City of Nanaimo Capital Project Planning, Design, Delivery and Operation Process Review

Transcription

1 City of Nanaimo Capital Project Planning, Design, Delivery and Operation Process Review City of Nanaimo November 14, 2017

2 City of Nanaimo Table of contents Table of contents 1 Executive summary 1 2 Introduction 5 3 City of Nanaimo 8 4 Findings & recommendations 11 5 Next steps 30 6 Appendix A List of documents reviewed 32 7 Appendix B List of interviewees 36 8 Appendix C Stage Gate checklist 37 9 Appendix D RACI Appendix E Prioritization 39 i Deloitte LLP and affiliated entities

3 City of Nanaimo Executive summary 1 Executive summary 1.1 Background Deloitte was retained by the City of Nanaimo (the City) to conduct a review of the City s project planning, design, delivery and operational processes (the Review). More specifically, the scope of the Review focused on four (4) departments which are responsible for delivering the City s capital projects: Engineering & Public Works (ENGPW) Parks & Recreation (PR) Fire Rescue (FR), and Information Technology (IT) As a subsequent phase, the City intends to enhance its project management practices by developing processes and tools, and providing training to its staff. For the year 2016, the City budgeted $50.6 million for its capital projects, whereas the actual capital spend was $24.9 million. The City intends to spend approximately $188 million for capital projects during the period , ranging from a high of $58.6 million in 2017 to a low of $26.4 million in Approach Deloitte reviewed the City s capital project planning, design, delivery and operation practices related to construction and IT projects; and further examined the maturity of the City s processes by utilizing a Project Lifecycle Framework which aligns with leading industry practices. Deloitte carried out a review of the documentation provided by the various City departments relating to its current practices. The observations from the document review were then tested, explored further and verified during interviews with 28 City staff involved in the planning, design, and delivery of capital construction and IT projects. We compared the City s current state against industry leading practices, identified gaps and developed recommendations for improvement. Subsequently, Deloitte prepared this report incorporating our detailed findings, recommendations, and a preliminary road map to guide the implementation of our recommendations. 1.3 Summary of findings and recommendations Overall the City s processes related to capital planning appear to be standardized, well understood, and followed by various departments involved in the capital planning process. There are opportunities for improvement in terms of establishing a consistent framework for project prioritization, and ensuring that the capital plans are aligned with the long term community plans. In terms of project management, City project managers design and deliver projects inconsistently, based on their prior experience. The City does not have standardized project management processes and tools, and governance structure, limiting its ability to ensure consistent project delivery practices across various departments. Based on our review, we identified a number of gaps within the various City departments related to capital planning and project management practices compared to practices adopted by peers and recommended by industry for portfolios of similar size and nature to those of the City. In structuring our recommendations, we focused primarily on those that are achievable in the short and medium terms, and that have high-impact in terms of tangible improvements on project and portfolio performance. We also provided a number of recommendations that relate to leading practice improvements that may be addressed in the longer term once critical inefficiencies have been addressed. 1 Deloitte LLP and affiliated entities

4 City of Nanaimo Executive summary # Findings Recommendations Capital project planning 1 The capital planning process appears to be well understood; however, there is no standardized project prioritization framework in place for the various departments. 2 The City s Asset Management initiatives are evolving; however, they are underutilized for its annual capital planning process. 3 There appears to be disconnect between the long term Official Community Plans (OCPs) and the annual capital plans. 4 Inadequate workforce planning causes departments to over-commit in terms of their capacity to deliver projects, resulting in frequent budget carry-forwards. Implement the framework currently being developed, for staff to prioritize and select capital projects for Council s consideration. The City should continue to promote asset management thinking throughout the organization. The City should ensure that a process is in place to promote alignment with community planning groups in the annual capital project planning cycle. The City departments need to undertake a more accurate capacity analysis prior to assigning resources and committing projects for any given year. Governance and roles & responsibilities 5 Lack of a Structured Project Management & Governance Framework limits the ability to ensure consistent project delivery practices across various departments. 6 Accountability and ownership for project definition is unclear and lack of clarity on the deliverables and approvals required for the various phases of the project lifecycle. 7 Project Execution Plan (PEP) does not exist. Approaches for project implementation are adhoc, and lack planning and oversight. 8 Project roles and responsibilities are not clearly defined across various departments. 9 Inconsistent or inappropriate staff qualifications /experience, and under-resourced departments. Develop a Project Management Framework, governed by a new Project Management Office (PMO), and compliant with Project Management Institute s (PMI) PMBOK. Implement an oversight process that follows mandated project lifecycle stages. Hold stage gate reviews with stage checklists to ensure compliance. Develop requirements for a PEP and integrate into the oversight process as part of the stage gate review sessions. Refine the roles and responsibilities of all internal and external stakeholders involved in the various phases of the project lifecycle and develop a RACI matrix. Review current staffing levels; establish formal project management qualifications, training or experience as a requisite for future recruits; and encourage existing staff to undertake training. Project management processes 10 Absence of a policy mandating portfolio or project management practices. 11 Lack of project management procedures and a Project Management System in place. Introduce a new policy that mandates the use of project management leading practices. Develop an integrated project management tool (using Excel and/or SharePoint) that includes a set of interconnected templates and sub-tools, and meets the requirements of the Project Management Framework. Provide training to ensure adoption. Procurement and contracting strategy 12 Lack of formal defined contract strategy evaluation for large projects. 13 The recently adopted procurement policy establishes governance protocols for the purchasing of all goods and services. The City should undertake formal defined contract strategy evaluation for large projects, taking into account factors such as potential project risks, market conditions, complexity of the project, and internal capacity. The City project managers should continue to work with the Purchasing department and ensure strict implementation of the procurement policy. 2 Deloitte LLP and affiliated entities

5 City of Nanaimo Executive summary # Findings Recommendations Reporting 14 Lack of clear guidelines for project/portfolio reporting. Develop reporting protocols to include specific information needed to support decision-making at senior organizational levels, and to demonstrate transparency around the performance of projects. 15 Lack of clear guidelines for contractor reporting. Establish and mandate clear guidelines for contractor reporting, and develop table of contents and metrics to be included as part of the contract requirements with third parties. Estimating and cost management 16 No formal guidelines for developing estimates, across all stages of the lifecycle. 17 Lack of clear guidelines for establishing contingency and for contingency drawdown. 18 Lack of a cash flow forecasting methodology which takes into account the construction and spending cycles. 19 Lack of a standardized tool for project cost tracking. Establish clear guidelines for estimating, with requirements for costing to be based on specific project documentation, site visits, actual unit rates from completed projects (not only from recent bids received), and with adjustment ratios as needed. Develop guidelines for establishing contingency and managing contingency throughout the lifecycle, with clear assignment of responsibility over contingency reallocation and drawdown. Develop an approach to cash flow forecasting that takes into account industry best practices, and project spend timing and magnitude patterns, thereby providing a more accurate picture of the spending curve at the portfolio level. Develop a coherent project-based cost management and tracking tool, in line with industry practice. Schedule management 20 Project schedule management is generally informal. Develop guidelines for baseline schedule development and management. Scope management 21 Project scoping appears to be siloed, lacking coordination between various City departments. 22 Inconsistent application of change management processes. Poor tracking of change control and contemplated changes. No visibility over forecasted changes 23 The project close-out procedures are not well developed yet, with unclear rules around documentation, review and archiving of as-builts, warranty information, and document storage. Mandate the use of Project Charter for all large projects, with clear scope definition requirements. Develop and standardize a change control process that follows industry practice, and develop templates for change request forms and change log. Develop project close-out procedure including a checklist, and mandate the compliance with the checklist s requirements. Risk management 24 The practice of risk management is generally informal within project teams. Formalize the risk management process and address lack of compliance of risk procedures. 3 Deloitte LLP and affiliated entities

6 City of Nanaimo Executive summary 1.4 Next steps Having identified 24 findings and recommendations, we have mapped these recommendations against a matrix that identifies level of impact relative to ease of implementation for each of them. This mapping allowed us to identify those recommendations that are quick wins and that can be tackled in the short term, as well as these that are longer term, as presented in figure 1. Out of 24 recommendations identified, five (5) are quick wins which are high-impact recommendations which can be implemented in a short timeframe. High Quick Wins Highest Impact, Easiest to Implement Solutions : 6 Implement an oversight process that follows mandated project life-cycle stages. Hold stage gate reviews with stage checklists to ensure compliance. Level of Impact Refine the roles and responsibilities of all internal and external stakeholders involved in the various phases of the project lifecycle and develop a RACI matrix. 14 Develop reporting protocols to include information needed to support decision-making at senior organizational levels, and to demonstrate transparency around the performance of projects. 1 Implement the framework currently being developed, for staff to prioritize and select capital projects for Council s consideration Develop an approach to cash flow forecasting that takes into account industry best practice, and project spend timing and magnitude patterns. Low Hard Ease of Implementation Easy Figure 1: Prioritization of recommendations Subsequently, we developed a roadmap to assist the City determine which areas could create immediate improvement, along with defining achievable and sequenced steps for implementation and sustainable improvements. The roadmap acknowledges the challenge of introducing change across a large organization such as the City, and groups the recommendations under three phases: short term (0-6 months), medium term (6-12 months) and long term (1-2 years). We propose that the City reviews and validates Deloitte s prioritization and grouping, as detailed in section 5 of this report, prior to taking any steps towards implementation. 4 Deloitte LLP and affiliated entities

7 City of Nanaimo Introduction 2 Introduction 2.1 Scope of the Review Deloitte was retained by the City of Nanaimo to conduct a review of the corporate project planning, design, delivery and operational processes (the Review). More specifically, the scope of the Review focused on four (4) departments which are responsible for delivering the City s capital plan: Engineering & Public Works (ENGPW), Parks & Recreation (PR), Fire Rescue (FR), and Information Technology (IT). As a subsequent phase, the City intends to enhance its project management practices by developing processes and tools, and providing training to its staff. 2.2 Approach The project management process review for the City was performed using Deloitte s established approach for reviews and audits. This approach included interviewing key City personnel and reviewing key project documents to understand the project management processes in various departments. To complete the Review, Deloitte implemented a four (4) phase approach, as shown in figure 2 below. The phases were: 1. Project initiation, 2. Gathering and analysis of data, 3. Recommendations development, and 4. Reporting. Phase 1 Phase 2 Phase 3 Phase 4 Project Initiation Gathering and analysis of data Recommendations development Reporting Figure 2: Our Approach Phase 1 Project initiation: Deloitte held a project kick-off meeting on July 27, 2017, introducing our team, presenting our methodology, firming up the objectives, scope and timescales, and establishing a communication and reporting protocol with the City team. Phase 2 Gathering and analysis of data: To review the current state of the City s capital planning and project management processes, Deloitte issued an initial document request list, collected, and reviewed more than one hundred documents received, which are listed in Appendix A. In conjunction with the documentation review, Deloitte scheduled and held individual meetings with 28 stakeholders involved in project planning and delivery from the four (4) departments, starting August 8, through September 13, These meetings took the form of semi-structured interviews, ensuring that all aspects of capital planning and project management are covered. The interviews focused on the key aspects set out in the Framework (see Methodology section below). A complete list of interviewees is included in Appendix B. 5 Deloitte LLP and affiliated entities

8 City of Nanaimo Introduction Phase 3 Analysis and recommendations development: Deloitte adopted a structured approach to the analysis of the documentation and information obtained (see Methodology section below). We compared the City s current state against industry leading practices, identified gaps and developed recommendations for the City s consideration. Deloitte also used the experience and lessons learned collected from implementation of similar improvements with other organizations. We have further summarized and prioritized recommendations, i.e., short term vs. medium term vs. long term, and developed a roadmap for implementation. Phase 4 Reporting: Deloitte prepared this report incorporating our detailed findings, recommendations, and a preliminary road map to guide the implementation of our recommendations. A draft of this Review report was circulated to the City Project Sponsor as a validation process of the findings and to help ensure that the current state of the City s capital planning and project management processes were appropriately captured and documented. Following Deloitte s receipt of comments and/or feedback from the City Project Sponsor, we edited the report, as required, to address factual corrections or agreed comments. Once City Project Sponsor s comments and/or feedback were addressed, Deloitte prepared this final report for transmission to the City of Nanaimo. 2.3 Methodology We reviewed the City s practices related to construction and IT projects covering planning, design, delivery and operation; and further examined the maturity of the City s processes by utilizing a Project Lifecycle Framework which meets leading industry practices, notably Project Management Institute s PMBOK, Construction Industry Institute, United States Department of Energy, and the Association for the Advancement of Cost Engineering. The Project Lifecycle Framework illustrated in Figure 3 outlines the major review areas and the focus areas under each major review area. Figure 3: Project Lifecycle Framework 6 Deloitte LLP and affiliated entities

9 City of Nanaimo Introduction 2.4 Disclaimer This report was prepared for the exclusive use of the City of Nanaimo, and is not to be reproduced or used without written permission of Deloitte. No third party is entitled to rely, in any manner or for any purpose, on this report. Deloitte s services may include advice or recommendations, but all decisions in connection with the implementation of such advice and recommendations shall be the responsibility of, and be made by, the City of Nanaimo. We reserve the right, but will be under no obligation, to review and revise this report if we consider it necessary in light of any information which becomes known to us after the date of this report. This report is based on the information, documents and explanations that have been provided to us and therefore the validity of any conclusions noted rely on the integrity of such information. This report relies on certain information provided by third parties, and Deloitte has not verified this information. Deloitte was not engaged to, and did not perform, a financial statement audit, review or compilation engagement for the purposes of expressing an opinion on, or creating, historical financial statement in accordance with standards established by Chartered Professional Accountants Canada (CPA Canada), or any other regulatory body. 7 Deloitte LLP and affiliated entities

10 City of Nanaimo City of Nanaimo 3 City of Nanaimo 3.1 Overview The city of Nanaimo is the second largest urban centre on Vancouver Island. Nanaimo is fast growing and is located on the east coast of Vancouver Island, 113 km north of Victoria, and 55 km across the Strait of Georgia from Vancouver. The local landscape is defined by Mount Benson, which rises 1,006 metres (3,300 feet) just west of Nanaimo, and the Nanaimo River estuary, the largest estuary on Vancouver Island, which flows into Nanaimo Harbour at the south end of the city. 3.2 Organizational structure The Chief Administrative Officer (CAO) and the City staff help City Council set community priorities. These priorities improve City services for its citizens. The CAO provides leadership, control and direction to all City departments and operations. The CAO s office is also the primary liaison between staff, the Mayor's Office and Council. The City s current organizational structure is illustrated in in Figure 4. Figure 4: Organizational Structure Our Review has focused on four departments which are primarily responsible for managing capital projects: Engineering & Public Works (ENGPW), Parks & Recreation (PR), Fire Rescue (FR), and Information Technology (IT). Among the four departments, the City s construction capital projects are primarily designed and delivered by the ENGPW department, and the PR department. Engineering & Public Works: The ENGPW department is responsible for the management and operations of water, sanitary and storm sewer, transportation, garbage and recycling, and cemeteries. The capital projects are managed by the design team within the ENGPW department during the concept design and design development phases. The design team primarily uses external consultants for concept design and design development. For smaller and less complex capital projects, the design team uses inhouse design staff. The design team also manages the cost estimation process until projects are ready for procurement. Once tender ready, the projects get handed over to the construction project managers within the within ENGPW department. The construction project managers review the cost estimates before going out for procurement. Thereafter, the construction project managers manage the procurement process in coordination with the Purchasing department and manage the construction process. Parks and Recreation: The PR department coordinates and oversees recreation programming for all ages and abilities in several interest areas, including fitness, wellness, arts, crafts, cooking, sports, music, 8 Deloitte LLP and affiliated entities

11 City of Nanaimo City of Nanaimo dance and language. The department also maintains city-owned properties, including arenas, pools, community centres, civic buildings, as well as the amenities at these locations (tennis courts, lacrosse boxes, etc.) and organizes the booking of recreations facilities, parks and equipment. Along with managing and maintaining 1,400 hectares of parks, trails and other protected open spaces, the department protects, conserves and enhances Nanaimo s natural environment by providing input into the development process and guiding environmental policy to support stewardship and outreach program efforts. The projects which are managed by the P&R department are mainly operational projects and a number of smaller capital projects. Capital projects related to any facilities within the City are managed and delivered by the facilities project managers who reside in the P&R department. Fire Rescue: The FR department aims to accomplish its mission through prevention, emergency response services, education and training by providing innovative protection and safety to life, property and the environment. The FR department relies on more experienced construction project managers in the ENGPW department for managing the delivery of major multi-million dollar capital projects. The facilities project managers in the PR department manages smaller capital projects for the FR department. Information Technology: The IT department supports the other departments at the City and the public through web services, mapping and GIS services, mobility and wireless services, electronic document and records management, and network services. The IT department develops and maintains the information technology infrastructure and supports client workstations and applications. 3.3 Capital plan The City s five-year financial plan, which includes the current year s budget and taxes, sets out the planned services and initiatives for the next five years, and how the City will pay for them. The focus of the Financial Plan (Financial Plan) is on maintenance and renewal of municipal infrastructure, including roads, drainage, water, sewer and civic facilities. The Capital Plan (Capital Plan) is a component of the City s Financial Plan, outlining the City s planned budget allocation for the maintenance of existing assets, and for building new infrastructure and facilities to meet community needs. The Capital Plan acknowledges that the need for new infrastructure must be balanced against the City s obligations to existing infrastructure. Over the next five (5) years, as shown in figure 5, the City intends to spend $188 million on capital projects including construction and IT projects. The capital projects are assigned to various departments/sub-groups including ENGPW (sanitary sewers, storm drains, water, and transportation), PR (aquatic services, arena services, civic properties, parks and recreation, parks maintenance), FR, Police, Fleet Operations, IT, Parking, Purchasing, Emergency Measures, and Bylaw and Regulatory department. 9 Deloitte LLP and affiliated entities

12 City of Nanaimo City of Nanaimo $70 $60 $58.6 Through 2021, a total of $188 million allocated to fund capital projects Capital Projects Planned Budget ($ million) $50 $40 $30 $20 $47.5 $29.4 $26.6 $26.4 $10 $ Figure 5: Capital Plan As noted previously, the various City departments rely on ENGPW department, and Facilities group (a subgroup within PR department) for design and construction of their capital projects. As such, the ENGPW department is responsible for delivering approximately 77% of the City s Capital Plan over the next 5 years. Figure 6 outlines the distribution (%) of the City s Capital Plan based on the various departments responsible for delivering capital projects over the next five (5) years. Figure 6: Capital Plan budget allocation (based on departments responsible for delivering capital projects) 10 Deloitte LLP and affiliated entities

13 City of Nanaimo Findings & recommendations 4 Findings & recommendations The Review findings and recommendations are presented in this section. Based on our review, we identified a number of both positive and negative attributes based on our experience, comparing practices adopted by peers, and recommended leading industry benchmarks. In the following pages, the City s capital project planning, design, delivery and operation processes within the scope of Deloitte s review are addressed in turn, starting with a narrative of the findings and followed by corresponding recommendations. Some recommendations relate to short or medium term, high-impact or critical opportunities to develop new processes or enhance existing processes, while others relate to leading practice improvements that may be addressed once critical inefficiencies have been resolved. Finally, Deloitte has developed a proposed roadmap suggesting a sequencing and grouping of these recommendations into actionable phases. This roadmap is presented in Section 5 ( Next Steps ) of this report. 4.1 Capital project planning All levels of government are challenged with maintaining ageing infrastructure, demanding substantial rehabilitation at a time of competing needs and budgetary constraints. High quality asset management outcomes are highly dependent upon the consistent use of planning frameworks by stakeholders, planners and decision-makers. Findings and recommendations related to the City s capital project planning process are discussed in this section. Finding # 1: The capital planning process appears to be well understood; however, there is no standardized project prioritization framework in place for the various departments. The capital planning process appears to be well understood by the various departments involved in the process. In order to decide how much can be spent and what programs to include, Council takes a balanced approach between maintaining and improving existing City facilities and infrastructure, and building new infrastructure to meet community needs. The priority in the City s capital planning is to ensure that the existing infrastructure and facilities are properly maintained, meet the needs of all stakeholders, and when appropriate, renewed. To prioritize, the City uses a planning process that consists of Asset Management Plans (AMP), 10-Year Department Renewal Plans, and a Five-Year Financial Plan, which includes the current year s planned budget. Each stage in the process informs the next. The Five-Year Financial Plan lists the physical assets and needs of the municipality (such as land, buildings, infrastructure, equipment, studies, etc.) as identified in the AMP, annual condition assessment programs, and internal risk analysis. Throughout the year, once a capital project is identified, long-term projects are logged into the City s Capital Project Management System (CPMS) for tracking purposes; and the short-term priority projects are added to the Five-Year Financial Plan for review by the appropriate stakeholders groups; and, ultimately, by the City Council in June. The individual departments also prepare scope sheets for the identified projects outlining the scope, cost, and tentative timeline for completing the project. 11 Deloitte LLP and affiliated entities

14 City of Nanaimo Findings & recommendations While the capital planning process appears to be well understood, it was noted that the City lacks a standardized framework to guide staff in prioritizing and selecting projects for the capital plan. It appears that project prioritization for construction projects is based on experience, without any formal ranking process. Some interviewees believe that they do not have sufficient projects or assets to warrant a complex prioritization framework. Notable exception in this case is the IT department which applies a scoring framework to prioritize projects. The framework, illustrated in Figure 7, is a weighted multi-criteria decision support tool that considers project value, impacts, outcomes, costs, and objectives Strategic Alignment Does the project meets City Initiatives, Strategic Priorities, Department Objectives, or Department Innovation? Risk Mitigation Would the project reduce the City s or Citizens exposure to a risk or impact if the service or product not offered? Leverage Potential Value & Significance. Does the project add Value to stakeholders? Can the Significance be measured in terms of what is being done or not being done? Cost What are the implementation and maintenance forecasted costs? Quick Wins What the timeline to implement the project? Profile Multiplier Is the project mandated by Council, City Manager, corporate initiative, citizen perception? Figure 7: Information Technology department project prioritization framework Recommendation # 1: Implement the framework currently being developed, for staff to prioritize and select capital projects for Council s consideration. The City has recently hired a consulting firm to develop Asset Management Risk Framework. The framework proposed by the consulting firm employs predictive modelling, risk management and optimized decisionmaking techniques to identify not only long and short term needs, and funding requirements but also, understand and consistently measure risk. The framework proposes a management structure within which stakeholder needs, levels of service, asset information, finance, risk and resources are brought together to enable balanced, consistent and high-quality decision-making. It appears that the proposed framework integrates planning processes, decision-making and information across all City assets and activities. The City should further evaluate the proposed framework and implement it to streamline the City s capital planning process. Finding # 2: The City s Asset Management initiatives are evolving; however, they are underutilized for its annual capital planning process. The City s Asset Management Strategy outlines a high-level long-term approach to asset management including AMP and objectives, decision-making criteria, and governance for managing assets, and ensuring continuous improvement of the City s assets. According to the interviewees, recently, the City s asset management initiatives have progressed well; and they are seen to be of great benefit to the City; however, the AMP is underutilized in a formal, consistent manner, for the City s capital planning process. The City is currently in the process of updating its AMP with 12 Deloitte LLP and affiliated entities

15 City of Nanaimo Findings & recommendations asset related information including useful life, replacement value etc. for all types of assets, broken down into various individual components. Recommendation # 2: The City should continue to promote asset management thinking throughout the organization. AMPs are integral to a robust long-term financial plan, and support sustainable service delivery. The City needs to operationalize and support proactive asset management throughout the organization by developing an effective city-wide framework. The framework should incorporate AMP reporting, and its subsequent iterations, thereby ensuring that the outcomes and learnings are captured. This feedback can then be used to update the five year and annual capital plans for all City assets. Finding # 3: There appears to be disconnect between the long term Official Community Plans (OCPs) and the annual capital plans. Individual departments are well informed at the creation of a new OCP, which in turn feeds their master plan. However, it appears that the annual capital plans are not always aligned with the master plan. It appears that there is no feedback loop to ensure that departments are identifying their projects based on the long term objectives established in the OCPs. Recommendation # 3: The City should ensure that a process is in place to promote alignment with community planning groups in the annual capital project planning cycle. The City needs to continuously promote a collaborative approach to capital planning by regularly involving the Community Development department in the capital planning process. Departments such as ENGPW should continuously interact with the Community Development department to ensure that initiatives/projects envisioned in the OCPs are captured in the annual capital plans and get implemented in the timelines planned in the OCPs. Through these ongoing dialogues, ENGPW department can obtain better understanding of the needs of various communities for consideration in the annual capital plan. Finding # 4: Inadequate workforce planning causes departments to over-commit in terms of their capacity to deliver projects, resulting in frequent budget carry-forwards. With respect to budgeting for projects in the capital plan, it appears that departments are relatively accurate when assigning funds; however, they apply less sophisticated workforce planning for projects. The issue here is premature commitment to undertake projects prior to undertaking a detailed capacity analysis. Sometimes, this results in departments over-committing in terms of their capacity to deliver projects. Subsequently, projects in the capital plan have resources assigned to them, meaning that these staff are not available for other planned projects. In some cases, those projects that have not been put through a proper feasibility analysis may be delayed or cancelled. Had proper foresight been in place, these resources could have been placed in other more feasible projects, reducing budget carry- forwards and increasing relative capacity. 13 Deloitte LLP and affiliated entities

16 City of Nanaimo Findings & recommendations $45,000,000 $40,000,000 $35,000, Capital Projects Budget $30,000,000 $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000 43% Unspent budget 42% Unspent budget 69% Unspent budget 76% Unspent budget 53% Unspent budget 92% Unspent budget $0 Engineering & Public Works Facilities Fire Rescue Information Technology Parks and Recreation Misc. Departments 2016 Budget Actual Spent Unspent budget Figure 8: 2016 Budget vs. Actual spent Budget carry-forward appears to be a recurring issue in all the departments. In the 2016 capital budget variance analysis (figure 8) provided by the City, we have noticed residual budgets as high as 92% in certain departments. ENGPW department delivered majority of the capital projects for the City in 2016; however, the department did not spend 43% of its planned budget in Recommendation # 4: The City departments need to undertake a more accurate capacity analysis prior to assigning resources and committing projects for any given year. Required staff numbers and their availability, and seasonality of projects should be taken into consideration prior to committing projects for any given year. The City departments should focus more on project planning, sequencing and aggregation. This will provide an opportunity for the calibration of annual plans to take full advantage of matching available project manager resources available with the mix and seasonality of projects. Consistent planning efforts could lead to efficiency in managing workload peaks and resource allocation, and to an opportunity for aggregation of procurement. 14 Deloitte LLP and affiliated entities

17 City of Nanaimo Findings & recommendations 4.2 Project management Findings and recommendations related to design, delivery and operations processes within the City are discussed in this section Governance and roles & responsibilities Successful delivery of capital projects largely depends on the establishment and implementation of common standards and protocols across all projects, which set out the roles, responsibilities, accountabilities and expectations of all involved. Finding # 5: Lack of a Structured Project Management & Governance Framework limits the ability to ensure consistent project delivery practices across various departments. The various departments do not follow a consistent approach to project governance and delivery and there is no delineation of authority between key project stakeholders, specifically as it relates to segregation of authority over scope definition and oversight (steering committee, project sponsor) and execution of projects. It appears that project managers rely on their experience and historic practices for project management; however, their day-to-day practices do not yet reflect leading standards. Once a project is allocated funding, there are few governance arrangements in place to monitor and regulate how the project is progressing at each stage. There is no existing lifecycle approach that is standardized across the various departments and project teams. Recommendation # 5: Develop a Project Management Framework, governed by a new Project Management Office (PMO), and compliant with Project Management Institute s (PMI) PMBOK. The City should evaluate options for ensuring that its project managers have access to a documented project management governance and control framework, as well as, training and skills development in project management. The leading practice in this area is for a PMO to provide oversight, metrics, reporting over performance, centralized knowledge database, technology, tools and support to project managers and project owners. The PMO would oversee projects both proactively through the stage gating process, and retroactively through audits. To build capacity, the PMO should have adequate governance powers, tools, and processes to function effectively. An example of a governance framework is illustrated in Figure Deloitte LLP and affiliated entities

18 City of Nanaimo Findings & recommendations Project Management Office (PMO) Function 1: Portfolio Performance Management (PPM) (up to 2 FTE) Project-Level Teams The Sponsor/Project Manager (PM) relationship must clearly address: Accountabilities and responsibility of the Sponsor vs PM Nature and extent of reporting, decisionmaking, and solicitation of actions Project Sponsor (Director) Performance Management: Sets performance targets in matters of PPM Gathers and analyses data Conducts benchmarking and performance reporting Planning and Delivery Management: Metrics Multi-year capital plan Dashboard reporting Portfolio forecasting Function 2: Project Performance Management (up to 2 FTE) Project Manager Pro-active enforcement of PM policies: Leads stage-gating process Conducts ad-hoc review of project compliance Design Team Contractor(s) Technical backstop and support on high risk projects: Provides PM services as needed Provides specialist services: Contract Administration, Commercial Support, Risk Management, Peer Reviews Centre of excellence in project management: Develops, governs and sustains the PM framework Supports the technical infrastructure (software, data) Enables PM training and career support Figure 9: Example of a Governance Framework Finding # 6: Accountability and ownership for project definition is unclear and lack of clarity on the deliverables and approvals required for the various phases of the project lifecycle. Accountability and ownership for project definition is unclear, and inter-departmental collaboration is often poor. This often results from issues with handover over from planning and design, and represents a major project milestone. In practical terms, this involves the transfer of control of the project to the team responsible for procurement and construction. There is lack of clarity on what documents, reviews and approvals should be in place prior to proceeding to the next phase of the project. 16 Deloitte LLP and affiliated entities

19 City of Nanaimo Findings & recommendations Recommendation # 6: Implement an oversight process that follows mandated project lifecycle stages. Hold stage gate reviews with stage checklists to ensure compliance. A firm and mandatory project stage gating process adapted to the various project classes and within the context of the City will improve consistency and oversight for project inception, planning and implementation. Stage gates are mandatory checkpoints, as illustrated in figure 10, that ensure necessary review and approvals have been satisfied prior to proceeding past key milestones in the project lifecycle. Stage gating is a powerful tool that provides the City with much greater control over how projects are delivered by linking availability of funds to the achievement of certain milestones and demonstration of compliance with corporate standards and procedure. The City should develop checklists for the various stage gates outlining the deliverables and approvals required for each stage gate, and templates for documenting and tracking key project related documents. Figure 10: Example of Stage gate approval process An example of a Stage Gate Checklist is illustrated in Appendix C. Finding # 7: Project Execution Plan (PEP) does not exist. Approaches for project implementation are adhoc, and lack planning and oversight. The City does not develop PEPs for its large projects. PEP is an important document that will set out how the project will be managed and delivered. Not following a predetermined execution path leads to inconsistent understanding by the parties of the methodology for project implementation, of their respective roles, and of the lines of communication and authority. Lack of a PEP can impact collaboration and communication among the various project stakeholders, resulting in poor workforce planning across all departments, and potential schedule delays, and cost overruns. Recommendation # 7: Develop requirements for a PEP and integrate into the oversight process as part of the stage gate review sessions. The City should develop requirements for a PEP, especially on large projects. The document details and communicates the methodology adopted to deliver the project. It outlines the work plan, deliverables, key risks and details for how departmental or City policies will be applied to the project (schedule, quality, environmental, health and safety, documentation, reporting, financial, human resources, procurement, etc.). 17 Deloitte LLP and affiliated entities

20 City of Nanaimo Findings & recommendations Finding # 8: Project roles and responsibilities are not clearly defined across various departments. There is lack of clarity in the roles and responsibilities of project personnel in various departments, excluding the IT department. The ENGPW department used to assign separate project managers during the design and construction phases of a project. They are in the process of changing this practice; instead, the department will be assigning a single project manager throughout the lifecycle of a project. It appears that several members of the department are not fully clear of their roles and responsibilities as they go through this transition phase. There is currently an inconsistent application of the Responsible, Accountable, Consult and Inform (RACI) framework. This is reflected in the ENGPW department and Facilities group with a significant confusion of reporting hierarchy, role assignment and authority. This has also led to a drift in the perceived roles and responsibilities of individual team members, leading to reactive work environment, and imbalance in workload and work composition between teams and positions. Recommendation # 8: Refine the roles and responsibilities of all internal and external stakeholders involved in the various phases of the project lifecycle and develop a RACI matrix. The City should ensure that roles and responsibilities of key project personnel and stakeholders are clearly and systematically defined within various departments. Detailed terms of reference, and responsibility matrix (RACI) would identify the parties responsible (R), accountable (A), consulted (C), and informed (I) at every step of every project, covering the lifecycle from planning to close-out. These rules would govern the interactions on a project across the portfolio. Regular and rigid reporting requirements should be put in place, giving considerable accountability to the Project Sponsor around ensuring the project meets baseline parameters. A sponsor s performance should be evaluated, in part, based on these parameters being met. Finally, an emphasis should be placed on early identification and engagement of project stakeholders, and determination of each stakeholder s role and interest in the project, and an approach to ensure proactive engagement of these stakeholders. An example of a RACI is illustrated in Appendix D. Finding # 9: Inconsistent or inappropriate staff qualifications /experience, and under-resourced departments. There appears to be a consensus that certain experienced individuals are far more capable in terms of project management relative to junior or subordinate staff. This appears to create a lack of trust in those junior members resulting in projects being held back in favour of senior staff availability. Nearly all interviewees indicated a lack of sufficient human resources as a cause for budget carry-forward. This theme manifested in three distinct ways; a series of historical redundancies that had reduced capacity, the vacant Director of Engineering role, and under-qualified/inexperienced staff. The later relates to staff who do not have appropriate project management qualifications; and to operations staff taking on capital projects. 18 Deloitte LLP and affiliated entities

21 City of Nanaimo Findings & recommendations Recommendation # 9: Review current staffing levels; establish formal project management qualifications, training or experience as a requisite for future recruits; and encourage existing staff to undertake training. The City should review staffing levels to identify if any areas are under resourced. More importantly, the City should ensure any current staff are fully equipped to deliver on their current role and responsibilities. The City should ensure established roles and responsibilities of existing project resources in conjunction with recommendation # 8 prior to recruiting any new hires. Any request for additional staff from various departments should have adequate justification, potentially through a business case to demonstrate the value-added from additional staff. The City should also ensure that all future recruits have formal project management qualifications, training or experience, and encourage its existing staff to undertake training courses. The City should also focus its efforts in recruiting a suitable candidate for the Director of Engineering role. Once the Director is appointed, the City should consider finalizing resources for the potential PMO. The PMO resources could be a combination of existing and new hires with project management expertise Project management processes Standardized processes and tools can ensure consistency in the application of project management by various departments and project teams within an organization. Finding # 10: Absence of a policy mandating portfolio or project management practices. There is currently no policy on portfolio structuring and project approach, nor any policy mandating portfolio or project management practices. These can could include standardized project management tools, templates, project phasing, milestones, deliverables and overall client experience. The scale of projects within the City s portfolio lends itself to a high level of repeatability. Lacking the efficiencies of repeatability lends itself to slower speed of delivery, lower quality, higher cost, additional rework, more mistakes, longer delays and less efficient allocation of time and resources. Recommendation # 10: Introduce a new policy that mandates the use of project management leading practices. The City should introduce a new policy that mandates the use of standardized project management tools and templates in line with leading practices and based on project value, complexity, and risk. There is considerable variance in the scale and complexity of projects at the City, and scarce resources available to deliver those projects. A simple project sizing tool (figure 11) may help identify project scale (e.g., Small, Large) based on dollar value, complexity and risk. For each scale, the necessary project management processes would apply with a consideration for minimal additional administrative burden. 19 Deloitte LLP and affiliated entities

22 City of Nanaimo Findings & recommendations Figure 11: Example of project sizing tool Finding # 11: Lack of project management procedures and a Project Management System in place. There is no integrated Project Management System in place. The current system which is utilized primarily by the ENGPW department is the Capital Project Management System (CPMS), used as a repository of scope sheets during the capital planning stage. The City does not have any other system/manual with a full suite of tools, templates and process guidelines for project management. The City relies heavily on staff expertise and historical experience for the design and construction of capital projects. There are no documented best practice processes in place to aid the project team in managing capital projects. Several interviewees believe that the procedures are well understood and doubts the need for formalized and documented project protocols. This creates excessive variation in project performance that can be directly attributed to the assigned project team and accountable senior management. It can also lead to substantial project delays, cost overruns, expansion of project scope and even the failure to deliver the end result envisioned at the concept stage. Recommendation # 11: Develop an integrated project management tool (using Excel and/or SharePoint) that includes a set of interconnected templates and sub-tools, and meets the requirements of the Project Management Framework. Provide training to ensure adoption. The City would benefit from a manual or a centralized toolbox (e.g., Intranet-based) for project management, with a complete set of standards, guidance, tools and templates, as well as accompanying onboarding documents. This facilitates project managers access to departmental resources, enables transition and onboarding of new staff, and systematic project delivery. 20 Deloitte LLP and affiliated entities

23 City of Nanaimo Findings & recommendations Procurement and contracting strategy Effective procurement management requires a carefully developed contracting strategy supported by a fully documented procurement & contract administration process and procedure. Finding # 12: Lack of formal defined contract strategy evaluation for large projects. The size, nature and complexity of construction capital projects typically undertaken by the City appear to favour design-bid-build delivery model. The City s project managers are more familiar with this tried and tested traditional delivery model. It appears that even for larger projects, the City s project managers do not undertake formal evaluation of potential delivery models or contracting options prior to the procurement. Recommendation # 12: The City should undertake formal defined contract strategy evaluation for large projects, taking into account factors such as potential project risks, market conditions, complexity of the project, and internal capacity. On projects of a defined value or risk profile (e.g., large projects) a requirement should be put in place to mandate that projects undergo a contract strategy evaluation at key project stage gates, in accordance with BC Capital Asset Management Framework. The evaluation is an opportunity for a structured evaluation of project risks and objectives against the range of contract strategy options. Finding # 13: The recently adopted procurement policy establishes governance protocols for the purchasing of all goods and services. The City has recently adopted a new procurement policy which provides guidelines to ensure fair, open and transparent acquisition of good and services, construction-related services, consulting services, space leases, and revenue contracts. The procurement policy provides guidance for sourcing, establishes responsibilities of various stakeholders, and controls for approval, process, advertising and contract requirements appropriate for a public institution. Some of the interviewees expressed concerns that the approval thresholds and new processes are not fully appropriate for capital projects and make the overall process lengthy. Recommendation # 13: The City project managers should continue to work with the Purchasing department and ensure strict implementation of the procurement policy. The project managers should coordinate with the Purchasing department for timely completion of procurement activities. The project managers should prepare a procurement plan and notify the Purchasing department at the onset of a project, thereby providing visibility to the Purchasing department of upcoming procurements. The project managers should also ensure that sufficient time gets allocated for procurement activities in the overall project schedule Reporting Accurate, complete and timely information is the basis of good decision making, and each stakeholder in a given capital project has different information requirements at different stages of the project. Finding # 14: Lack of clear guidelines for project/portfolio reporting. The City does not have any guidelines in place for project reporting. Currently, the project managers coordinate with the Finance department and update the actual spend, and commitments on a monthly basis in the SAP module. The Finance department then produces a monthly financial report based on these updates. However, the individual departments do not prepare any other form of project performance reports. 21 Deloitte LLP and affiliated entities

24 City of Nanaimo Findings & recommendations The City has not established any key performance indicators for its projects and hence does not have visibility on project metrics apart from the actual spend and commitments. The City does not have any guidelines for portfolio level reporting, specifically around key metrics such as cost, schedule, spending, scope, quality, risks, and health & safety. Cost management and cash flow reporting takes place at a project level in an ad-hoc manner without considering the overall project portfolio of directors, its annual fluctuation and its implications. This limits the Directors ability to monitor project spend at a portfolio level and take proactive remedial action to meet forecasted annual portfolio spending targets. Recommendation # 14: Develop reporting protocols to include specific information needed to support decision-making at senior organizational levels, and to demonstrate transparency around the performance of projects. Management reporting involves providing internal stakeholders with accurate, complete, and up-to-date project information for the purposes of management, control, and oversight. Reporting is about ensuring that this quality information is provided to those who need it. It is also about focusing the team on the project objectives. Systematic and reliable reporting provides senior management with a birds-eye view of performance and progress, and enables them to track and manage performance and take remedial action. For reports to be of any value to senior management, they need to be timely, complete, and non-biased. The report needs to track performance versus plan around key indicators such as progress to date, forecast at completion, and variance against approved baseline budget and schedule. The City should develop a new format for monthly reporting, including protocols related to distribution of reporting. The new reporting format should include key performance indicators such as budget/actuals/forecast, safety, work process, schedule, risks/issues, quality, contract status, etc. Reporting should also objectively document approved, pending and contemplated scope changes and trends, cash flow over time compared to the original business case cash flow, key environmental, health and safety data (as applicable), and the status of key risks and issues identified and being monitored. Finding # 15: Lack of clear guidelines for contractor reporting. Contractor reporting was found to be inconsistent in its application. Currently, the reporting requirements for projects are mandated inconsistently by the project managers in various departments. There exists an opportunity to refine/tailor contractor reporting requirements and in line with the nature and magnitude of the project portfolio and apply consistently across various departments. Recommendation # 15: Establish and mandate clear guidelines for contractor reporting, and develop table of contents and metrics to be included as part of the contract requirements with third parties. Establish clear guidelines for contractor reporting and develop a template that could be used consistently across various department for contractor reporting. The standard report format should cover the basic information required for the project manager to understand the status of the contract. Importantly, the report should systematically provide benchmarking against an approved baseline (budget, schedule, scope, quality), progress to date, and forecast at completion; Reporting should also objectively delineate approved, pending and contemplated scope changes and trends, cash flow over time compared to the original business case cash flow, key environmental, health and safety data (as applicable), and the status of key risks and issues identified and being monitored. 22 Deloitte LLP and affiliated entities

25 City of Nanaimo Findings & recommendations Estimating and cost management Alignment of capital spend to budget is fundamental to successful project delivery. Financial management tools and cash flow management in particular are a part of this, but their success ultimately depends on ensuring that initial project budgets are realistic and that the commercial aspects of projects are actively managed. Finding # 16: No formal guidelines for developing estimates, across all stages of the lifecycle. The City s financial performance is highly dependent on efficient project estimating, and systematic delivery against estimates and forecasts. The City s CPMS Process Flow Chart refers to the need of having Class estimates at different stages of the project lifecycle; however, there are no formal cost estimating procedures and industry-compliant guidelines in place. Currently, in the ENGPW department, the design team manages the cost estimation process until projects are ready for procurement. Once tender ready, the projects get handed over to the construction project managers within the same department. The construction project managers revalidate the construction cost estimate before going out for procurement. It appears that there is often discrepancy in the estimates by the time the projects are ready for construction. Recommendation # 16: Establish clear guidelines for estimating, with requirements for costing to be based on specific project documentation, site visits, actual unit rates from completed projects (not only from recent bids received), and with adjustment ratios as needed. There is a need for clear, industry-compliant guidelines on how estimates are developed, by whom, and the minimum standards and requisites in place for preparing them. An industry-compliant matrix would substantially help in addressing this issue, along with estimating resources being trained and qualified within various departments. Site visits should be made mandatory prior to preparing estimates and a database with actual unit rates from completed projects should be developed. Estimates developed should be prepared by qualified professionals within pre-agreed contingency brackets (e.g., $1,000,000 estimate, +50%; -30%) depending on the estimating class, and the project lifecycle, refer to figure 11 below. The contingency bracket reduces as the project progresses through stage gates. At the portfolio level, consistent project budgeting and estimating practices, and clear contingency management, enable better oversight and tighter management of the annual budget for the individual department directors. 23 Deloitte LLP and affiliated entities

26 City of Nanaimo Findings & recommendations Figure 12: Example of estimation classes across the lifecycle Finding # 17: Lack of clear guidelines for establishing contingency and for contingency drawdown. The lack of guidelines for contingency management contributes to poor budgeting and estimating. Contingency allocation is at a high level with little consideration for any project particulars or lifecycle stages, and as such, it does not follow leading estimating practices. This results in inaccurate representation of the project risk funds and management reserve at the various stages of design development and project execution. Contingency allocation is not based on formal identification and quantification of project specific risks either. Contingency mandate is known to be at 5-20% across various departments, however project managers set this at their own discretion without guidance from Directors or senior management. This contributes to poor forecasting of financials at the portfolio levels, and contributes to a perception of increased project budget and schedule underperformance, generating more frequent requests for new contingency reallocation to projects. The City does not have a formal or documented procedure in place to request, approve and use the project contingency fund when required. Recommendation # 17: Develop guidelines for establishing contingency and managing contingency throughout the lifecycle, with clear assignment of responsibility over contingency reallocation and drawdown. The City should develop a procedure that defines how project risk and contingency allowances are determined, how they may be reviewed, and how a contingency draw may be authorized, according to various levels of authority and depending on project size and risks. A contingency fund, refer to figure 12 for reference, closely aligned to the projects risks contributes to accurate project cost management. A wellmanaged contingency pool requires staged reduction of contingency amounts throughout the project lifecycle 24 Deloitte LLP and affiliated entities

27 City of Nanaimo Findings & recommendations based on agreed guidelines tied to project stage gates. Also cost-weighed risks help complement contingency allocation, and allow for release of the allocated risk funds if risks don t materialize. The project mangers should identify project specific risks, quantify the risks, and track them in risk registers throughout the lifecycle of projects. The City should consider developing a risk register template which could be used consistently for all projects. 80% 60% 40% Contingency (%) 20% 0% -20% -40% -60% Planning Design Procurement Construction Close-out Project Lifeycyle Upper Limit Lower Limit Figure 13: Contingency/Risk Reserve classification Finding # 18: Lack of a cash flow forecasting methodology which takes into account the construction and spending cycles. The City does not have a project cash flow forecasting methodology which takes into account financial year planning, and the construction and spending cycles. Typically, the individual departments do not provide any spending forecasts for the purposes tracking fiscal year spends, thereby limiting visibility around timing and magnitude of spending on an annual or multi-year basis. In certain instances, for large projects, the Finance department works with the project manager to understand the cash flow projections. Recommendation # 18: Develop an approach to cash flow forecasting that takes into account industry best practices, and project spend timing and magnitude patterns, thereby providing a more accurate picture of the spending curve at the portfolio level. The individual City departments would benefit from a systematic approach to monthly project cash flow forecasting, and tracking of key cash flow variables: actual project expenditure, forecasted spend, and contingency draw. Cash flow reporting, illustrated in figure 13, may be integrated into project dashboard reporting, and rolled-up into a portfolio view, allowing the Directors to monitor project spend and take remedial action to meet forecasted annual portfolio spending targets. 25 Deloitte LLP and affiliated entities

28 City of Nanaimo Findings & recommendations $20,000,000 Over-budget project: cost management plan details how costs should be monitored and controlled throughout the life of the project $18,000,000 $16,000,000 $14,000,000 $12,000,000 $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 $0 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Planned Budget Actual Contingency Figure 14: Recommended project management outputs throughout a project s lifecycle, as per the Project Management Institute (PMI) Finding # 19: Lack of a standardized tool for project cost tracking. The City does not have a standardized tool for cost tracking tool for the project managers to use them on a daily basis for cost tracking, commitment management or change control. The actual costs and approved changes are tracked in the SAP module by the Finance department. The SAP module does not allow to log commitments or expenditure that are in process or awaiting approval, contemplated change orders, or other forecasted changes. Therefore, project managers individually maintain separate cost tracking tools, resulting in inconsistent reporting on incurred costs. Recommendation # 19: Develop a coherent project-based cost management and tracking tool, in line with industry practice. The City should consider developing and mandating the use of a project-based cost management tool. The tool could be a standardized spreadsheet with an adequate procedure for cost tracking and reporting budgets, commitments, expenditure, and contingency and approved changes Schedule management Delivery of capital projects on time is a higher level project management skill which starts with establishment of a detailed baseline schedule and associated schedule change controls, together with tracking and reporting of actual progress against the baseline by individual activity. Finding # 20: Project schedule management is generally informal. The City does not have procedures related to schedule development, or establishing a baseline. It is common for projects and programs to be managed purely on the basis of a limited number of milestone dates rather than a detailed Gantt chart. For large capital projects, the project managers rely on external contractor/consultant for preparing Gantt charts. It appears that project delivery team has limited understanding of the critical path methodology, schedule development techniques such as schedule compression, Activity ID Numbering using a Work Breakdown Structure, schedule analysis, and fast-tracking. 26 Deloitte LLP and affiliated entities

29 City of Nanaimo Findings & recommendations Recommendation # 20: Develop guidelines for baseline schedule development and management. A procedure is needed for schedule management, including consistent use of software, minimum level of detail and content, consistent terminology and wording for inclusion in consultant and contractor scope of work. These requirements would take into consideration project size, risk and complexity. The use of schedules should be mandatory for all projects beyond a specified size, and clear reporting requirements should be mandated for project managers and contractors Scope management There are two primary aspects of project scope management the first is ensuring that contracted third parties deliver that which they have been contracted to deliver (their scope), and the second is ensuring that the scope of the project is fixed and well defined, and that where a change is required, controls are in place to ensure that the impact of change is fully identified, considered, accepted and approved by the responsible parties. Finding # 21: Project scoping appears to be siloed, lacking coordination between various City departments. The various City departments prepare scope sheets for the projects in the capital plan. However, scope sheets are often prepared in silos without proper coordination between various departments. For example, the IT department typically addresses malfunctions or planned projects from other departments that did not factor in IT components from the beginning. It appears that other departments reach out to the IT department with projects requiring IT application at ad hoc points without proper planning. Currently, project charters are not used, depriving project stakeholders from the opportunity to collectively assess risks, and determine a cohesive approach to definition and implementation, determine outcomes, scope boundaries, roles and responsibilities, budget, schedule and risks. The current practices within the Department do not provide adequate due diligence around scope definition and project planning, and around scope management both during project definition and execution. It appears that project baseline scopes are developed at the planning stage without adequate consultation with project managers. Recommendation # 21: Mandate the use of Project Charter for all large projects, with clear scope definition requirements. The City should consider updating the scope sheet to include a requirements tracking matrix, which collects key project parameters, business needs, technological constraints, user preferences, quality requirements, and any other scope-related parameters. The matrix is both an input into the project charter and a living document that continues to develop and track scope evolution throughout the lifecycle. The charter is a baseline document (defines the what and the who of a project). The City should consider mandating the use of project charter for all large projects. A new charter template should be developed to include details such as project budget, start date, duration, phases, and identify the roles and responsibilities of key stakeholders and governance mechanism involved in the project. A charter is signed by the project sponsor and acts as the baseline and terms of reference for project implementation. Refer to the example governance framework in recommendation#1. Finding # 22: Inconsistent application of change management processes. Poor tracking of change control and contemplated changes. No visibility over forecasted changes. Regardless of the phase of project development, managing change to the baseline scope (or schedule, cost and risk) requires a change control system that defines the policies and procedures by which change may be 27 Deloitte LLP and affiliated entities

30 City of Nanaimo Findings & recommendations requested, assessed, processed, implemented and tracked. While the departments have some processes for change management in place, there is no consistency in the application of these processes and the extent to which project delivery staff are successful in managing the scope of consultants and contractors varies from project to project. Change logs to track agreed, contemplated and forecasted changes, and their status are used in an ad-hoc manner. There are major opportunities to improve change management to empower project managers, hold them, as well as the Directors, accountable for project success. Recommendation # 22: Develop and standardize a change control process that follows industry practice, and develop templates for change request forms and change log. A procedure for change control could help establish coherent project change control requirements, with agreed change terminology, levels of authority, and a tracking log that may be integrated into the cost tracking tool. The procedure would identify what constitutes a change, develop templates for change request form and change log, identify signatories, and clarify why scope changes cannot be funded by contingency. Improved change tracking provides critical KPIs relating to project progress and success. Finding # 23: The project close-out procedures are not well developed yet, with unclear rules around documentation, review and archiving of as-builts, warranty information, and document storage. Currently, the project close-out process are conducted informally by project managers, based on the nature of the project. The approach varies between project managers and from project to project. The City does not have a project close-out procedure describing the close-out process from pre-close preparation through technical and commercial compliance, addressing outstanding project elements, and identifying the activities that must be followed and deliverables that must be received, documenting lessons learned, and completing the final account. Recommendation # 23: Develop project close-out procedure including a checklist, and mandate the compliance with the checklist s requirements. Develop a comprehensive checklist including sign-off sheets for all steps, requirements, reconciliations, documentation, lessons learned, final account and turnover of documents required from both contractors and project team during project closeout. The City should mandate the approval of the close-out checklist as part of the stage gate approval for project close Risk management While risk in a project environment can never be totally eliminated, a formalized risk management activity involving avoidance, transfer, reduction, and mitigation of discrete or continuous project risks can dramatically reduce the impact risks have on the project in terms of scope, schedule, cost, quality and safety. Finding # 24: The practice of risk management is generally informal within project teams. The practice of risk management is generally informal within the City s project teams during the design and construction phases of a project. Risks are managed based on prior experience, without any procedures. Project managers are aware of project risks based on their experience; however, risks are not systematically identified and captured in a risk register or monitored. There are no regular meetings and there is limited dialogue within project teams to discuss the risks and mitigation strategies. Recommendation # 24: Formalize the risk management process and address lack of compliance of risk procedures. 28 Deloitte LLP and affiliated entities

31 City of Nanaimo Findings & recommendations To ensure that risk management continues to play a valuable and proactive role in the delivery of capital projects, risk management should be more formalized such that it includes approved policies, and processes and procedures for the systematic identification, analysis, monitoring and control of risks. The City has recently hired a consulting firm to develop Asset Management Risk Framework. The framework proposed by the consulting firm provides guidelines related to risk management during the capital planning process. The City should leverage and refine the guidelines and tools proposed by the consulting firm and implement them throughout the project lifecycle. 29 Deloitte LLP and affiliated entities

32 City of Nanaimo Next steps 5 Next steps 5.1 Prioritization of recommendations Having identified the above 24 findings and recommendations, we have scored and prioritized them as outlined in Appendix E. Subsequently, we have mapped, as shown in figure 14, these recommendations against a matrix that identifies level of impact relative to ease of implementation for each of them. This mapping allowed us to identify those recommendations that are quick wins and that can be tackled in the short term, as well as these that are longer term, as presented below. Figure 15: Prioritization of recommendations 5.2 Implementation roadmap Subsequently, we developed a roadmap to assist the City determine which areas could create immediate improvement, along with defining achievable and sequenced steps for implementation and sustainable improvements, refer to figure 15 for details. Some recommendations are high-impact opportunities which can be implemented over short and medium term, while others relate to opportunities that may be addressed in the longer term, once critical inefficiencies have been addressed. The roadmap acknowledges the challenge of introducing change across a large organization such as the City of Nanaimo, and groups the recommendations under three phases. 30 Deloitte LLP and affiliated entities

33 City of Nanaimo Next steps Figure 16: Implementation Roadmap 31 Deloitte LLP and affiliated entities