Internal Audit Report. Mica Kootenay Microwave Project. December 20, To:

Transcription

1 December 20, 2001 To: R.J. Threlkeld G.S. Smyrl D.C. Bryson J.J. Haley P.L. Shtokalko G.N. Sherlock D.A. Harrison L.I. Bell M. Costello Audit and Risk Management Committee AU0209TD Audit Services Internal Audit Report Mica Kootenay Microwave Project Prepared by: A. Lagnado B.R. McConachy (Consultant) D. Snow

2 Contents 1. Background, Audit Objective and Scope 2. Observations and Recommendations 2a. Project Summary Results 2b. Project Investment 2c. Project Management 2d. Project Implementation Internal Audit Report Page 2

3 1. Background, Audit Objective and Scope Background BC Hydro operates a provincial wide microwave radio network for protection, control and data communication purposes. The Mica Kootenay microwave project is the second phase of a $90 million multi-staged program to replace aging analogue equipment with digital technology, in order to maintain current power system operations, increase equipment reliability and meet regulatory compliance. Objective To assess the effectiveness of the Mica Kootenay Microwave Project management and identify lessons learned for subsequent phases of the microwave replacement project. Scope The audit reviewed business risks, processes, procedures and controls, focussing on the key areas of Investment, Project Management, Implementation and User Satisfaction. We reviewed project documentation and tested key project stages for compliance with BC Hydro s Project Management Policies. We also interviewed the project initiator, stakeholders, project managers, task managers and end users. The audit team was supplemented by Bryan McConachy P. Eng, a Project Management Professional with 20 years of project management experience and a Fellow of the Project Management Institute. Internal Audit Report Page 3

4 2a. Project Summary Results The project delivered the approved scope, on schedule and within the budget. The project met the critical success factors of maintaining continuity of microwave radio links during installation with minimum disruption of service during the transition. The following opportunities for improvement were identified for future projects: Strengthen the risk identification and mitigation strategies during the project planning. Develop a plan to address staff turnover, a certainty in a multi year project. Further develop Project Plan and performance reporting. Strengthen installation quality and testing oversight controls. Evaluate major project schedules changes to avoid compressing critical tasks. Incorporate opportunities for improvement into current project plans based on similar project post implementation reviews. Internal Audit Report Page 4

5 2b. Project Investment The Mica Kootenay microwave project involves replacing equipment at 42 microwave radio sites. The two year project, which commenced in 1999, was completed as planned in The project is expected to be completed at $30.3 million, $3.8 million below the approved budget of $34.1 million. The main reason for the project to be below budget is due to overhead being applied at a lower rate (7%) than budget (18%). A summary of the project costs is provided in the following table: Description Approved Actual (October 2001) Forecast to completion % variance Direct costs (incl contingency) $ 27,098,000 $ 25,422,000 $ 26,730, % Overhead $ 4,883,000 $ 1,933,000 $ 1,955,000-60% Interest during Construction $ 2,152,000 $ 1,604,000 $ 1,604,000-25% Total $ 34,133,000 $ 28,959,000 $ 30,290,000-11% The main project benefit was to support power system operations. Reliability metrics for the digital microwave radio were not yet available and management advise that the calculation methodology is being determined. Other expected benefits include, regulatory compliance and higher bandwidth for data services. Based on this project, future teleprotection cost reductions of the order of $3.3 million are expected for the Southern Interior by elimination of expensive analogue interfacing equipment. Recommendations None. Management Action Plans None required. Internal Audit Report Page 5

6 2c. Project Management We assessed project management performance based on BC Hydro Project Management policies, and best project management practices identified by the subject matter expert. Overall we concluded that the project was well managed. The project was lead by an experienced project manager, and supported by a committed project team. Significant effort was devoted to planning. The project business case was rigorous and comprehensive. An independent review of the project scope was undertaken. These measures allowed successful delivery in spite of many unanticipated risks. Our discussions with internal customers confirmed that they were satisfied with the replacement project, and that no serious operational disruptions were experience during the installation. Our subject matter expert has identified the following opportunities to strengthen project delivery: Risk Assessment: The project encountered some unanticipated risks. While some risk assessment and mitigation strategies were included in the planning of the project a more formal risk mitigation plan could have been developed. Project Plan: The project plan should have been more developed for the size of project. Key items such as organization chart, responsibility matrix and transition strategies should be included according to project management policy. Staff Turnover: The loss of key resources was not anticipated or planned for, which created a significant challenge for the project team. Monitoring and Reporting: Reporting of performance results was not sufficient. Also, deficiency resolution report and the project completion report have not yet been completed. Regular and comprehensive status reporting is needed to manage a project of this size. Internal Audit Report Page 6

7 2c. Project Management Recommendations Strengthen project management by incorporating more comprehensive risk assessment and mitigation strategies, project plans, resource contingency plans, formal and regular project status reporting. Management Action Plans Risk Assessment and associated mitigation forms part of BC Hydro policy and will be continued and expanded in future project plans. Completion date March 31, Project plans will be strengthened and identify more stringent and formal status reporting to be implemented by task managers. Level of reporting will be consistent with size and risk of project. Completion date April 30, Internal Audit Report Page 7

8 2d. Project Implementation We reviewed the key stages of project execution, including design, contract management, equipment commissioning, switchover of circuits and project closure, and concluded that overall, implementation was very successful primarily due to the outstanding effort of staff. Significant positive outcomes include: Use of formal contract management methodology for tendering equipment and installation. Public tendering approach for installation work resulted in low bid award and significant savings ($0.6 to $0.8 million) over traditional suppliers. Secured a competitive 5 year pricing option on major radio equipment with potential for further cost reductions in subsequent projects. Our subject matter expert has identified the following opportunities to strengthen project management: Project Schedule: The two year project schedule was tight with limited flexibility to cope with changes. For example, the loss of key staff in the Design group and the compressed time to transfer circuits to the new system created additional challenges. Contract Management: The selected equipment installers were not experienced in some areas of telecommunication work. While specialist expertise and BC Hydro support were made available to the installers, there were still some concerns about quality controls and future use of non-qualified suppliers for delicate work. Site Operation Testing: Testing of the 42 radio sites for operation is a key step, but there was limited formal test plan preparation. The review by an engineer of record of the equipment commission test templates was overlooked. Internal Audit Report Page 8

9 2d. Project Implementation Recommendations Strengthen implementation controls including: quality controls and site inspections to minimize installation deficiencies, and Operations Testing Plan with oversight controls for procedures, review of test results, and system testing. Management Action Plans More formal process associated with project implementation, commissioning and acceptance are being implemented. The process that uses commissioning notices to energize and to operate will be used in future telecommunication projects. Multiple projects various completion dates. Formal documentation and reporting from the Project site coordinator will be enhanced. Completion date May Formal test procedures will be implemented by field resources but managed and approved by design. Completion date September 30, Internal Audit Report Page 9