10th pwc and minex moscow mining club meeting mining...
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Mega-projects - how to increase confidence in delivery and success MOSCOW MINING CLUB
10th PwC and Minex Moscow Mining Club meeting
Mining investment process and project management
PwC
What we’ll discuss today
• Why do projects fail?
• Enterprise/Group Capital Strategy
• Project Level Controls
• Case Studies
• Risk modeling – Quantitative Risk Assessment
• Schedule Analytics
• Package Level Risk Profiling
Slide 2
•Why do projects fail?
PwC
The vast majority of failures are due to managerial aspects
Only 2.5% of companies
deliver their projects within the deadline, costs, scope and with the benefits expected for the business.
Technical problems
Suppliers’ failures 8 %
92%
Inappropriate/inadequate
resources
Inadequate
Project Environment
Inadequate Planning/
Monitoring
Lack of clear
objectivesDirectly related to managerial aspects
Directly related
to technical aspects
Lack of management
(organizational)
4%
4%
10%
11%
15%
20%
36% Technical and managerial aspects
Slide 4
Enterprise Level Strategy
PwC
How do Companies React?
Establishment of Capital Project ‘Center of Excellence’ / Centralized PMO
• Central planning and execution across regions with resource optimisation
• Establish interdependencies and central coordination between functions
• Clearly defined criteria for group level control and strengthened functions for Group support including:
• Project portfolio prioritisation and optimisation within set criteria to inform future investments and risk profile of major capital projects;
• Enhanced maturity of business cases, via cross-functional teams;
• Increased transparency on project and portfolio performance;
• Standardized project development /execution (consistency and quality);
• Improved support in contract formation and enforcement
• Enhanced use of project steering committee’s, and group level investment and procurement committees
Slide 6
PwC
Mining Industry Best Practice Front end loading – phased project planning
Pre-concept Concept Pre-feasibility Feasibility Implementation
• Plan for
resources
• Define roles
• Define success
criteria
• Define models
and scope
• Identify
opportunities
and scenarios
• Classify risks
• Align objectives
• Identify quick
wins
• Quantify
economics
• Define options
and portfolio
• Rank by value,
risk and effort
required
• Basic
engineering
• Operations plan
• Risk plan
• Contracting
• Sanctioning
• Detailed design
• Plan and
logistics
• Risk
management
• Execution
• Supervision
• Measurement
Post Imp. Review
• Track plan vs.
real
• Measurement
• KPI monitoring
• Plan correction
Concept Feasibility Pre-feasibility
Front End Loading
Influence
Approval
Expenditures
Mechanical
Completion
Implementation
Detailed Design Construction
Start Up
Slide 7
PwC
Constantly Refine Cost and Contingency Estimating
Confidential - For the sole use and benefit of Minex
Class 5 0%-2%
Class 4 1%-15%
Estimate Amount
Project Definition
3%-5%
Schematic Design
15%-20%
Design Development
35%-45%
Construction Documents 90%-100%
Construction Cost Estimate Accuracy Ranges
Class 3
10%-40%
Class 2
40%-70%
Class 1
70%-100%
Estimate Amount
Adapted from the AACE
Cost Estimate Classification System
+15%
-10%
+20%
-15%
+30%
-20%
-30%
+50%
<+100%
-50% Nominal Level of Design Detail
0%
100%
PwC
Scalable Governance / Delivery Models Avoid a ‘One Size fits all’ approach
Capital investment risk scenarios
Mega Project
The mega project is an order of magnitude (or
more) larger than the typical project for the
organization.
One-Time Large or Very Large Project
Capital projects are not executed as a normal
course of business and this is a single capital
investment.
Program of Small and Medium Projects
The program involves a collection of projects for
meeting a specific objective (e.g. growth or
regulatory)
Capital Intensive Routine Projects
The asset base for the company requires steady
capital investment to maintain production.
Margin
OH/Risk
Capex
Feed/Opex
$
Time
Margin
OH/Risk
Capex
Feed/Opex
$
Time
$
Time
Margin
OH/Risk
Capex
Feed/Opex
$
Time
Margin
OH/Risk
Capex
Feed/Opex
Slide 9
PwC
Scalable project governance and delivery model
Routine Projects
Small Projects
Medium Projects
Large Projects
Very Large Projects
Megaprojects
Business Case
Approval Authority
Execution
Tools, Systems, and Processes
Oversight and Assurance
Basic to simple support
Business unit
Comprehensive and detailed analysis
Divisional and executive Board
Division or department Capital project cross-functional group
Basic office Standard project and ERP systems Custom
Dept. reports
‘Flash’ reports
PMO, Steering Committee Board
Independent Audits
($ vary) (< $10m) ($10m-$100m) ($10om-$250m) ($250m-$1b) (> $1b)
Slide 10
Project Level Controls
PwC
Effective Project Governance Structures
Execution
Oversight Assurance Project Sponsor
Project Director
Project Controls
Engineering Procurement
Owner’s Engineer
Consultants
EPC Vendor
Subcontractors
Fabricators Material Suppliers
Quality Management
Commissioning EHS
Executive Steering
Committee
External Program
Advisory Board
Construction
Slide 12
PwC
Procedural framework Project life-cycle
Pr
oje
ct
Ele
me
nts
Evaluation Design Development Production Turn-over M & O
Organization design and HR management
Project resource plan, organization, roles and
responsibilities
Mobilize and manage project
labor Demobilization
Operations staff planning
Ongoing requirements /
skill review
Procurement and contract
management
Contract strategy
Contractor qualification and
evaluation
Contractor selection and negotiation
Contract compliance
review
Trouble-shoot and punch-list
Vendor qualification and
selection
Scope and change management
Project and scope definition
Detailed design and scope freeze
Change control Owner
acceptance Asset change management
Cost management Project estimate Project cost
baseline Cost control and Cost to Complete
Modeling Final payment / retention release
M & O budgeting
Schedule management
Project schedule requirements
Project schedule baseline
Schedule management and data analytics
Completion checklist
Ongoing maintenance
Business systems and technology
Project systems strategy
Implement project systems
System support and maintenance Transition to enterprise asset
management
Risk and issue management
Risk and issue management
plan Risk and issue tracking and resolution
Confirm issue resolution
Ongoing issue management
QA / QC, Safety Management
Health and Safety plan
Design review, method
statements
Training, Safety Assessments, Independent testing and inspection
Safety file handover
O&M Manuals
Communication, reporting and
regulatory
Stakeholder assessment and
reporting requirements
Project status and regulatory
filings
Permits, Licensing Project performance
Asset performance
Project close-out Operations and
financial reporting
Slide 13
PwC
Establish contracting strategy selection criteria
Define objectives and establish parameters
(scope, cost, schedule, etc.)
Segregate scope
(self performed, alliance vs. contractor)
Evaluate delivery options
(EPC, EPCM, Multi-prime, etc.)
Evaluate pricing options (lump sum, cost +,
incentives, etc.)
Evaluate award options (bid, ,
negotiated, Etc.)
Contract strategy
•Typically output of Front End Loading (FEL)
•Typically bulk of services associated with direct project costs
•Project: Schedule, scope, definition, funding
•Owner: Internal capabilities, risk aversion, contract restrictions, strategic, regulatory/political factors
•Market: Resource s, competitiveness, commodities
•Qualitative Risk Assessment
•Desired allocation of risk
•Ability to manage risk
•Relationship considerations
•Commodity vs. Service
•Regulatory requirements
Slide 14
PwC
Standard Project ‘tool box’ to Accelerate Project
Types of training Media Northern Trust benefits
Tier 1—Learn from co-location (face-to-face)
• Traditional classroom, instructor-led
training (ILT)
• Train the trainer (TTT)
• Cascaded learning small group activity
(CSGA)
• On-the-job training (OJT)
• Classroom training materials (CLASS)
• Electronic performance support system (EPSS)
• Quick reference (QRs) and Frequently Asked
Questions (FAQs)
• Interactive simulations and games (SIM)
• ERP sandbox training environment (TRN ENV)
• Local coach/mentor support (COACH)
• Frontline leadership
• Mentoring (experienced with novice)
• Organizational knowledge retention
• Quicker evaluation
• Quicker remediation
Tier 2— Learn from collaboration (group collaboration)
• Traditional classroom, instructor-led
training (ILT)
• Virtual classroom, instructor-led (VCT)
• Video teleconferencing/satellite
distance learning (DL)
• Train the trainer (TTT)
• Cascaded learning small group activity
(CSGA)
• Classroom training materials (CLASS)
• Electronic performance support system (EPSS)
• Quick reference (QRs) and Frequently Asked
Questions (FAQs)
• Interactive simulations and games (SIM)
• ERP sandbox training environment (TRN ENV)
• Collaboration (instant messaging) or (IM)
• Collaborative teamwork
• Cross-organizational cooperation
• Quicker communication of solutions
• Broader, effective reach
• Increased communication frequency
Tier 3—Learn from interaction (multimedia and simulations)
• Traditional classroom, instructor-led
training (ILT)
• Virtual classroom, instructor-led (VCT)
• Video teleconferencing/satellite
distance learning (DL)
• Cascaded learning small group activity
(CSGA)
• Online self study web-based training
(OSS)
• Computer/web-based training (WBT)
• Electronic performance support system (EPSS)
• Quick Reference (QRs) and Frequently Asked
Questions (FAQs)
• Interactive simulations and games (SIM)
• ERP sandbox training environment (TRN ENV)
• Collaboration (instant messaging) or (IM)
• Self-directed learners
• Problem solving
• 24x7 continuous education
• Higher retention
• Self-evaluation
• Self-remediation
Tier 4—Learn from information (performance support and reference)
• On-the-job training (OJT)
• Online self study web-based training
(OSS)
• Reference only (REF)
• Computer/web-based training (WBT)
• Electronic performance support system (EPSS)
• Quick Reference (QRs) and Frequently Asked
Questions (FAQs)
• Interactive simulations and games (SIM)
• Collaboration (instant messaging) or (IM)
• System understanding
• Basic skill proficiency/performance
• Basic navigation
• Business process context for transaction
Enabling Systems, and
Tools (Reporting)
Integrated Performance
Analytics
Governance and Risk
Frameworks
Cost to Complete
Models
Process and Procedures
High Performing Teams:
Leverages multiple accelerators, frameworks, tools and proprietary methods.
Process and procedures based on best practice, experience and lessons learned.
Reporting tools that help the team accelerate analytics and early warnings
As a Result:
Timelines are shortened
Increased efficiencies at all stages
Reduced disruption to mobilization and start-up
Effort required is more predictable,
Project Development has higher level of confidence
Slide 15
PwC
Real-Time Integrated Scheduling
Group - high level schedule overview
Division - Level 1/2 schedules with some level of integration between projects
Program/Region – Level 2 integrated schedules
Project – Detailed level 3-4 schedules (standard WBS coding)
Project 1
Project 2
Project 3
Project 4
Slide 16
PwC
Programme Value Chain
Invoice Management Module, Depiction of a Potential Invoice Dispute Process+
Invo
ice
Man
agem
ent
Mod
ule
Lega
l Tea
mCo
nsor
tium
Proj
ect
Man
agem
ent
Team Dispute Invoice /
Portion of Invoice
Submit Notification
of Disputed
Invoice and
Amounts
Receive
Notification of
Disputed Invoice
and Amounts
Receive
Notification of
Disputed Invoice
and Amounts
Meet to Resolve
Disputed Invoice
No
Resolution
Invoice
Resolved
Notify Legal Team
Invoice Dispute
Resolved
Clarify Issues
Related to Interest
on Disputed
Invoice
Receive
Notification Invoice
is Resolved and
Approved
Amounts
Calculate Interest
Due on Approved
Amounts
Identify Disputed
Invoice and
Amounts
Follow Add’l
Dispute Resolution
Procedures
Process Resolved
Portion of Invoice
Variance / Dash-boards Three Week Look-aheads Analytics
Contractor Programmes CM Mini-Programmes Start-up & Commissioning PMP, Level 3/4 programmes Design Programs
Inputs (raw data)
Site Outputs
Level 1 programme Oversight Authorities - Public Audits Client Executive Leadership / Dashboards Strategy (what-if’s) Contracts / Commercial Quantitative Risk Assessment
Client Level 2 Programmes
Management Outputs
Working Tool (‘shadow program’)
Slide 17
PwC
Cost to Complete
Description FormulaeP02 - Boiler
Total Approved Budget (B)+(C) 21,307,113,033R
Proposed Budget (A)=(B)+(C)+(D) 21,260,530,901R
Original Contract Value (B) 19,913,189,751R
Contingency (C) 1,393,923,282R
Strategical Spares (D) 176,276,269R
Approved CSI Cost Savings (E) -46,582,132R
Approved Variations (F ) 320,762,271R
Approved Instructions 558,953R
Approved Proposals 296,301,470R
Approved Deviations 23,412,055R
Approved Claims 489,793R
Total Approved Value to Date (G)=(B)+(E)+(F) 20,187,369,890R
Pending Variations (H) 575,820,559R
Pending Instructions 2,118,000R
Pending Proposals 577,747,222R
Pending Deviations -4,044,663R
Pending Claims
Pending CSI Cost Savings (I) -R
Forecast Cost at Completion (Approved & Pending Variations Only) (J)=(G)+(H) 20,763,190,449R
Potential Variations (K) 244,330,381R
Risks within the Contract Execution -R
Trends -R
Disputed Claim Values -R
Potential Claims 244,330,381R
Forecast Cost at Completion (Approved, Pending & Potential Variations Only) (L)=(J)+(K) 21,007,520,830R
Contingency & Additional Approved Commitment (M)='(C) 1,393,923,282R
less Total Growth (N)=(E)+(H)+(K) 1,140,913,211R
Balance of Contingency Allowance (O)=(M)-(N) 253,010,071R
Forecast Cost at Completion (incl. Balance of Contingency Allowance) (P)=(L)+(O) 21,260,530,901R
Contract Price Adjustment (CPA) (Q) 5,044,663,375R
Forecast Cost at Completion (incl. CPA) (R)=(P)+(Q) 26,305,194,276R
Financial Costs (S) 4,774,946,335R
Foreign Exchange Cover (FEC) 695,729,527R
Interest During Construction (IDC) 4,079,216,808R
Forecast Cost at Completion (incl. Fin. Costs) (T)=(R)+(S) 31,080,140,611R
CONTRACT COST INFORMATION
Contract Control Sheet
CO
NT
RA
CT
CO
ST
FO
RE
CA
ST P
B P
ow
er C
ost
Item
sE
sko
m C
ost
Item
s
Time
Cu
mu
lati
ve
Resource Flow for Cost
Contracted work & variable price elements
Earned value
trends
Changes pending and agreed
Risk Weighted CPM and scenario analysis
Quantified risks & mitigation costs
Forex
Inflation
Interest during construction
Risk weighted cost estimate
Slide 18
PwC
Modeling Risks Using Monte Carlo
• Based on the risk probabilities and ranges, thousands of unique possibilities are simulated.
• Probabilities trigger risks & impact are randomly selected from distribution range
• Workshops help identify risks, likelihoods, and potential impact
• Typically a three-point estimate, as follows:
Optimistic – The best possible outcome if the risk occurs
Most Likely – The most likely outcome if the risk occurs
Pessimistic – The worst possible outcome if the risk occurs
• A three-point estimates is typically modeled by a triangular distribution
Pessimistic Most Likely Optimistic
Triangular Distribution : When each risk occurs, its impact will be along the defined distribution (three point estimate), randomly Each risk has a unique distribution
Slide 19
PwC
Notes: Change Order 105 Chronology : Base on the document and records management system log
dated August, 2011
Description Observations Actions
This chart illustrates the documents, e-mails,
testing, meetings and events that are relevant
to the negotiations of root-cause analysis
Based on the assessed risks, there were
large periods of time when SEC did not
respond to specific requests, causing delays.
Issue notice of delay, notify insurers, and
underwriters of SEC failure, and quantify
damages resulting from delay.
Risk and Issue Management
Slide 20
Project Execution
Executive Project Management
Contract and
Change Mgt Project
Controls
Executive PM
Medupi Organisation Assessment and Re-Alignment
Project Execution Director
Site CM
Sit
e S
erv
Mg
r
Co
mm
issio
nin
g &
Inte
gra
tio
n
En
g &
Co
nfi
g M
gr
Qu
al
Co
ntr
ols
Mg
r
FID
IC E
ng
ineer
Pro
j C
on
tro
ls M
gr
Co
mm
erc
ial
Mg
t
Mg
r
Pro
ject
Su
pp
ort
Mg
r
Scheduling
Cost
Assurance
Deputiy Project Dir.
External S/H Mgt & Reporting
Boile
r &
Mechanic
al
Turb
ines
Ele
ctr
ical
Contr
ols
&
Instr
um
enta
tion
Civ
il &
Build
ings
Coal &
Ash
Bala
nce o
f P
lant
Coal, W
ate
r, T
x, G
x
LDM QS
LDM DM
LDM MG
LDM
PS LDM
TC
LDM RG
LDM NP
LDM BS
SH
E &
Q M
gr
Site Director
Gap
Att
ack L
ead
Project
Support
Estimating
TBD
Risk
Claims
Variations
Contract
Admin
HR
C Fourie / V
Admin
Doc Mgt
Procurement
Document/
Issue Mgt
TBD
IM Finance
Case Studies Mining & Energy
PwC
Case Study Mining
Slide 23
PwC
Capital Project Review for an $1Bn Mine development
Funding / Partners
Plant and equipment ownership
Water & Power
Rail, Port and pipeline
Permitting
Environmental and Closure Costs
Community relations
Man-Camps / force optimization
Safety
Owner vs Contractor operated
Depreciation
Taxation
Foreign exchange rates
Royalties and levies
Emissions monitoring
Consumer price indices
Product split/price relativity
Commodity proce
Closure costs
Development Factors Operational Factors
Case Study 1
Slide 24
PwC
Procurement and contracting strategy Misalignment of contracting strategy and risk appetite
Case Study 1
60%
0%
1%
39%
Contracts based on fixed price
1 - Contracts based on time and materials
2 - Contracts based on unit price
Combination of 1 and 2
Actual split among different types of client’s contracts
In this case client believed that all his contracts were with fixed price, however analysis revealed another
situation
Slide 25
PwC
• Reducing owner/employer design/drawing review time;
• Unrealistic early completion schedules;
• Artificial activity durations to hide float;
• Artificial logic to hide float (sequestering);
• Artificial logic to exaggerate known delays;
• Selective issue of progress information;
• Progress updates with no historic as-built data;
• Incorrect actual dates in progress updates;
• Changing historical data in final as-built;
• Unidentified logic/duration changes in updates.
Schedule Analytics Common ‘Tricks’, Tactics or Strategies
Case Study 1
Slide 26
Schedule Analytics – Float Deterioration
Notes:
Description Observations Actions
This chart illustrates the trending of the total float
for the various key components of the project.
The platform rehabilitation work continues to lose
float due to low contractor productivity.
Engage with contractor to remedy the lackluster
productivity. Ensure that sufficient manpower is
being provided.
-80
-60
-40
-20
0
20
40
60
To
tal
Flo
at
(Days)
Track Extension As-Planned Platform Rehabilitation Systems Upgrades
Most Critical
Sub-Critical
Case Study 1
Port Rehabilitation Site Development
PwC
Equipment and consumable lead times Consumables are in short supply and lead times are rapidly returning to 2007 boom levels
2011 lead time outlook (years)
Gas generators
Wagons
Reclaimers
Tyres
Large Haul trucks
Crushers
Barges
Locomotives
Grinding mills
Draglines
Ship Loaders
Rope Shovels
0 5 1 2 3 4
2007 delivery time
Current delivery time
Normal delivery time
Heavy equipment lead time Consumables demand / supply
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
98 105
117 120
127
135 143
155 165
175 185
Demand Supply
Global Tyre Sypply/Demand (Thousands of 40’’ to 63’’ Units)
Case Study 1
Slide 28
Description Observations Actions
This graphic shows the percentage of open ends
(i.e. activities without predecessors or
successors) in the updates analyzed in this
report.
Then number of open ends has been
substantially reduced in the last two updates.
This is a good trend and indicates that the team
is taking steps forward to enhance the quality of
the schedule.duration overruns .
Ensure that open ends in the schedule are kept
to a minimum.
Schedule Analytics – Logic Check
Notes:
8%7%
4% 5%
2%3% 3%
10%
5%
1%0%
2%
4%
6%
8%
10%
12%
31-Jan-12 29-Feb-12 31-Mar-12 30-Apr-12 31-May-12
Data Date
No Predecessors No Successors
Case Study 1
Description Observations Actions
This graphic shows the number of each
relationship type in the schedule updates
analyzed. In order for a logic tie to be valid, it has
to be linked to an incomplete task (e.g. not a
completed task, LOE, etc.)
There are a number of start to finish task in the
schedule the usage of which is highly
discouraged due to the ambiguous nature of the
tie.
Eliminate SF relationships where possible and
replace these with more suitable schedule ties
(e.g. FS, SS).path.
Schedule Analytics - Relationship Tie Check
Notes:
Case Study 1
Description Observations Actions
This graphic summarizes the various constraint
types in the schedule. Hard constraints which
override the logic may dampen the ability to
accurately report the project's critical path.
As of the May 2012 update, all hard constraints
have been eliminated with the overall number of
constraints dropping as well. This is a positive
trend in the quality of the schedule.
Excessive use of constraints impedes ability to
determine the project’s critical path Increasing
constraints could indicate ‘lazy’/ bad scheduling
practices. Confirm need for hard constraints
Schedule Analytics - Hard Constraint Check
Notes:
Case Study 1
Description Observations Actions
This chart shows the distribution of the float
values reported in the schedule for all of the
remaining tasks.
Over 50% of tasks have over 70 days of float.
For a project with only 13 months of remaining
duration, this percentage is excessive and may
be an indication of missing logic ties.
Ensure that all tasks are properly linked to the
project's completion milestone and that the float
is accurately reported
Schedule Analytics - High Float Check
Notes:
Case Study 1
Description Observations Actions
This chart shows the distribution of the durations
reported in the schedule for all of the remaining
tasks.
Since the schedule is updated on a monthly
basis, the target should be to have as many
activities as possible with a duration of one
month or less. In the latest update, about 60% of
tasks fall into that category.
Where possible, tasks should be broken down
into a higher level of detail to improve the ability
to track progress on a monthly basis.
Schedule Analytics - High Duration check
Notes:
Case Study 1
Schedule Analytics - Early Finish count
Notes: Analysis is based on contractor submissions from 5700 to 5702
Description Observations Actions
This chart illustrates the planned early
completion date of all activities , window by
window.
The wave of activities appears to shift indicating
that slow progression and failure to meet
planned progress
Identify root cause of progress slippage, issue
warnings for non-performance, or revised
projections to reflect realistic progress
0
500
1000
1500
2000
Ac
tivit
y C
ou
nt
Case Study 1
0
500
1000
1500
2000
M-1
0
J-1
0
J-1
0
A-1
0
S-1
0
O-1
0
N-1
0
D-1
0
J-1
1
F-1
1
M-1
1
A-1
1
M-1
1
J-1
1
J-1
1
A-1
1
S-1
1
O-1
1
N-1
1
D-1
1
J-1
2
F-1
2
M-1
2
A-1
2
M-1
2
J-1
2
J-1
2
A-1
2
S-1
2
O-1
2
N-1
2
D-1
2
J-1
3
F-1
3
M-1
3
A-1
3
M-1
3
J-1
3
J-1
3
A-1
3
S-1
3
O-1
3
N-1
3
D-1
3
J-1
4
Ac
tivit
y C
ou
nt
M-10
J-10
J-10
A-10
S-10
O-10
N-10
D-10
J-11
F-11
M-11
A-11
M-11
J-11
J-11
A-11
S-11
O-11
N-11
D-11
J-12
F-12
M-12
A-12
M-12
J-12
J-12
A-12
S-12
O-12
N-12
D-12
J-13
F-13
M-13
A-13
M-13
J-13
J-13
A-13
S-13
O-13
N-13
D-13
J-14
7/23/2010 0 0 597 208 141 102 849 569 467 456 476 337 340 183 139 94 102 97 119 44 5 33 6 7 37 8 4 2 2 12 12 0 1 4 1 0 1 0 0 0 4 0 0 0 3
8/27/2010 0 0 0 390 198 153 974 722 474 476 544 359 377 216 213 105 105 123 125 40 15 35 6 13 33 8 4 2 2 12 12 0 1 4 1 0 1 0 0 0 4 0 0 0 3
9/24/2010 0 0 0 0 470 186 122 681 640 556 711 559 241 248 159 67 128 74 96 44 13 39 20 9 29 8 4 2 7 8 10 0 1 5 3 0 0 0 1 0 6 0 0 0 0
10/22/2010 0 0 0 0 0 413 157 110 802 641 772 468 226 276 323 91 135 48 91 56 15 20 24 14 1 6 4 2 6 8 7 0 4 5 3 0 0 0 0 0 6 0 0 0 0
11/26/2010 0 0 0 0 0 0 658 150 914 761 849 513 324 268 265 132 87 107 106 62 14 16 25 18 10 13 4 1 7 12 9 2 2 9 3 0 0 0 0 0 6 0 0 0 0
12/17/2010 0 0 0 0 0 0 0 794 139 967 871 615 379 296 269 142 92 111 57 112 27 14 25 18 9 13 4 3 5 12 10 2 3 9 3 1 0 0 0 0 6 0 0 0 0
Early finish activity count - sample schedule slippage
Description Observations Actions
This chart illustrates the planned early
completion date of all activities , window by
window.
The wave of activities appears to shift indicating
that slow progression and failure to meet
planned progress
Identify root cause of progress slippage, issue
warnings for non-performance, or revised
projections to reflect realistic progress
July 2010 update forecasted 467
activity completions for January 2011
December 2010 update forecasted 1395
activity completions for January 2011
Variance = 928
Case Study 1
Description Observations Actions
This chart illustrates the distribution of activities
performed within their as-planned duration by
Wick’s law contractor
H & P were relatively accurate in predicting the
majority of their task durations. G & E activities
however , show significant duration overruns .
Schedule Analytics - Task Duration Variance
Notes: Analysis is based on contractor submissions to update 5751
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
-50 -40 -30 -20 -10 0 10 20 30 40 50
Pe
rce
nta
ge
of
Ac
tiv
itie
s
Days Between Original Duration and Actual Duration
ENER
VOSE
DOMD
TOSH
30% - Less than or Equal
to Original Duration
70% - Greater than
Original Duration in
Port tasks
Mechanical
Civil/Structure
Railway
Port
Case Study 1
PwC
Schedule Analytics – Integrity checks
Assessment Area Criteria Schedule Update
Jan-12 Feb-12 Mar-12 Apr-12 May-12
1. Logic Check <5% missing ties 2. Leads Check (Negative Lag) 0%
3. Lags Check <5%
4. Relationship Types Check No SF relationships
5. Hard Constraints Check <5% 6. High Float Check <5% Acts with excessive float
7. Negative Float Check No negative float 8. High Duration Check <5% with excessive duration 9. Invalid Dates Check planned dates < DD or actual > 10. Missed Tasks Check 95% of monthly targets achieved 11. Critical Path Test Check Delays in CP accurately reflected
• 14 Point Assessment gauges the quality of the contractor’s schedule
Case Study 1
Slide 37
PwC
Case Studies Energy
Slide 38
PwC
Refinery Modernization / Expansion Modernization/ expansion to diversify products and improve product yields. Due to repeated funding requests client
required validation of cost and schedule
Forecasts
• Review growth of the cost and schedule projections
• Establish accurate design status and undefined scope
• Challenge assumptions and reasonableness of estimates
• Challenge manpower productivity drivers to completion
• Prepare independent cost-to-complete/quantitative risk assessment (QRA)
to establish required contingency to ensure P80 confidence level
Case Study 2
Slide 39
PwC
Cost and schedule validation
Design Completion
Quantity Estimation
Performance Factor / Output
Assumptions
Contingency Management
Establish Completion
Level
• Design hours
• Design drawings
• Provisional Sums
• % Complete
Establish Confidence
Level
• Bulk Material
• Parametric Estimates
• Allowances
• Quantity Take-Offs
Verify P/F Assumptions
• Allowances
• Unit Rates
• Historic Outputs
• Performance Degradation
• Anticipated disruption and Inefficiency
Identify ‘soft spots’
• Cost at Completion
• Remaining Durations
• Allowances
• Assumptions
• Potential over-runs and undefined scope
Remaining Contingency
• Test confidence in remaining UAP
• Review content of worst-case scenario assumptions
Schedule Durations/
Logic
Cost to Completion
Case Study 2
Slide 40
PwC
Cost validation (qualitative)
Project Design
Estimate Schedule Risk
Quantity Perf.
Factor Indirects CPM PRA Cost Schedule
12PS l l l l l l l l
GOHT l l l l l l l l
OSBL l l l l l l l l
Coker l l l l l l l l
SRC l l l l l l l l
PMT l l l l l l l l
Case Study 2
Slide 41
PwC
Quantitative Risk Analysis
Stakeholder Input
Develop Risk Model
Run Simulation
Vet Data
Generate Reports
Risk Response
Gather data:
• Risk & Issues (Workshops/ Risk Registers)
• Review status reports (minutes, monthly reports)
• Cost Estimates / Estimate to Complete models
• Contract / Design Documents
Quantitative Model
•Create model based on
• budget
•ETC/EAC
• level 2 schedule)
• estimating confidence range
(Class 1, 2, 3, 4, or 5)
•Quantify risk likelihood
•Quantify risk impacts
•Create risk register
Monte-Carlo (@Risk)
•Run simulation and gather output
•Test results and model integrity
•Adjust model if appropriate
Review Results
•Validate the data
•Test results against estimtate
•Test results to industry standards
(AACEi, DOE, ANSI, ASPE)
•Compare outliers to assumptions
Summarize Output
•Create functional reports to
present to steering groups
• Update Risk Dashboards
• Identify Exposure (P80/P90)
• Update Sensitivity Analysis
• Prepare Mitigation Road-map
Risk Mitigation
•Mitigate/Manage Risk
•Accept /Share Risk
•Transfer Risk
•Revise Scope/Budget/Schedule
•Update Estimate to Complete
Case Study 2
Slide 42
PwC
Monte-Carlo Simulation (Results Distribution)
Distribution of rolling a pair of dice a 1000 times
Case Study 2
Slide 43
PwC
Quantitative Risk Assessment
Distribution of building a project 1000 times.
P90 = $1.57Bn
P50 = $1.55Bn
Slide 44
PwC
Risk Weighted Contingency Confidence model
Confidence Forecast + UAP ($M)
Forecast + UAP +Discrete Risks ($M)
0% $ 8,692.31 $ 8,818.85
5% $ 8,880.34 $ 8,961.37
10% $ 8,934.22 $ 9,004.27
15% $ 8,961.11 $ 9,038.06
20% $ 8,986.39 $ 9,067.49
25% $ 9,007.90 $ 9,090.49
30% $ 9,028.86 $ 9,111.90
35% $ 9,045.76 $ 9,127.08
40% $ 9,063.55 $ 9,142.84
45% $ 9,075.98 $ 9,159.37
50% $ 9,094.21 $ 9,173.02
55% $ 9,109.87 $ 9,195.27
60% $ 9,126.12 $ 9,214.58
65% $ 9,148.78 $ 9,233.08
70% $ 9,167.78 $ 9,254.97
75% $ 9,193.81 $ 9,280.19
80% $ 9,219.84 $ 9,310.05
85% $ 9,249.40 $ 9,342.35
90% $ 9,293.65 $ 9,387.51
95% $ 9,349.05 $ 9,440.45
100% $ 9,609.42 $ 9,725.96
What we did • Challenged proposed project
funding cap of $9bn
• Developed risk model incorporating
• Estimated to complete
• Risks (monetized)
• Performance trends
• Schedule trends
• Quantity increases
• Established quantitative confidence level with, and without discretely monetized risks
Benefit to Client • Request adequate project funding
based decision support.
• Establish realistic project targets
• Enable more effective project controls and realistic baseline.
Case Study 2
Slide 45
PwC
CP&I – Selected thought leadership
Risk management and schedule management on mega-projects. Since your day-to-day
business is construction, you know construction projects are inherently risky. Managing this risk is
essential and, like any other important management or oversight function, is either done well or it is a
wasted effort that can risk everything. Capital project owners have focused on improving governance
structures; yet too many projects still fail to deliver on cost, schedule or quality commitments. The
consequence of failure can be public embarrassment and disappointed stakeholders
Quantitative risk analysis. As major capital projects are subjected to greater regulatory and
political scrutiny, the pressure on contractors to meet tight schedule and budgetary constraints
increases. Often cost and schedule targets are reported without accounting for potential risks and
impacts, which leads to an erosion of confidence in reaching those targets. Having a systematic
quantitative risk analysis process in place to gauge the confidence level of the project’s cost and
schedule is important for establishing realistic expectations.
Schedule analytics tools As capital project spend increases and aggressive deadlines are built into
project schedules, the reliance on accurate, transparent and meaningful schedule practices is growing.
Too often, major projects suffer from missed milestones, schedule slippage and delays with no way of
determining recovery plans or realistic forecast completion dates.
Optimizing capital project delivery. A major US utility was finalizing its plans to construct new
plants costing several billion dollars. Working in a highly regulated environment, the client recognized
the importance of a strong control environment to manage the project. The client requested a
governance readiness review to determine whether its systems and controls could support a project of
this magnitude and complexity.
Slide 46
PwC
Thank you
Slide 47