Consulting Engineers of Alberta (CEA) 38 Annual General Meeting Project Governance

Transcription

1 Consulting Engineers of Alberta (CEA) 38 Annual General Meeting Project Governance DR. GEORGE JERGEAS PEng. Professor of Project Management Department of Civil Engineering, University of Calgary May 18, 2016

2 How confident are you on your organization s ability to deliver projects on time and on budget? Slide 2

3 Evaluate How Your Organization Handles These Situations Is your organization able to move faster? Are critical decisions made in a timely manner? Are your stakeholders fully engaged? Are your Business Units fully engaged? Do you expect your organization to meet moving targets? Can your organization achieve predicted results without direction? Is it acceptable for you to throw more money at a problem? Slide 3

4 Key Message Major projects are in crisis Incredibly complex Consistently 50% to 100% cost overruns Blame Game Our future is at stake We can fix the problem Slide 4

5 Major Projects No major problems re quality and safety Projects running in excess of design capacity Hardworking people No unskilled or unprofessional conduct Proud of industry s achievements Slide 5

6 Major Projects We systematically do not deliver on time and on budget. No single actor in control of the vision and implementation. Projects are delivered by a network of stakeholders. Slide 6

7 Reasons for Cost Overruns Lack of realism and underestimation of initial cost estimates Inappropriate management influence of cost estimates to meet economic hurdles, and ignoring project reality Lack of appropriate risk analysis and management expertise Contingencies are set too low Changes in scope are not sufficiently taken into account Lack of discipline and ineffective control of project scope Underestimation of the geological/geotechnical risk Quantity and price changes are undervalued Lack of experienced owner and contractors Overall quality of owner and contractor construction management capabilities Ineffective organizational and governance structures for mega-projects Lack of collaborative relationships and myopic risk allocation strategies Inappropriate delegation of owner responsibilities to contractor Lack of clear definition of lines of authority and management responsibilities and lack of empowerment Slide 7

8 Typical Project Cost Allocation Engineering: 8 15% Equipment: 32 35% Construction: 50 60% Engineering is the smallest % with the biggest impact on construction. Slide 8

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10 How Projects are Delivered? PHASE 1 IDENTIFY & Assess Opportunities Determine Project Feasibility and Alignment with Business Strategy PHASE 2 SELECT from Alternatives Select the Preferred Project Development Option PHASE 3 DEVELOP Preferred Alternative Finalize Project Scope, Cost and Schedule and Get the Project Funded ~25 % Engng. AFE/FIDE PHASE 4 EXECUTE (Detail EPC) Produce an Operating Asset Consistent with Scope, Cost and Schedule PHASE 5 OPERATE & Evaluate Evaluate Asset to Ensure Performance to Specification s and Maximum Return to the Shareholders -Feasibility -DBM - Application -FEED -Long-Leads - Reg. Approval - Detailed Design - Procurement - Fabrication -Construction -Commissioning -Start-Up - Perf m Testing - De-bottleneck 25% engineering is not enough to provide the Slide 10 required accuracy in the AFE budget!!!

11 Insanity Slide 11

12 More % Engineering Complete and Better Quality Design Final approval after detailed engineering rule 80% of engineering complete before mobilizing to site 100% of IFC drawings before construction Slide 12

13 Cost Growth and Design Completion Construction Cost Growth Percentage of Design Complete Before Construction part of the Aker group

14 The Four Planes of Projects Activities on each plane are impacted by the other planes Slide 14

15 Project Risks Slide 15

16 Operational (Project) Risks Corporate management Explore Operational risks Project management Environment Slide 16 Availability of resources Efficiency/productivity Timeliness Operability HSSE Site related risks Normal logistics risks

17 Strategic (Enterprise) Risks Strategic risks Corporate management Project management Environment Deliver Maturity at project sanction The project execution strategy Changes to project objectives Acceptance of project business risk exposure Organizational Alignment JV issues Slide 17

18 Contextual (Global) Risks Corporate management Project management Environment Contextual risks Adapt Project location Market conditions Geopolitics Public opposition Slide 18

19 Three Buckets for Project Risks Contingency: for the Operational Risks Scope Allowance: for the Strategic Risks Management Reserve: for the Contextual Risks Slide 19

20 Cost Contingency Drawdown Curves Cost % of Contingency Time Now Time % of Project Schedule Drawdown Plan Actual Amount Allotted to Date Slide 20

21 Project Governance CEO Principal (owner) Project sponsor External stakeholders PEO Subproject leaders Functional leaders Team leaders Self leadership Agent (project organization) Slide 21

22 SBU Strategy Project Goals Corp. Strategy Marketing Public Relations Human Resources Finance Business Technical Project Sponsor PEO Project Manager Manufacturing Planning Operations Maintenance Safety Execution Team Consultants Safety Specialists Environmental Purchasing Regulation Metrics Process Engineering Constructability/ Construction Design IPA Project Finance Materials Management Slide 22

23 Project Sponsors Set the course for the project team to: Build a unified vision, based on teamwork, trust, and innovation. Ensure project leaders are committed to collaborative thinking (adversarial thinking costs everyone). Develop project specific charter, conflict resolution process, key performance indicators and ground rules. Conduct independent health check of the soft and hard issues on projects acting as an early warning system for potential problems. Conduct on-going training and coaching in response to identified issues. Develop tailored training for key team members and additional high impact training customized to the project. Slide 23

24 Fresh Thinking is Required Slide 24

25 Slide 25