Does poor project governance cause delays?

Transcription

1 Society of Construction Law Does poor project governance cause delays? February 2010 Anthony Morgan

2 Agenda Project objectives success or failure What is Capital Project Governance? Capital Project Governance in Practice Metronet Case Study Capital Project Governance in Practice Case Study 2 Risk resilient capital projects Relevance to Construction Law 2

3 Project objectives Success or failure Time / Cost / Performance & Quality objectives should be clearly defined. Project Governance ensures that these objectives are identified, monitored and reported throughout the project lifecycle and that the business benefits of the project are delivered. Time Cost Performance & Quality 3

4 Causes of failure The Office of Government Commerce (OGC) 2005 report Common causes of project failure Lack of clear links between the project and the organisation s key strategic priorities, lack of clear senior management, lack of engagement with stakeholders Evaluation of proposals driven by initial price rather than long-term value of money Lack of effective project team integration between clients, the supplier and the supply chain Lack of skills and lack of effective approach to project management and risk management Lack of understanding of, and contact with the supply industry at senior levels in the organisation Too little attention to breaking development and implementation into manageable steps 4

5 Capital Project Governance How did we get here development of project management tools Studies identify project s environment (economic, political, community and ecological issues) as critical to success 1970s 1960s 1950s Studies link integration of project team with the overall organisation to success on large complex projects Development of critical path analysis. PERT linked to cost control Introduction of Work Breakdown Structures (WBS) and Earned Value Management (EVM) Development of Program Evaluation Review Technique (PERT) Project Management focus solely on delivery of a technical solution 5

6 Capital Project Governance How did we get here development of corporate governance 2000s 2000 The Code is made law by Financial Services Authority s Listing rules, under the authority of the Financial Services and Markets Act Hampel Report unifying the code set out by Cadbury and Greenbury 1990s 1980s 1995 Greenbury Report of Corporate Governance and Directors remuneration 1992 Cadbury report: Financial Aspects or Corporate Governance 6

7 What is Capital Project Governance? Organisation for Economic Co-operation and Development Twelve principles of Corporate Governance Association of Project Managers Four main components of Project Governance Treasury guidance on Project Governance 7

8 What is Capital Project Governance? OECD Corporate Governance principles that relate to Project Governance The role of stakeholders in corporate governance Disclosure and transparency The responsibilities of the board 8

9 What is Capital Project Governance? Association of Project Managers components of Project Governance 01 Portfolio Direction 02 Project Sponsor 03 Project Management 04 Disclosure and Reporting 9

10 Causes of project failure Can poor Project Governance be identified as the cause of project failure? 10

11 Capital Project Governance How did we get here development of corporate governance APM components Poor Portfolio Direction / Project Sponsorship Poor Project Management Ineffective reporting and disclosure Common causes of project failure Lack of clear links between the project and the organisation s key strategic priorities, lack of clear senior management, lack of engagement with stakeholders Evaluation of proposals driven by initial price rather than long-term value of money Lack of effective project team integration between clients, the supplier and the supply chain Lack of skills and lack of effective approach to project management and risk management Lack of understanding of, and contact with the supply industry at senior levels in the organisation Too little attention to breaking development and implementation into manageable steps 11

12 Metronet case study Poor corporate governance and leadership is said to be the main cause of the failure of Metronet * *National Audit Office. Department for Transport: The Failure of Metronet

13 2nd case study Refurbishment of corporate offices Effective project governance goes beyond the apportionment of blame or risk via the contract, it is about identifying risk events and putting a structure in place that ensures these risks do not have an impact on the objectives of the organisation 13

14 Risk Resilient Capital Projects Avoiding surprises in Capital Projects Achieving risk resilience through development of three components Oversight and Governance Management Systems 3 People, Culture and Values 14

15 Risk Resilient Capital Projects Avoiding surprises in Capital Projects Develop a culture of Risk Resilience Focus on Management Systems and People Competency Improving risk management Evolving Project Controls Active monitoring of key controls Assurance of information management and reporting 15

16 Risk Resilient Capital Projects Management Systems and People Competency must both be strong Strong Demographic and retention risks Risks mitigated People Competency Weak High performing teams Ad-hoc processes Uncontrolled risk Structure and Standardisation Inactivity risk Easily auditable processes (Prince2, APM) Weak/uncommitted teams Training and Development Weak Management Systems Strong 16

17 Risk Resilient Capital Projects Oversight and governance of key project management processes Project management processes Business case and regulation Scope and change control Cost management Time management (schedule / planning) HSE and Quality management Procurement / contract management Communication and reporting Human resource management Risk and issue management 17

18 Risk Resilient Capital Projects Oversight and governance of key project management processes such as progress reporting is key Controls Policies and Standards Internal Audit Ethics and Compliance Risk Management Independent Review Direction Board / Executive Team Steering Committee Sponsors Direction Reporting Project Project Manager Functions Finance Tax Legal Procurement HR IT BD / Marketing Delivery Teams / Suppliers PMO Effective challenge of what the project team reports on the project status, control effectiveness, issues to be resolved, outturn forecasts is a key part of a governance regime 18

19 Relevance to Construction Law When delay experts are asked to establish the reasons for delayed completion of a capital project they should consider taking into account the potential contribution to delayed completion from ineffective governance or poor risk management of the project. When risk allocation is negotiated in complex contracts for the delivery of capital projects, consideration should be given to the operation of an effective governance regime and the requirements of project management processes for disclosure, information management and reporting across the breadth of the supply chain. 19

20 Any questions? This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers LLP, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it All rights reserved. 'PricewaterhouseCoopers' refers to (a limited liability partnership in the United Kingdom) or, as the context requires, other member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity. Hb