepage and other wastages would reduce significantly. Water
losses resulted in lesser water availability along with irregularity in supply of irrigated water,
causing an estimated loss in yields of ten percent. Given the entire irrigated area of 3.03
million acres under the LCCE complex, the total improvement in agricultural yield due to the
project, had an estimated value of Rs 12 billion per year
8
.

Types of Work
The project objectives were expected to be achieved by implementing the following physical
works:
1. Raising and Strengthening of the Canals Banks
2. Construction and Repair of Head Regulators (mechanism to control the height of
water flow)
3. Stone Lining of the Banks of the Canals in the Segments of Friable Soil
4. Constructing Spurs (water channels) in Abnormally Widened Parts of the Canal
5. Renovation of the Gates and Gearing System (mechanism to stop/regulate water
flow)
6. Streamlining Flow at Existing Bridges
7. Construction of New Bridges
8. Concrete Lining of the Canal
9. Providing Cattle Bath Stations, and;

7
Irrigation water in Pakistan is generally made available to watercourses in a continuous (but not necessarily
constant) flow. The farmers receive their irrigation water on a fixed rotation basis known as warabandi.
Warabandi is a rotational method for equitable distribution of the available water in an irrigation system by
turns fixed according to a predetermined schedule specifying the day, time and duration (typically a seven day
rotation but may be 10 days in some places) of supply to each irrigator in proportion to the size of his
landholding in the outlet command (Malhotra, 1984).
Malhotra, S.P., Raheja, S.K. and Seckler, D. 1984. A performance monitoring study of the warabandi system of
irrigation management. In: Productivity and Equity in Irrigation Systems. Niranjan Pant (ed.). Delhi: Ashish
Publishing House.

8
Source PC 1: Rehabilitation of Lower Chenab Canal Eastern.
-7-

10. Rehabilitation / Replacement of Century Old Hydraulic Structures

THE LCCE PROJECT PERFORMANCE MANAGEMENT

The primary objective of the PMU in the LCCE project was to assist the Irrigation and Power
(I&P) department in developing their in-house project management capacity. A weekly
reporting format was introduced by the PMU to keep Mr Javed Majid, the Secretary I&P and
Mr Salman Ghani, the Chairman Planning and Development (P&D) departments, updated on
the status of the project. In addition to the data collected from the LCCE project team, the
PMU team had conducted eight onsite visits to various project locations to monitor the
progress of the project.

At the time of initiation, the LCCE project was expected to be completed by 31
st
January,
2005 (1
st
base line). However, progress on the project was behind schedule from the start due
to delays in design and mobilization of the contractors. The LCCE Project had 12 sectors
with an approximate value of Rs 1.73 billion. The original plan called for the project to be
started on 10
th
January 2004 and completed by 31
st
January, 2005. Out of 12 sectors, 10 were
initially awarded after a delay of about two months from the initial schedule. Two packages
(A&E) were reported to have been awarded on 3
rd
July 2004 with a delay of almost six
months. Current and projected delays had created the risk of claims
9
by the contractors. It
was not known if the claims had already been filed or were likely to be filed. Additionally,
there was no assessment of the possible cost escalation due to project delays.

On 31
st
July, 2004 the PMU generated a Project Alert Report to highlight the fact that the
project had achieved little progress in its first five months, especially in packages A & E. In
PMU, a Project Alert was generated when it was clearly established that a project was
unlikely to meet its schedule, scope or budget targets. Generally, a project was reviewed and
re-planned to re-adjust the scope, schedule and budget to address the causes that were
resulting in an unacceptable performance. The report indicated that the project would miss its
completion target of 31
st
January 2005. Based on the progress at the time, the earliest forecast

9
When a contractor has to employ more labour hours than the planned amount because of an issue that is not
his fault, he files a claim for additional money that he has to spend to complete the tasks. For example, if the
contractor has to engage machinery and manpower for more than the planned time due to material supply or
design issues, he files a claim for the additional cost that he has to incur as a result. These claims are paid from
the project cosst, thus increasing the project cost beyond its budgeted amount.
-8-

date for project completion was around October, 2005. Achieving that completion would
require the LCCE team to achieve very high productivity during closure. In the closure
period the supply of water to the canal and cultivated lands was stopped temporarily in order
to complete a few works that could not be performed during the water supply period. The
duration for this closure could not be prolonged for more than the specified period of time, as
any further delay in the closure period would cause tremendous loss to the farmers of the
region.

After the project alert, issued on 31
st
July 2004 by PMU, a meeting of the Provincial Steering
Committee for Project Management (PSCPM) was called by Mr. Kamran Rasool, the Chief
Secretary, Punjab. This meeting was held on 5
th
August, 2004.

AUGUST REVIEW MEETING

During the meeting on 5th August, Chief Secretary Kamran had enquired about the design
issues, financial progress and the overall scope of the project accomplished till that date.

Kamran: Can you (Javed) please update us on the performance and the physical
progress of the LCCE project. We would also like to know about the steps taken by
the department to resolve the design issue, given the impact of this issue on the
project. I fail to see why we started the project without completing the design; in fact,
all I can say is that it is plainly, either bad planning or over ambitious planning.

Javed: You are right, the primary cause of the delay on this project is design and site
acquisition. This project was part of the National Development Plan (NDP) with
WAPDA as the client. The designing of the project was to be done by a consulting
firm however, due to some problems at WAPDAs end, the appointment of the
consultant was delayed by 6 months. During this time the department used internal
resources to design some of the structures who were unable to devote sufficient time
from their operational duties to complete the design in time. These designs had been
passed on to the consulting firm for review and finalization. WAPDA had also
assigned the role of detailed supervision to the consulting firm- a role that was
previously being handled by the irrigation department. As you know, the overall
project had been broken down into 12 sectors and at present all 12 of these had been
awarded. Two packages, A&E, were delayed by approximately 6 months. The
-9-

progress achieved so far in terms of budgeted cost, actual cost and percentage
completion of work is shown on this sheet (Javed passes copies of Table 2 to the
Committee).

Table 2
Data I&P August 2004

Sectors
Budgeted Cost
BC (Rs)
Actual Cost
AC (Rs)
% age
Completion
A 173,256,140 31,460,401 18%
B 145,315,150 32,191,709 22%
C 128,625,820 33,974,036 26%
D 163,301,830 15,455,149 9%
E 146,555,360 19,611,663 13%
F 152,951,830 49,018,210 32%
G 151,738,500 47,838,965 32%
H 77,111,960 16,852,744 22%
I 147,718,380 21,650,797 15%
J 135,336,820 21,366,667 16%
K 122,521,140 10,749,246 9%
L 186,630,310 34,091,762 18%
Total 1,731,063,240 334,261,346 19%

Javed (cont.): In my opinion the project should be complete in 6 months. I&P target
for the completion of the balance works in 6 months requires that, they complete all
works by 31
st
January 2005 using the 15
th
October 2004 and 26
th
December 2004
closures. As of today, the remaining work that was only possible in closure days,
amounts to approximately Rs. 544 million. Closure days available before the targeted
completion date were from 15
th
Oct till 5
th
Nov 2004 and then from 26
th
Dec 2004 till
23 Jan, 2005, both included (next closures available after the targeted completion date
were from 15 April till 29
th
April 2005; 15
th
Oct till 5
th
Nov 2005 and from 26
th
Dec
till 23
rd
Jan 2006). The total days available for project completion within the targeted
date of 31
st
January 2004 were 180 (from 5
th
Aug 2004 till 31
st
Jan 2005, both
-10-

included). Although the I&P department had achieved a load of Rs 300 million /
week on a previous project, considering the project specifications of the LCCE
project, they could go upto a work load of Rs 75 million per week. I assure you that
the project would be completed on time with this estimated work load.

Khalid: The progress of the project till August 2004, shows that the project has been
in suspension for the last seven months. The biggest mistake in my opinion, that led
to many other problems was that Sector A was handed over to the contractors without
finalizing the design issues. We do this just too often in the public sector to start
getting the project related financial incentives. I also have concerns regarding the
work load estimates. Keeping in view the previous performance and the potential
problems (such as contractors claims and design issues) with the project, a target of
above Rs. 50 million per week would be unrealistic. I would suggest that we start
working on making a revision in the estimated cost and duration of the project
without further delay.

Both Kamran and Javed, however, disagreed suggesting that it would be too early for such an
exercise, and that instead of making revisions, they should try to complete the project within
the estimated time and cost. They decided to meet again at the start of next month.

EARNED VALUE

After the August 5th meeting, Khalid was thinking about his future actions. He knew that
delays beyond the targeted date were bound to happen, resulting in the project exceeding its
estimated cost. As sufficient funds were not clearly identified or locked, a small deviation in
the project cost could result in further delays. Khalid was convinced that he needed a better
performance management tool to show the actual picture of project and decided to use the
earned value system of project performance management.

The Earned Value (EV) system was based on the physical completion of a project, as well as
on the actual cost spent on it. Thus, instead of depending on the cost spent on a project as a
proxy for physical completion, the EV system measured the physical completion itself. The
planned cost of work that should have been completed till a specific time was termed as the
Planned Value (PV) whereas, the planned value of work that had actually been completed
-11-

was termed as EV. This system enabled project managers to calculate both the cost and
schedule variance of an ongoing project
10
.

Khalid and his team spent the next two weeks in digging up the planning documents of the
project, to identify the tasks that should have been completed till date. They also identified
the tasks that were actually completed. Khalid, along with some of his team members also
visited the project site to assess the physical progress of the project. This extra work enabled
them to calculate the planned value (the planned cost of work that should have been
completed by then) and the EV (the planned cost of work that was actually completed by
then) for each sector of the project. The actual cost data was already available to him (the
data that Javed had shared in the meeting).

Khalid looked at the data collected (see Table 3), and wondered how to present it to the
senior Secretaries in PSCPM the next day, to convince them that he was right; and without
stepping on too many toes, to motivate them to take appropriate corrective action.

10
Schedule variance is the difference between the value of work that was planned to be completed and the value
of work that was actually completed, whereas cost variance is the difference between the value of work that was
completed and the amount that was used to complete the work.
-12-

Table 3
The Planned Value, Actual Spending and Earned Value, as on 4
th
August, 2004

Sectors

Total Budgeted
Cost
Planned Value Actual Cost Earned Value
B.C (Rs.) PV (Rs.) A.C (Rs.) EV (Rs.)
A 173,256,140 37,064,340 31,460,401 17,875,614
B 145,315,150 33,380,370 32,191,709 25,253,576
C 128,625,820 33,266,450 33,974,036 26,275,164
D 163,301,830 17,394,690 15,455,149 13,614,146
E 146,555,360 39,663,380 19,611,663 13,739,982
F 152,951,830 50,384,680 49,018,210 32,669,884
G 151,738,500 41,785,820 47,838,965 33,932,470
H 77,111,960 18,478,150 16,852,744 12,116,794
I 147,718,380 21,039,960 21,650,797 16,799,022
J 135,336,820 20,699,440 21,366,667 15,437,050
K 122,521,140 13,192,700 10,749,246 9,126,480
L 186,630,310 49,666,210 34,091,762 24,811,940
Total 1,731,063,240 376,016,190 334,261,346 241,652,123

-13-

Exhibit 1


Public Sector Project Performance 1998

Sr # Name of Project Approved
Cost
Revised
Cost
%
Increase
1 Third KV Jamshoro- Multan Second 500 KV Multan-Lahore Gilgit
Transmission Line
9806 18,727 91%
2 Left Bank Outfall Drain (LBOD) Stage-1 8594 31,040 261%
3 Bulk Water Supply From Khanpur Dam To Islamabad/Rawalpindi 3606 6,819 89%
4 Balochistan Primary Education Project 3010 4,460 48%
5 3 x 30 MW EB.Clakhra 2651 5,730 116%
6 Additional 415 MW Combined Cycle Power Unit At Guddu 2586 7324 183%
7 On-Farm Water Management Project 2016 3327 65%
8 Chashma Right Bank Irrigation Projects 1570 13870 783%
9 Development Of Sector I-16 Islamabad 1188 2212 86%
10 132 KV Transmission Lines And Grid Station In Makran Area
Phase- 2
781 879 13%
11 Construction of Parliament Lodges at Islamabad 700 1157 65%
12 Family Health Project NWFP 684 843 23%
13 Tarbell Watershed And Management Project (Phase- 2) 574 753 31%
14 Second SCARP Transition Project Punjab 531 696 31%
Total 38,296 97,837 155%
All costs in million rupees

-14-

Exhibit 2


Average Time (months) for Public Sector Project in Punjab

Source: Directorate General - Monitoring & Evaluation, Planning & Development
Department.

-15-

Exhibit 3


The Evaluation of Public Sector Projects

Source: Directorate General - Monitoring & Evaluation, Planning & Development
Department.
-16-

Source: Punjab ADB 2000 Report
Exhibit 4

Public Sector Project Monitoring and Evaluation Framework
Name of the scheme
Location of the
Scheme
Status of
the Scheme
Estimated cost
Expenditure
up to 1998-
1999
Revised
allocation
for 1998-
1999
Provision for 1999-2000
Foreign
Aid for
1999-
2000
with
source
Physical Progress
Percent
Column 3 4 5 6 7 8 9 10 11 12 13 14 15 16

District Tehsil
Foreign
Exchange
Component
Total
Cost
Capital Revenue Total
Upto
June
1999
Expected
during 1999-
2000
ON-GOING SCHEMES MEDICAL EDUCATION

Replacement of damaged
roof of patiala Block in the
Department of Pathology,
KEMC, Lahore
Lahore Lahore Approved 5.98 5.60 0.98 0.98 94 110
Establishment of Allama
Iqbal Medical College,
Lahore
Lahore Lahore Approved
993.9
433.0
580.9
867.6
350.7
517.1
0.95
0
0.96
1 1 87 88
Construction of Admin.
Block in FJMC, Lahore
Construction of 70-
students Hostel at 1- Road,
FJMC
ROADS & BRIDGES ON GOING SCHEMES
W/I of Attock Pindi Gheb
road (Tarbela- Hattian-
Talagang road) L= 76.00
KM
Attock
Fateh
Jang
Approved 99.1 19.39 15.34 2 2 35 37
W/I of Attock Fateh Jang to
Jang Bhater Brehma road
L= 18.50 KM
Attock
H.Abdal/
Fateh
Jang
Approved 40.15 17.21 5.30 3.69 3.69 56 65
Const. of high level bridge
over river Harro Near
Sanjwal
Attock Attock Approved 19.93 15.63 4.18 0.11 0.11 99 100

Revised LCCE Case

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