111014-vic-govt-paec-submission-v01-dvh1.pdf

Submission: Inquiry into effective decision making for the successful delivery of significant infrastructure projects

Prepared for: Public Accounts and Estimates Committee: Parliament of Victoria

2 The contents of this document are subject to copyright and may not be reproduced or utilised in any way whatsoever without the written consent of

Ensemble Partners Pty Ltd. ABN 27 091 919 961

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Contents 1. Executive Summary .................................................................. 41.1. Introduction ............................................................................................................ 41.2. The situation .......................................................................................................... 41.3. Implications ............................................................................................................ 41.4. The Opportunity - Critical Chain Project Management .......................................... 41.5. Benefits .................................................................................................................. 42. Current challenges and their implications .............................. 52.1. Challenges for reliable delivery of infrastructure projects ...................................... 52.2. Implications of project performance issues ............................................................ 53. Introducing Critical Chain Project Management ..................... 63.1. Critical Chain Project Management ....................................................................... 63.1.1.A conceptual introduction to CCPM ..................................................................................... 63.1.2.Why is CCPM different? ...................................................................................................... 73.2. Critical Chain Project Management Implementation Results ................................. 73.2.1.Multi-industry CCPM implementation results ....................................................................... 73.2.2.Case Study: Japans Ministry of Land, Infrastructure and Transportation (MLIT) adoption

of Critical Chain Project Management for infrastructure projects ........................................ 84. Our responses to the Terms of Reference .............................. 94.1. Response to request A .......................................................................................... 94.2. Response to request B ........................................................................................ 114.3. Response to request C ........................................................................................ 134.4. Response to request E ........................................................................................ 144.5. Response to request F ........................................................................................ 155. Concluding remarks ................................................................ 166. An overview of Ensemble Partners ........................................ 176.1. Who are Ensemble Partners? .............................................................................. 176.2. Ensemble Partners Track Record ........................................................................ 176.2.1.BHP Billiton Iron Ore .......................................................................................................... 176.2.2.Thiess Degremont Victorian Desalination Plant Construction Project ............................... 177. The Ensemble Team ................................................................ 187.1. Ensemble Team Members ................................................................................... 187.1.1.David Hodes ...................................................................................................................... 187.1.2.Francois Faure ................................................................................................................... 187.1.3.Stephen Nicholas ............................................................................................................... 187.1.4.Geoff Markley ..................................................................................................................... 197.1.5.Steven Balderstone ............................................................................................................ 197.1.6. Inge Brown ......................................................................................................................... 197.2. References .......................................................................................................... 20



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8. Appendix .................................................................................. 218.1. White Paper: Taming uncertainty in the multi-project environment: The Critical

Chain difference ................................................................................................... 218.2. Bibliography of CCPM Publications ..................................................................... 22



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1. Executive Summary

1.1. Introduction The Public Accounts and Estimates Committee (PAEC) of the Parliament of Victoria published a Terms of Reference relating to an Inquiry into Effective Decision Making for the Successful Delivery of Significant Infrastructure Projects. This document is a submission to the PAEC in response to the Terms of Reference. Ensemble Partners is a management consultancy with offices in Australia and Singapore, and specialises in management of large and complex projects.

1.2. The situation Australia is in the midst of a period of large investment in physical infrastructure, with Victoria at the forefront of investment activity through rail, road, healthcare, and desalination projects. Many public infrastructure projects are structured as partnerships and through contracts for service of a variety of types with private sector companies.

1.3. Implications In a public sector context, poor project performance will conflict with the public interest, due to excessive expenditure and degraded return on investment, late completion, compromised scope, adverse publicity and reputation damage. There is also evidence that the morale and job satisfaction degrades when people work on under-performing projects.

1.4. The Opportunity - Critical Chain Project Management The Project Management Body of Knowledge saw little widespread evolution in the second half of last century, apart from the introduction of IT systems. This is despite considerable evidence of inconsistent performance of conventional approaches to project management in many industries and sectors.

During the mid-1990s a new approach to managing projects known as Critical Chain Project Management (CCPM) was developed. CCPM is one component of the systems-thinking oriented suite of management techniques known as the Theory of Constraints (TOC). CCPM has found favour with many large corporations and government organisations in the US, Europe, and particularly Japanese infrastructure. The adoption of CCPM in Australia has lagged behind other regions, but has now been adopted by Australias largest private sector company. There is an opportunity for the public sector in Victoria to develop the requisite skills to manage, evaluate, and oversee infrastructure projects via a working knowledge of CCPM, to the benefit of the public interest.

1.5. Benefits CCPM implementation across broad and diverse industry sectors has generated evidence of a level of effectiveness in the range of 20%-30% improvement over conventional approaches to project management, with regard to timeliness of performance, cost, earlier realisation of business performance and conformance to specification. Such benefits have also been realised widely in public sector infrastructure projects.



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2. Current challenges and their implications

2.1. Challenges for reliable delivery of infrastructure projects An Infrastructure Partners Australia study1 identified a sizable and growing backlog of up to 160 priority projects across Australia. At various stages of the project lifecycle, these projects are valued between $455 billion and $770 billion (according to estimates published by IPA, RBS/ABN Amro, and Citigroup). Victoria is well represented in these numbers, through projects such as Regional Rail Express; East West Rail Tunnel; Parkville Cancer Hospital; Victorian Desalination Plant; and Peninsula Link.

Governments, State and Federal, face the challenge of entering agreements with private sector organisations to deliver large infrastructure projects in a manner that aligns with public interest.

Government organisations are not alone in their general sense of frustration around project delivery. Numerous studies by the Standish Group examining the results of traditional project management methods in the IT sector, show only 44% of projects typically finish on time, and usually complete at 222% of the duration originally planned, 189% of the original budgeted cost, 70%of projects fall short of their planned scope (technical content delivered), and 30% are cancelled before completion.2 Anecdotal reports from other industry sectors suggest similar project performance issues.

With this context in mind the Public Accounts & Estimates Committee recognised, That to strengthen effective decision-making for the successful delivery of significant infrastructure projects, including public-private partnership arrangements, there is an integral need for public sector managers overseeing these projects to possess appropriate skills and expertise in the field.

2.2. Implications of project performance issues The recent history of infrastructure projects across Australia provides numerous examples of projects that resulted in outcomes that did not align with the public interest. Large projects of various types across a myriad of industries display common performance problems, which can be summarised as:

Excessive expenditure and degraded return on investment Late completion Compromised scope Adverse publicity and reputation damage

Large projects of all types that run over budget and are delivered passed their due date with compromised scope have adverse implications for the investors and stakeholder groups.

1 Australias Infrastructure Priorities; Infrastructure Partners Australia, July 2007

2 Standish Group, Boston Ma. CHAOS Summary Report 2009



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3. Introducing Critical Chain Project Management

The penultimate decade of last century saw the emergence of numerous new approaches to managing manufacturing operations as Western companies responded to economic challenges from foreign manufacturers. Methods such as Lean, Total Quality Management, Six Sigma, and Just-in-Time were some of the first major variations in management of manufacturing operations since Henry Ford introduced the moving production line.

By contrast, only subtle refinements to the Project Management Body of Knowledge (PMBOK) emerged over the post WWII years of last century aside from the introduction of scheduling and management software. The approach to managing projects remained largely unchanged over many decades even though evidence of the effectiveness of the conventional wisdom of project management was at best mixed.

During the mid-1990s a methodology to supplement the existing body of knowledge for project management was developed and publicised through a series of books and journal articles. The intervening years have seen many major private sector organisations and government bodies adopt this complementary approach to managing projects as their preferred methodology. Globally, a small industry of organisations providing training, scheduling software, consulting services, and project management services in support of this new approach has grown, as anecdotal evidence points to the effectiveness of the method.

3.1. Critical Chain Project Management Critical Chain Project Management (CCPM) is that methodology. A growing body of evidence, which we quote elsewhere in this document supports claims that CCPM delivers projects 20%-30% quicker, and at a lower cost than traditional approaches of management, without compromised quality or scope. CCPM is often applied as an intervention mechanism; to rescue troubled projects. There has been widespread adoption of CCPM across the USA, Europe, and particularly in Japan where government has adopted CCPM for many infrastructure projects. Although relatively new in Australia, CCPM has recently been implemented to manage the largest IT project commissioned by Australias largest private sector organisation.

3.1.1. A conceptual introduction to CCPM

CCPM is one component of the systems-thinking oriented suite of management techniques known as the Theory of Constraints (TOC). TOC was developed over several decades by Israeli physicist turned management consultant Dr Eliyahu M. Goldratt. Over sixty books and several hundred journal articles have been published on TOC techniques globally, and Dr Goldratts own books have sold in excess of four million copies.

TOC can be considered as a method for continuous improvement in organisational productivity. It is an accepted law of TOC that any complex system has within it a constraint. If that were not so, the system would produce an infinite amount of output.

Put more simply, a constraint is anything that prevents the system (project) from achieving more of its goal. In the language of project management, a constraint is anything that prevents projects from achieving shorter delivery times.

The Critical Chain determines the overall duration of the project, any increase in the length of this chain will, by definition, cause a delay in the project. Critical Chain endeavours to protect the stakeholders of the project from negative variation along the critical chain, and



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protect the critical chain from negative variation along the non-critical chains, or feeding chains.

3.1.2. Why is CCPM different?

The Critical Chain method is unique in the way in which it treats and measures variability within a project and across projects, so that the effects of that variability are minimised, performance is optimised and reliability is improved. Critical Chain Project Management:

aligns managerial behaviours with project objectives, based on an understanding of the system dynamics evident within the project;

plans and schedules work in a way to minimise the negative impacts of variation on the project plan;

coordinates the efforts of all parties to deliver the projects critical tasks in a timely manner;

provides a focussing mechanism to concentrate managerial attention on the aspects of the project that limit the projects performance.

Critical Chain is designed to mitigate the behaviours that hinder the successful completion of projects. Critical Chain helps management determine where to focus so that the entire project is completed on time.

Projects are often structured (managerially) around functional silos, meaning an inherent conflict arises between functional and project managers over the use of finite resources (often skilled people or expensive capital equipment) which are in high demand. The functional manager is trying to optimise his or her profit or cost centre while at the same time the project managers are pushing for adherence to their schedules. CCPM coordinates and synchronises decision making for the benefit of the project as a whole, with special emphasis in overcoming conflicts between business and the project.

3.2. Critical Chain Project Management Implementation Results We are not aware of any comprehensive meta-study reporting the results of CCPM implementation across regions, industries, and project types. However, there is considerable information from numerous sources that points to the effectiveness of CCPM.

3.2.1. Multi-industry CCPM implementation results

HP Digital Camera Group 100% on time delivery, 60%> product launches

Central Nuclear Almaraz Trillo 25% more projects completed per month

Action Park Multiforma Grupo 20% more projects completed

Marketing Architects 30% additional projects completed

Rapid Solutions Group 30% increase in project delivery

Celsa Group 30% more projects completed per month

TECNOBIT 20% reduction in project cycle times

Boeing Space & Intelligence Systems 80% productivity increase

US Air Force, B-1 Bomber Line 30% cycle time reduction, 33% productivity increase

USAirForce, C130ProductionLine 90%on time or early delivery of aircraft to service

US Air Force C5Production Line 33%reduction in cycle time; 75%reduction in defects



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Many of the behavioural dynamics that exist within projects are common across projects in a range of industries and of a variety of magnitudes. By effectively managing these dynamics CCPM improves project performance irrespective of the project environment or industry.

3.2.2. Case Study: Japans Ministry of Land, Infrastructure and Transportation (MLIT) adoption of Critical Chain Project Management for infrastructure projects

Japans Infrastructure challenge is unique. For a relatively small country, it is impacted disproportionately by natural disasters. Although Japan has some unique infrastructure project challenges, the generic construction challenges were alltoo common:

Construction projects were often not completed on time; Although overtime is excessive, workers were idle too often; Cost overruns; Projects became delayed by unpredictable events, such as the weather.

The Japanese Ministry of Land, Infrastructure and Transportation (MLIT) has embraced Critical Chain Project Management since 2004. Why?

(1) The Japanese Ministry of Land, Infrastructure and Transportation (MLIT) is the largest Ministry in Japan and commissions some 20-30,000 public works projects per year;

(2) In 2004, Mr. Koyishi Okudaira (Director General of MLIT) was introduced to Critical Chain Project Management techniques;

(3) After being successfully tested and then used in over 4,000 public works projects in 2008, the Japanese government recommended, That Critical Chain be used on all projects henceforth. Project completion times were reduced by 20%-30% over conventional project management techniques;

(4) Today the use of Critical Chain Project Management Methodology forms part of the selection criteria when government awards a contract;

(5) Over half of all local prefecture governments are now also using CCPM for many of their non-construction projects.



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4. Our responses to the Terms of Reference

4.1. Response to request A (a) the competencies and skills that public sector managers require for the effective evaluation, decision making and oversight of significant infrastructure projects and protection of the public interest.

Response

Discussion

What is required to protect the public interest? This question is critical because it begs two fundamental questions. What is the public interest? And, how do we best protect it? The first question is relatively simple to answer and yet, it is surprising how often in the context of infrastructure projects it is divorced from the second question. The first question assumes the purpose or goal of infrastructure, the second on how to ensure or reach it.

If we assume the purpose of building infrastructure is to provide benefits to the public, it naturally follows, that the more rapidly infrastructure can be installed the sooner those benefits can be enjoyed. The public interest therefore consists chiefly in enjoying the value derived from their tax dollar investment in infrastructure. As with any investment, the faster the payback period the more attractive the investment is to the investor. If the investment not only provides rapid payback but is also low risk to the investor, then the investment becomes even more attractive because the benefits are greater.

Public sector managers, as custodians of the public interest, require an integrated management methodology that provides them with the competencies and skills that empower them to reliably fulfil their obligations in protecting the public interest. That is, a methodology that assists managers to reliably deliver infrastructure on time at the lowest cost and risk possible to the public.

Recommendation

Critical Chain Project Management (CCPM) has a simple objective; to deliver more projects, on time, in less time, every time. It provides a coherent framework for the effective evaluation, decision making and oversight of significant infrastructure projects.

CCPM provides managers with detailed visibility of a projects status and accurate frontline information that helps managers understand what obstacles are preventing a project from advancing toward completion. CCPM mitigates a projects risk of delay by providing managers with tools that enhance their ability to mange external influences. CCPM helps managers answer crucial questions such as how much resource will be required to ensure on-time delivery, and which interdependencies in a project will require management attention given their exposure to resource contention. Unlike traditional project management its orientation is proactive, helping managers to anticipate obstacles to project completion and to take corrective actions.

It also provides the management principles that mitigate behaviours that typically put a project at risk such as overestimating task durations, leaving tasks until the last minute and task managers expanding their work to fill the amount of time available. CCPM can help public sector managers to collaborate with private sector in understanding how best to



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synchronise resources to ensure on time project delivery. Particularly in the context of Public Private Partnerships (PPPs) Critical Chain Project Management makes partnering meaningful by providing a single source of information that can be shared by both the public and private parties. Critical Chain drives real teamwork between private and public sector stakeholders by providing a system-wide and shared perspective of an infrastructure projects resource and schedule priorities. For public sector managers, CCPM makes collaboration possible by making the sources of shared risk visible and explicit. This drives accountability and produces an environment conducive to effective decision making.

Knowledge of CCPM can empower public sector managers to build on existing project management knowledge and tools and enhance their competencies and skills to successfully deliver significant infrastructure projects in terms of the following areas.

Evaluation

Project portfolio evaluation framework: provides visibility on which projects will contribute the most value towards maximising public interests based on the resource investment.

Providing a means to accurately evaluate the effect of resource allocation scenarios on project end-dates.

Providing a means to evaluate where the constraints of infrastructure projects lie and provides a mechanism to focus management attention on the critical aspects that have the most impact on timeliness of delivery.

Decision Making

Facilitates effective management decision making forums by providing a meeting cycle structure encouraging robust decision making based on shared information.

Helps to provide visibility into project status and provides an evidence base for making and justifying decisions.

Oversight

Provides portfolio level information about which project plans are on-track and which ones need attention.

Provides accurate project milestone and end-date forecasts based on real-time progress information.

Provides scenario planning, giving managers the power to understand the impact on the projects end-date by applying different resource and scheduling scenarios.

Ensemble Partners services

To inform public sector managers, Ensemble Partners would provide workshops to provide the principles of Critical Chain Project Management and the package of support services available in the market such as online training, technology solutions and mentoring. This information can be tailored to public sector managers to demonstrate how this can be practically applied to the dynamics of large infrastructure projects.

The workshop provides managers with access to management tools designed to evaluate the systemic drivers of infrastructure project performance. Ensemble will showcase information systems used to provide up to date financial data of the cash burn rate and the drivers of a projects financial performance.



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4.2. Response to request B (b) the extent to which Government policies such as the National Public Private Partnership Policy and Guidelines and the Partnerships Victoria Requirements specify these requisite competencies and skills, and support the Department of Treasury and Finance's application of these across the public sector;

Response

Discussion

Based on Ensemble Partners analysis of the above recommended policy documents, the competencies and skills we have outlined in our Response to request A are not specifically addressed in these documents. Ensembles core expertise is in enhancing our client organisations ability to drive project performance through the optimisation of resource and schedule management. Our input to this submission is specifically related to our expertise in this field. Infrastructure Australias National Public Private Partnership Policy and Guidelines and the Partnership Victoria Requirements Document do not specifically consider resource and schedule management as a part of the policy as they are more concerned with matters related to project governance and finance.

The strengths of the policy documents are in providing a clear framework for selecting procurement models for infrastructure service delivery. In order for government to understand the risks involved in delivering infrastructure the public sector needs to more explicitly engage with the private sector in evaluating the strengths and weaknesses of their project planning and execution methodologies in evaluating one of the key pillars of the policy, Value for Money.

Whilst it is entirely appropriate, normative and necessary for the public sector to devise the best ways to transfer risk, manage commercials, contracts and also define what is considered value for money, an opportunity exists for government to increase the level of competency they possess in evaluating private sector project bids. Public sector managers need to be able to identify with greater accuracy how well potential private sector bidders can complete infrastructure projects in a timely manner. Without the capacity to understand the granular drivers of project underperformance and how bidders plan to mitigate these risks, then public sector managers sub-optimise the potential to optimise the accountability required to protect the public interest.

The National PPP Guidelines (p5) states, that value for money is a key principle of PPP projects and includes both a quantitative and qualitative assessment of the benefits of the private sector proposals. Ensemble Partners maintains the public sectors power to protect the public interest and identify those bids where true value for money is represented would be enhanced if the appraisal process was informed by an understanding of the resource and schedule level drivers of infrastructure project underperformance.

Recommendation

Governments ability to engage meaningfully with the private sector will be greatly enhanced by equipping them with the skills and competencies to understand at a detailed level the resource and schedule drivers of the projects burn rate. A working knowledge of these factors from the lens of Critical Chain Project Management can greatly enhance the public sectors ability to optimise service delivery models. This has been evidenced by the adoption of Critical Chain Project Management in public works infrastructure as in the Japanese case study below.

Since 2008, Japans Ministry for Lands Infrastructure and Transport (MLIT) recommended public works projects use Critical Chain Project Management (CCPM).



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Why? After successfully using CCPM on over 4,000 public works projects completion times were reduced by a reported average of 20-30% over conventional project management techniques. The Japanese MLIT has recognised in order to meaningfully engage with private sector in infrastructure development, there needs to be an integration of thinking in terms of how to collaborate in project execution. Whilst the Japanese government cannot mandate to the private sector which project management techniques they must use, bidders proposing to use CCPM over conventional techniques are given a degree of preference because of the effectiveness of the techniques in providing the public-private partnership with a reliable source of decision making data in execution.

The proof of the Japanese MLITs commitment to CCPM has been their pledge to the private sector to respond to all their requests within 24 hours if those inputs will impact the Critical Chain of any particular project. That is, the sequence of tasks having a direct bearing on the end date of the project.

If these skills and competencies are normative in Japan, and they have experienced such uplift in productivity, Ensemble Partners recommends the Victorian government consider investigating CCPM as an innovation in project management and introduce the principles of these innovations into the assessment process of bidders.



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4.3. Response to request C (c) strategies in place within the public sector for the development of such requisite competencies and skills and for their ongoing refinement and enhancement through knowledge-building from the sharing of best practice examples and guidance in the public sector;

Response

Discussion

The public sector in Victoria is comprised of numerous departments, agencies, and authorities, each employing personnel with a range of skills and capabilities. The extent to which the roles performed by public sector managers require those individuals to possess a set of requisite competencies and skills relevant to infrastructure projects will vary considerably.

Recommendation

Ensemble Partners suggest a streamlined program:

To identify the office-holders of managerial roles within the public sector who would benefit from possessing requisite skills and capabilities relating to infrastructure project management, evaluation, and oversight.

Assess the training needs of managers, and target skill and knowledge development.

Ensemble Partners propose the initial development of an archetypal set of requisite capabilities, graduated by role and responsibility, for selected office holders within the Victorian public sector. The breadth of possible requisites skills and knowledge is extensive and would include discipline areas such as project finance, alliance relationships, evaluation of conformance to contractual terms and obligations.

An extended program of study can be subsequently designed to deliver both theoretical study plus practical immersion and learning opportunities for the participants to develop the requisite skills and capabilities based upon their role and needs by category.

In the context of this submission we propose a program of study focussed on development of requisite skills and capabilities relating to the operational management of infrastructure projects. To this end we suggest such a program would address:

An understanding and working knowledge of the operational management practices commonly undertaken in large infrastructure projects.

An understanding and working knowledge of the dynamics and interplay of factors influencing the performance of infrastructure projects.

An introduction to Critical Chain Project Management, the concepts and approaches to deliver superior project outcomes.

Exposure to best-practice application of project management methods and techniques.



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4.4. Response to request E (e) Relevant infrastructure delivery strategies and practices, including in public-private partnerships, in relation to enhancing public sector expertise in place in other Australasian jurisdictions and relevant jurisdictions outside Australia; and

Response

Discussion

This submission provides information about CCPM as methodology to consider for addressing the unique challenges of delivering large infrastructure projects. The information includes both a conceptual outline and case study material. To gain an understanding of the suitability of CCPM for application in Victoria, first-hand information of the implementation in an infrastructure project environment would also be a valuable source of information. We recommend observation of in-flight projects utilising the CCPM techniques in a foreign jurisdiction.

Recommendation

Section 4.2.2 of this submission provides an overview of the adoption of CCPM for management of infrastructure programs in Japan. Within the public sector globally, Japan is the leading adopter of CCPM. The breadth and nature of the adoption of CCPM in an infrastructure project context would make Japan an ideal research site to examine the effectiveness of CCPM a complementary approach to existing project management capability.

Ensemble Partners suggest the state consider a study tour of Japan for selected public sector managers to observe first-hand the implementation of CCPM in Japanese infrastructure projects. Such a study tour could provide the opportunity to visit in-flight projects, and to learn about the Japanese CCPM experience. Such a tour could inform and educate public sector managers and provide an opportunity for participants to evaluate the suitability of CCPM for implementation within Victorian infrastructure construction projects. Ensemble Partners has a network of international contacts to assist in facilitating such a study tour, as required.

Every year a CCPM conference is supported by organisations and people who manage large projects from a multitude of industries. This event is well attended, and is managed by one of our business partners. Public sector managers should attend the annual CCPM conference, to meet and interact with project managers from diverse geographies and diverse industries who have experience in implementing CCPM.

A packaged DVD set capture the presentations and talks given at the annual conference by hands-on project managers and executives. We have made this DVD set available with this submission. A number of the talks and presentations capture the experiences and results of CCPM implementations, and some communicate the culture change journey which accompanies CCPM.



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4.5. Response to request F (f) The merits of centralisation versus decentralisation of available skilled experts in the Victorian public sector during the life-cycle stages of public-private partnership projects, including considering any benefits that may be derived from greater flexibility to contract specialist services from external sources.

Response

Discussion

A centralised approach via an infrastructure project management centre of excellence is a means of driving consistency and standardisation of CCPM best-practices across the Victorian public sector. The ability to retain learning, re-use knowledge, acquire requisite skills, may be realised by the State developing a centralised capability. Similarly well executed centralisation presents the opportunity for government to gain more control of capital expenditure and delivery of infrastructure and associated services. An example of centralised project execution capability operating in a current in-flight project is presented:

Case example

Australias largest private sector organisation decided to implement the complex SAP IT system across their entire operation. They appointed a global consulting organisation to act as the system integrator to design and construct the new IT system.

The first release of the program was delivered many months late and well over budget. A third party was subsequently contracted to act in a program management role for the resource and scheduling component of the remainder of the project. The third party was given the responsibility to educate managers, guide managerial behaviours, plan and schedule the work of the large system integrator firm. The third party program managers were able to act in the interests of the client, ensuring the project was managed effectively, resources were effectively managed and client objectives met. The result represented a dramatic turn-around, as the second release of the project was delivered to full specification several months early, below budget and with good quality. It is worth noting that, independent auditors had claimed earlier in the project that there was only a three per cent chance the project would be completed in that timeframe.

Two major differences occurred between release one and release two of this program of work. Firstly, the third-party project managers were given responsibility for managing the resource and scheduling aspects of the project helping to keep the system integrators accountable. Secondly, CCPM was introduced as the methodology used to manage the project.

Recommendation

There is an opportunity for the Victorian Government to replicate such an approach. Government may consider forming a specialist project management centre of excellence which acts in the public interest to guide and monitor the activities of contracted service providers. Following recommendations elsewhere in this submission, this specialist project management group would benefit from being skilled and tooled in the application of the CCPM methodology.

Similarly, government could contract specialist services from external sources to collaborate with public sector managers in the formation and operation of a specialist project management arm.



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5. Concluding remarks

Ensemble Partners thank the Parliament of Victoria and the Public Accounts and Estimates Committee for providing us with the opportunity to offer this submission. Representatives of Ensemble Partners will make themselves available to meet with members of PAEC as requested, and attend hearings as required.

Critical Chain Project Management represents a complimentary addition to the Project Management Body of Knowledge. CCPM was developed with the goal of improving the performance of projects to the benefit of industry and government. Over the fifteen years since its introduction CCPM has built a solid cadre of support in the project management community internationally. Australian adoption of CCPM is still in its infancy, yet the adoption by one of our most successful companies to manage their largest global IT project shows the local community is open to ideas that complement the status quo.

The successful and timely completion of a large infrastructure project requires management to understand the project as one interrelated system. The outcomes of such projects are a product of the interplay of a myriad of factors; variables and variation that must be managed. An approach to managing large projects must be geared to influencing and guiding synchronisation and coordination of the constituent components. CCPM provides a focussing mechanism that dampens the impact of external factors and internal sources of variability to deliver more projects on time, under budget, to specification, more often.



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6. An overview of Ensemble Partners

6.1. Who are Ensemble Partners? Ensemble Partners is a consultancy providing constraints based organisational resource and schedule management solutions in complex manufacturing and project driven environments. Our business is built on assisting companies address their delivery challenges by designing and embedding Theory of Constraints (TOC) based execution management solutions. We have previously worked with iconic companies such as Qantas, BHP Billiton, Cadbury-Schweppes and Coles. The approaches we use have been successfully implemented in project management and manufacturing environments in multiple industries.

6.2. Ensemble Partners Track Record Below is a brief synopsis of CCPM work undertaken by Ensemble with a number of Australian companies:

6.2.1. BHP Billiton Iron Ore

BHP Billiton is the worlds largest diversified resources company. In June 2005, Ensemble commenced work to assist with the expansion of capacity at BHP Billiton's Iron Ore facilities at Port Headland, Western Australia. In particular, the company was faced with the challenge of executing the instrumentation and controls aspect of the project with fewer engineers than were originally scheduled. A trial was executed using the Theory of Constraints-based Critical Chain method, supported by the Concerto multi-project management tool. Ensemble was subsequently engaged to implement CCPM in the Electrical and Civil-Mechanical-Structural areas of the engineering design phase of the port expansion project.

The engineering design originally had scoped duration of 25,000 hours but was completed within 19,000 hours as a result of the CCPM implementation.

6.2.2. Thiess Degremont Victorian Desalination Plant Construction Project

The Victorian Desalination Plant Construction Project is one of the largest, most complex, and costly projects ever undertaken in Victoria. Ensemble Partners were invited to perform a Critical Chain Project Management intervention by the leader of the Mechanical group within the Pre-Treatment area of the project. Ensemble Partners initial intervention provided a detailed insight to the dominant dynamics within the project, although our influence spanned only a small portion of the Wonthaggi project. Once the benefits of the intervention emerged, Ensemble Partners role was expanded to cover other trade groups within the Pre-Treatment area. Pre-Treatment will now be completed several months before the other four major areas of the Wonthaggi-based construction project. An additional phase of work has now been agreed to by the construction joint venture partners. The coordinated integration of civil, mechanical, and electrical engineering work in the critical Sea Water Lift-Pump area has commenced using the Critical Chain method and supporting software scheduling tools.



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7. The Ensemble Team

7.1. Ensemble Team Members

7.1.1. David Hodes

David is a qualified System Thinker and Practitioner. He was awarded a National Engineering Scholarship in the UK and attended Imperial College of Science and Technology in London, where he graduated with a BSc Mechanical Engineering. He is certified as a TOC expert with the TOC-ICO (TOC International Certification Organisation). His passion is in the creation of learning environments where new ideas can take root and deliver rapid tangible benefits to the people and companies he deals with.

David, who founded the TOC Centre of Australia (now Ensemble Partners) in January 2000, has been applying TOC for more than 10 years in Australia, the USA and South Africa. His working history includes TOC-based implementations in strategy, supply chain and distribution, project management and manufacturing. His client organisations include Australian icons such as Qantas, BHP Billiton, Cadbury Schweppes, Coles Group, Smorgon Steel, Sunbeam and Prysmian cables.

In one engagement at BHPB led by David, a 25,000 budgeted man hour infrastructure upgrade project was delivered in 19,000 man hours several weeks early using the same principles Ensemble will bring to other CCPM engagements.

7.1.2. Francois Faure

Franois works with organisations on both technical and social dimensions, to create effective value production processes and positive cultures. He has specific expertise in leadership development and supports senior leaders in building cohesive and effective organisations through implementation of innovative and engaging methodologies and tools, facilitation of strategic workshops with key stakeholders, coaching of executives and senior managers, and an overall strategic focus on organisational deliverables.

Prior to his work in Australia and Asia-Pacific, he was General Manager of an international coaching organisation in Europe with branches in seven countries, and has coached and mentored executives from large corporations (L'Oral, Renault, Schlumberger) as well as entrepreneurs, artists and professional athletes. His international career also includes major project management roles with large engineering organisations, such as the Areva Group and Asea Brown Boveri, as well as senior management roles in not-for-profit organisations.

His recent clients include some of Australia's most highly recognised organisations (BHP Billiton, Qantas, Sunbeam, Allens Arthur Robinson, Urbis), as well as global industrial manufacturing corporations, banks, consultancy firms, and both Federal and State Government Departments.

Franois holds Master Degrees in Management (Human Resources) and Engineering (Robotics).

7.1.3. Stephen Nicholas

Stephen is a qualified Chartered Accountant with a first class honours degree in Mechanical Engineering. He spent six years in the venture capital industry running a niche business angel boutique before moving into the consultancy sector. He has worked for the last 15 years in the UK, North America, Italy and China before settling in Australia. Stephen specialises in financial management and operations, using constraint methodology to help clients analyse their business, maximise profitability and establish a value-based finance



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operation. Stephen is currently guiding a constraints based analysis and design exercise with Australias largest bank.

7.1.4. Geoff Markley

Geoff brings a passion for successful project management which combined with extensive Enterprise Architecture expertise provides for unique insights into ensuring successful business outcomes for business projects. Geoff brings over 17 years of Project Management and Enterprise Architecture expertise working in a global IT services organisation across industries as varied as manufacturing, telecommunications, banking and government. Geoff has worked with clients of all sizes across Australia, Asia Pacific and globally.

Geoff has consulted and developed business transformation solutions for a global automotive company, global telecommunications organisation, governmental departments and financial institutions. These assignments have encompassed the full complexity of those environments to architect and implement successful projects for business transformation. In these roles, Geoff managed large diverse virtual teams. His senior management expertise and extensive experience working with senior executives, gives Geoff unique insights into our client's needs in delivering and exceeding their expectations.

Geoff has a Masters degree in International Business and graduate degrees in Electrical Engineering, Computer Science and Economics from The University of Melbourne.

7.1.5. Steven Balderstone

Steven is a management consultant with over eight years experience within Accenture and Ernst & Young in Australia. Steven has specialisations in analytical modelling and operations management. He managed a large operational business for the National Australia Bank for several years, gaining considerable change management experience. Steven has a solid background in the Theory of Constraints having co-authored the book The World of the Theory of Constraints, which was published as part of the American Production and Inventory Control Societys (APICS) series on constraint management in 1999. He has also co-authored numerous academic articles on TOC, published in international journals. He has applied TOC techniques within manufacturing organisations, completed a Masters Thesis on the application of TOC, chaired an international conference and received an award from the International Federation of Accountants for his work on TOC. He has a TOC accreditation from the Goldratt Institute. Steven has a Bachelor of Commerce and Administration degree and Master of Management Studies degree from Victoria University of Wellington, New Zealand. Steven is a former lecturer in Operations Management and Decision Sciences at VUW.

7.1.6. Inge Brown

Inge has extensive experience in the financial services industry, and more recently in the gas & energy sector, with a career spanning over 25 years in the Australian and international markets. She has held senior and executive management roles with local and foreign banks, telecommunication and software vendors as a consulting and execution expert in Business and Technology project and change management strategy development and execution, as well as portfolio management of the business, technology and capital works projects. Inge is responsible for leading Ensemble's strategic partnership and business development.



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7.2. References The following references are provided should you wish to obtain an independent view of Ensembles work:

Company Division(s) Type of Business Contact Phone BHP Billiton 1SAP ERP Implementation Stephen Casey

Program Manager +65 6349 2484

BHP Billiton Port Expansion -Iron Ore

Mining Lloyd Jones Program Director

+61 8 93204176

Thiess Degremont Joint Venture

Victoria Desalination Plant

Infrastructure Greg Locke +61 3 95162440



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8. Appendix

8.1. White Paper: Taming uncertainty in the multi-project environment: The Critical Chain difference



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8.2. Bibliography of CCPM Publications

Books

Goldratt, Eliyahu M. 1997. Critical Chain. Great Barrington, MA: The North River Press Publishing Corporation.

Newbold, Robert C. 1998. Project Management in the Fast Lane.The APICS Series on Constraint Management. Boca Raton, FA: St Lucia Press.

Leach, Larry: Critical Chain Project Management

Scherer, Andreas. Be Fast or Be Gone. 2011. Prochain Solutions Inc. Lake Ridge VA.

Journal Articles

Rivera, F and Duran, A. Critical clouds and critical sets in resource-constrained projects. International Journal of Project Management 22(6), 489-497. 2004.

Gregory, Alan and Kearney Gillian.Restriction Buster. Project 16(10), 20-22. 2004.

Raz, T. Barnes R. Dvir D. A Critical Look at Critical Chain Project Management.Project Management Journal 34(4), 2432. 2003.

Gupta, S.My Project Epiphany. Project management optimizes a software company's new product development strategy. PM Network 17(11), 20-21. 2003.

Leach, L. Schedule and cost buffer sizing: how to account for the bias between project performance and your model. Project Management Journal 34(2), 34-47. 2003.

Elmaghraby S.E.E., Herroelen W.S., and Leus R. Note on the paper 'Resource-constrained project management using enhanced theory of constraint' by Wei et al. International Journal of Project Management 21(4), 301-305. 2003.

Sood, S. Taming Uncertainty: Critical-chain buffer management helps minimize risk in the project equation. PM Network 17(3), 56-59. 2003.

Herroelen, W., Leus, R., and Demeulemeester, E. Critical Chain Project Scheduling: Do Not Oversimplify. Project Management Journal 33(4), 48-60. 2002.

Wei, C. C., Liu, P. H., and Tsai, Y. C. Resource-constrained project management using enhanced theory of constraint. International Journal of Project Management 20(7), 561-567. 2002.

Yeo K.T. and Ning J.H. Integrating supply chain and critical chain concepts in engineer-procure-construct (EPC) projects. International Journal of Project Management 20(4), 253-262. 2002.

Steyn H. Project management applications of the theory of constraints beyond critical chain scheduling. International Journal of Project Management 2002;20(1):75-80.

Patrick FS. Critical chain and risk management - protecting project value from uncertainty. World Project Management Week 2002; March 16; AIPM . Hong Kong: 2002.

Hameri A-P, Heikkila J. Improving efficiency: time critical interfacing of project tasks. International Journal of Project Management 2002;20(2):143-53.

Steyn H. An investigation into the fundamentals of critical chain project scheduling. International Journal of Project Management 2001;19(6):363-9.



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Piney CK. Critical path or critical chain -combining the best of both. PM Network 2000;14(12):51-4.

Steyn H. Does critical chain scheduling really work? ProjectPro 2000;10(5):34; 36.

Wilkens TT. Critical path, or chain, or both? PM Network 2000;14(7):68-74.

Simpson WP. Critical success factors. Discussion in project management circles is centred on determining what is new about critical chain project management and what isn't. Australian Project Manager 2000;20(2):34-5.

Parr J. A house in four hours using critical chain. Australian Project Manager 2000;20(2):17.

Leishman KA. Theory of constraints synchronisation of multiple project environments. Australian Project Manager 2000;20(2):19.

Schuyler J. Exploiting the best of critical chain and Monte Carlo simulation. PM Network 2000;14(1):56-60.

Rizzo T. Operational measurements for product development organizations -Part 2. PM Network 1999;13(12):31-5.

Cabanis-Brewin J. SoSo What?? Debate over CCPM gets a verbal shrug from TOC Guru Goldratt. PM Network 1999;13(12):49-52.

Loader R. Creating an organisation-wide project management culture. The Art of Strategy.Project Management Creating Solution.AIPM. Sydney: Australian Institute of Project Management (AIPM); 1999.

Leishman KA. Theory of constraints synchronisation of multiple project environments.The Art of Strategy.Project Management -Creating Solution.AIPM. Sydney: Australian Institute of Project Management (AIPM); 1999.

Levine HA. Software forum: Shared contingency: exploring the Critical Chain. PM Network 1999;13(10):35-8.

Pinto JK. Some constraints on the theory of constraints: taking a critical look at the critical chain. PM Network 1999;13(8):49-51.

Leach LP. Critical chain project management improves project performance. Project Management Journal 1999;30(2):39-51.

Patrick FS.Getting out from between Parkinson's Rock and Murphy's hard place. PM Network 1999;13(4): 57-62.

Simpson WP. Critical success factors in critical chain project management. Learning, Knowledge, Wisdom. PMI

Elton, J. & Roe, J. Critical Chain - Goldratt, E.M. Harvard Business Review. Vol 76, No. 2, 1998, Mar-Apr: 153.

111014-vic-govt-paec-submission-v01-dvh1.pdf

Documents

request b

request c

request e

request f

overview of ensemble

ccpm different

current challenges

conceptual introduction