capital projects & portfolio management augurst 20-22, 2014 vail, co 2014 transmission &...

Capital Projects & Portfolio Management

Augurst 20-22, 2014

Vail, CO

2014 Transmission & Distribution BenchmarkingInsights Conference

Agenda

DILBERT

2

◼Portfolio Management◼Project Management◼Outcomes◼Practices

Matrix organization

3

EARNED VALUE

4

The Capital project process

The capital project and portfolio management process is at the heart of a how a utility conducts business.

• Phase 1: work plan development creates a feasible schedule for the year

• Phase 2: executes the work plan through project and portfolio management

5

Role of asset management is described in the individual practice sections

Portfolio Management

PORTFOLIO MANAGEMENT QUESTIONS

Portfolio Management•Workplan Development: Software •Workplan Development: Regulatory mandates•Processes in place to re- evaluate portfolios •Adding new projects during the year•Estimating Accuracy -- % of projects completed within +/ - •% Capital Projects: Average "Actual as a % of Estimate"•Percent of the projects that are typically completed on time•Projects that are typically completed on or under budget•Percent of the completed projects that are walked- in during the year

Workload Volume•Capital budget projections for the next 3 years: T, D, S

Transmission Line Spending

We saw increased spending in 2013 . . .We saw increased spending in 2013 . . .

8

Total Transmission Capital Additions: US Utilities

Total market size for the US for the last 7 years has grown consistently, following a drop off during the recession. Only a portion of this will be for labor costs since some portion will be for materials.

This is total US utility population – FERC Capital Additions. Capital additions represents capital spending that closed to the books and became part of the asset base in the given year. 9

2014 T&D: Capital Projects

CAPITAL PROJECT SPENDING PER ASSET NEXT 3 YEARS - DISTRIBUTION

Mean Quartile

Mean

16 %

Comments

Calculation used

( CP125.1C ) / ( DF70.1 ) * 100 , ( CP125.2C ) / ( DF70.1 ) *

100 , ( CP125.3C ) / ( DF70.1 ) * 100

Page10


CAPITAL PROJECT SPENDING PER ASSET NEXT 3 YEARS - SUBSTATION

Mean Quartile

Mean

20 %

Comments

Calculation used

( CP125.1B ) / ( DF70.2 + TF65.2 ) * 100 , ( CP125.2B ) /

( DF70.2 + TF65.2 ) * 100 , ( CP125.3B ) / ( DF70.2 + TF65.2 ) *

100

Key Success Factors:Portfolio Management

12


PERCENT OF THE COMPLETED PROJECTS THAT ARE WALKED-IN DURING THE YEAR

Comments

Calculation used

CP46.4

Mean Quartile

Mean 17.3 %

Quartile 1 12.0 %

Quartile 2: 16.5 %

Quartile 3: 23.3 %

“Walked in” is terminology from one of our clients that refers to projects that are not in the original annual budget (usually approved prior to January 1 or sooner), but are added during the year. Usually these rushprojects do not always get the same degree of planning and vetting.


CAPITAL PROJECTS: AVERAGE "ACTUAL AS A % OF ESTIMATE"

Comments

Calculation used

CP46.1

Mean Quartile

Mean 96 %

Quartile 1 92 %

Quartile 2: 95 %

Quartile 3: 102 %


% OF PROJECTS THAT ARE COMPLETED ON TIME

Calculation used

CP46.2

PROJECTS THAT ARE TYPICALLY COMPLETED ON OR UNDER BUDGET

Timeliness

Calculation used

CP46.3

Improve Accuracy at each project phase

Phase Accuracy [# of companies]

Conceptual +75%/-50% [1]+-40% [1]+-30% [2]+-20% [3]+-10% [1]

Preliminary +-20% [1]+-10%[6]

Release to Construction

+10% [5]+-5% [2]

EXAMPLE: Substation EstimatingEstimating gets increasingly defined as a job progresses through design to construction. Based upon our 2011 survey, the typical accuracy goal is +/- 20-30% at the conceptual stage, decreasing to +/- 10-20% going to final design, and then +-10% when released to construction.

16

% accuracy 22 27 31 33 359 38 40 Avg%+/- 5% 94 % 9 % * 62 % 16 % 33 % 20 % 36%+/- 10% 3 % * 90 % 20 % 14 % 20 % 24 % 22%+/- 20% * 27 % 13 % 29 % 7 % 16 % 15%> 20% * 59 % * 41 % 40 % 40 % 32%

2014 Results – Estimating Accuracy at Release to construction

2011

Res

ults

Use Software tools for Work plan Development

17Capital Projects Pg 3

Source: CP15

Category Comments

In-house software 2

35 We utilize a specially- designed software to assess project attributes and to develop portfolios that satisfy key company objectives.

37 We utilize in- house database and spreadsheet tools to capture project attributes and perform comparisons based on established prioritization criteria.

Davies AIS and other tools 230 Davies - Asset Investment Strategy (AIS) tool31 MS Excel, AIS (Dist only)

Hyperion and other tools 2

16 Hyperion, an Oracle enterprise management system; Power Plant, Passport

18 Hyperion, an ORACLE Enterprise Performance Management System; Powerplant, PassPort

SAP and other tools 222 Distribution: LDPRO, SAP, DDS38 SAP, WMIS, Obvient, Crystal Business Objects

Other tools 226 Model web based overlay32 IES

None 1 34 None

A few companies use software tools to evaluate projects against multiple criteria.A few companies use software tools to evaluate projects against multiple criteria.

2013 Results


WORKPLAN DEVELOPMENT: SOFTWARE TOOLS USED TO EVALUATE PROJECTS AGAINST MULTIPLE CRITERIA

Calculation used

CP15.1

ID Response22 Davies - Asset Investment Strategy (AIS) tool31 Substation: Davies. Distribution: SAP, DDS

LDPRO33 With large projects will model the project using in

house Excel process. Normal budgeting process tools are engineering based LD- Pro, PLSCad

23 We utilize a specially- designed software to assess project attributes and to develop portifolios that satisfy key company objectives.

37 Primavera with web based overlay for prioritization questions

38 SAP, WMIS, Obvient, Crystal Business Objects40 None24 IES30 In - house analysis protocol (Excel platform)359 Primavera, Asset Suite, Excel32 Informal spreadsheet using risk matrixes

In-house software

#

Davies AIS and other tools

2

Hyperion and other tools 2

2

SAP and other tools 2

2

Other tools 2 2

None 1 1

2013 Results

PM ROLE

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• Size/types of projects have project managers• Full - time PMs per $100M Capital Additions: T, D & S• Support per project managers: T, D, & S• Project Dollars per PM: T, D, &S • Projects per PM: T, D &S• Software tools used for project management Authority the PM has over project execution• Relationship between construction and project management• Organizational relationship between PM, and Planning, Engineering • Construction report project progress• Software tools the project manager has to monitor projects Measuring "earned value”• PM’s role in project close- out Conducting a post- implementation evaluation• Using project management techniques to manage programs

Project Management Questions


ADDING NEW PROJECTS DURING THE YEAR

IDS Response

22 Specific projects may be identified during the year due to New Business (customer) requests and emergent

requests to address system issues. Project funding is 'drawn down' from established budgeted funds that have

been based on historic trends and projections.31 Substation: Based on need. No portfolio or ranking is done with all in progress projects. Distribution: unplanned

new loads are evaluated on a per project basis.33 New capital projects added during the year must be approved through Executive Capital Committee. Projects

are submitted with full explanation and costs. Entered into SAP Appropriation requests23 Individual requests for funding are submitted for evaluation and prioritization, and inserted in the asset plan under

a 'Hold' status. If the project or program is to receive funding, the status is changed to 'Funded.'37 Projects are added and deleted as business needs change and are re - evaluated at monthly program status

meetings and quarterly re-projections.

38 Projects are added as needed by the PRC after evaluating the project to ensure that it doesn't impact reliability, the budget or human resources in a negative manner.

40 Driven by customer demands and/or reliability issues

24 Through approval at Utility Review Board and Corporate Capital Review Committee meetings.

30 Request and approval through leadership based on project size

27 Capital projects are only added during the annual budget development. Capital budget evaluations are

developed from a 5 - year budget plan. Change orders are evaluated for projects that need to be advanced on a

case by case basis.359 Asset management performs technical challenge, project officially proposed at monthly organizational review

and funding granted for project planning phase, project planning phase completed and strategic in - service date

identified, finally project budget and cashflows submitted to governance

32 These go through project review (PRC) and are approved at appropriate level dependent on forecasted cost.Calculation used

CP40.1

PM ROLE

Key Success Factors:Project Management

23

Key Success Factors: Project Managers

24

Most utilities have PM’S for all unique projects

All projects (5)37 Distribution Projects - 100%

22 Distribution: Major overhead, URD and Street Light have individual

Division managers. Substation: All projects have a project coordinator

35 All capital funded projects have PMs. Serve New > 500KVA, Serve

Existing such as large road widening & system improvement type projects.

26 All projects are assigned a PM.17 PMs are assigned to all capital construction projects regardless of size.

Less complex capital projects may be assigned to engineers, designers

or planners to fill the role of PM

Complex projects (3)38 Complex, cross -functional and/or highly political projects and programs that usually spend >$5M.

32 230 kV and 500kV and UG Transmission Projects; these are outside consultant PMs.

31 345kV transmission line builds

Projects >$1M 34 Projects > $1,000,000 have PMP PM's, Projects <$100,000 do not require PM 's

Projects > $500k39 Projects that have a budget greater than $500,000 and have an engineering component have Engineering PMs. Line construction projects driven by private new business, public agencies,

system integrity and system reinforcement have RMT PMs.

Projects >$100k27 Over $100,000

Survey Results

2010 2011

2012 2013

All Projects 8 9 3 5

Significant Projects

3 1 6 3

>$1MM 3 3 2 1

>$500k 3 0 2 1

>$100k 4 4 2 1

25Source: Question, Page 12

2013 Results

SIZE/TYPES OF PROJECTS HAVE PROJECT MANAGERS

Comments

Calculation used

CP55.1

Responses

Total Participants 19

Number of Respondants 8

ID Response22 Distribution, Transmission, Substation Projects31 Substation: All. Distribution: Major overhead, URD joint trench and Street Lighting have individual

managers23 All capital funded projects have Project Managers. Serve New 500KVA, Serve Existing such as large

road widening & system improvement type projects; Transmission - Projects with accelerated

timelines or unique challenges may have a project manager (typically $3M). All other projects are

managed directly by the engineers and construction managers, and the portfolios are managed

holistically by the program managers.38 Complex, cross - functional and/or highly political projects and programs that usually spend more

than $5M.40 All projects have PM's. Projects $1M have PMP PM's.33 This is based upon our project assessment. All projects are ran through this assessment, if these

project exceeded a certain monetary value they were assigned a manager and were sujected to our

established major project management policy. This has changed effective 2015 projects to a more

risk based approach.27 Line construction projects driven by private new business, public agencies, system integrity and

system reinforcement have RMT Project Managers.35 All transmission projects/programs with the exception of relay test compliance work

2014 Survey

FULL-TIME PROJECT MANAGERS: T, D, & S PER $100M CAPITAL ADDITIONS

#32 reported a very high number of project managers

Comments

Calculation used

( CP60.1 ) / ( (Total T&D Capital FERC) / 100000000 ) , ( CP60.2 ) /

( (Total T&D Capital FERC) / 100000000 ) , ( CP60.3 ) / ( (Total

T&D Capital FERC) / 100000000 ) , ( CP60.4 ) / ( (Total T&D

Capital FERC) / 100000000 )

Mean Quartile

Mean 11.7

Quartile 1 11

Quartile 2: 5

Quartile 3: 5

2014 Results

CP p13

Project Managers per $100M Capital Spent

One measure of workload is the capital budget managed by PMs.

A simple ratio of capital additions to PMs is only a proxy, since not all of the projects have PMs. Another complication is that capital additions is a backward looking measure that only occurs once the project is in service.

Source: Question CP60, page 13

Median2013DRC = 3.5 FTEs/$100M2012 = 5 FTEs/$100M2011 = 3 FTEs/$100M

Note: the inverse is Budget Managed per PM

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2013 Results

Thank you for your Input and Participation!

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First Quartile Consulting is a utility-focused consultancy providing a full range of consulting services including continuous process improvement, change management, benchmarking and more. You can count on a proven process that assesses and optimizes your resources, processes, leadership management and technology to align your business needs with your customer’s needs.

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About 1QC

Satellite Offices

Debi McLain [email protected]

Tim. [email protected]

Dave [email protected]

Dave [email protected]

Your Presenters

Ken Buckstaff [email protected]

1QC Industry Perspective:Project Management

31

1QC Industry Perspective:Project Management

32

1QC Industry Perspective:Project and Portfolio Management

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capital projects & portfolio management augurst 20-22, 2014 vail, co 2014 transmission &...

Documents

capital projects percent

completed projects

portfolio management

capital spending

time projects

s slide

new projects

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