:AACE CERTIFICATION 2009-2010:

Capital Appropriation Request (CAR) Vs Work Authorization

Capital Appropriation Request (CAR) approval is the important gate in the project management process flow especially in PT Inco organization. The Capital Appropriation Request (CAR) is a document covering all of the project requirements. A capital appropriation represents a commitment of funds required to undertake a fixed asset investment. Once the planning process has been completed, the scope of work has been carefully defined and scheduled, budgets has been allocated, and performance methods has been identified, include assessment of the Health, Safety and Environmental, the Project Manager will then compile them into the Capital Appropriation Request (CAR).

Capital Appropriation Request (CAR) is the document to delegate the project responsibility to the Project Manager for accomplishing specific project tasks with associated budget and schedule. Formal signature however is required to indicate mutual agreement that the specific scope of work define within the authorizing document can be accomplished within define schedule and cost objective.

Capital Appropriation Request (CAR) actually is the ‘contract document’ between the project management organization lead by the Project Manager, Project Sponsor, Project Owner and executive management. The project can not be performed prior the CAR has been formally approved by formal signature through formal and electronic sign off and no expenditure should be committed without obtaining this approval. Looking at the life span management from owner perspective as picture 1, Capital Appropriation Request (CAR) gate approval exactly on the shareholder gate approval or final authorization where portfolio/asset manager and program/operation manager are rapidly decreasing their influence into the project and handed over the person responsibility for the accomplishment of project objectives, either a project manager or person acting in role of project manager.

Life Span Management R. Max Wideman’s “Project Management Framework”

Humphreys & Associates chapter 32, Establishing the Performance Measurement Baseline page 647-648, also state the work authorization requirement of the project. A project must be authorized before work can be performed and actual costs charged against the project. If it is an internally managed project, then the top level work authorization may be as simple as memorandum from executive management. This is exactly the same with PT Inco organization performing Capital Appropriation Request (CAR) as the work authorization to the project manager.

In some organizations, a project manager will issue work authorization documents to a functional manager, who will support the performance of a project. These documents are the vehicle of the project manager to delegate the responsibility for accomplishing specific project tasks, with associated budget and schedules, to these support organization. In PT Inco organization case, the functional manager is the contractor project manager.

The following items and information are needed for the work authorization:
1. Work Breakdown Structure (WBS) orientation
The WBS defined how the work is organized. Since it serves as the framework for the integration of all project management activities, it is an essential ingredient for a work order reference. WBS also becomes a compulsory for a CAR document.
2. Responsibility assignment from the Organization Breakdown Structure (OBS)
In PT Inco CAR document, Organization Breakdown Structure mentioned about the reporting line and who responsible for what.
3. Scope of work
Refer to the Work Breakdown Structure (WBS), will allow visibility into the specific work being authorized.
4. Schedule assignment
The schedule is integrated with the scope of work to be performed.
5. Budget statement
When work is authorized, the associated budget for accomplishing that work must be known. This budget value must correspond the scope of work and schedule for completing the work. Budget on the CAR which has been approved should not be added without proper further approval.
6. Charge number assignment
In PT Inco organization, charge number called capital work order which is created by the project controller and correspond to the Work Breakdown Structure (WBS).
Once the project formally has been formally authorized, it requires a formal change order to modify the scope of work, the schedule and the budget.

What lesson that I can learn here that for the entire organization who deal with the project management, the work authorization is the key gate as the formal agreement for the top management to authorize the work according the scope, schedule and cost and these authorization is the contract document between the management with the person who responsible to manage the authorized project.