lavingia1-how to create
TRANSCRIPT
Nick Lavingia 1
How to Create a World-Class Project Management Organization?
Dr. Nick J. Lavingia, P.E.
Chevron
Project Management Consultant
APEGGA Annual Conference, Calgary
April 26-27, 2007
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Dr. Nick J. Lavingia, P.E.Project Management ConsultantChevron
Nick has over 30 years of Global Project Engineering, Management, Consulting and Training experience in the Energy industry. As a Project Management Consultant at Chevron, he provides Consultation and Training to Project Professionals worldwide.
Nick has a B.S. and M.S. in Chemical & Petroleum-Refining Engineering and a Ph.D. in Engineering Economics & Management from the Colorado School of Mines. He is a registered Professional Chemical Engineer in the State of California.
Nick is a member of Project Management subcommittee for Athabasca Oil Sands expansion project. He has published and presented many papers at technical organizations and is a recipient of industry award from Pathfinder for outstanding Contribution to the advancement of Project Management Technology and Chevron Chairman’s award for implementing Value Engineering throughout the corporation.
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Agenda
• Business Case for Improvement
• Five Steps to Success:
Step 1: Common Language (PMI’s PMBOK)
Step 2: Common Project Development & Execution Process
Step 3: Application of Value Improving / Best Practices
Step 4: Total Cost Management
Step 5: Training & Certification
• Summary
• Q&A
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Business Case for Improvement
Improved Capital Stewardship
Lower Costs
More Projects
Better Projects
Improved ROCE
Higher Earnings Growth
Higher P/E
Higher Market Confidence
Improved TSR
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Project Management’s Impact on the Bottom Line
Project Management Improves ROCE by
Increasing Revenues, Decreasing Expenses,
and Reducing Capital Employed
REVENUE MINUS EXPENSES
CAPITAL EMPLOYED= ROCE
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Project Management Leads to Pacesetter Performance (Cheaper, Faster, and More Predictable)
1.25
1
0.750.75 1 1.25
Execution Schedule
Fac
ilit
y C
ost Industry Average
Ind
us
try
Ave
rag
e
30%Improvement
30% Improvement
PacesetterPacesetter CompanyCompany
Company XCompany X
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Step 1. Common Language
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PMI’s PMBOK
Project Management Skills from PMBOK:
--Project Integration Management
--Project Scope Management
--Project Time Management
--Project Cost Management
--Project Quality Management
--Project Human Resource Management
--Project Communications Management
--Project Risk Management
--Project Procurement Management
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Step 2. Common Project Development & Execution Process
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Project Development & Execution Process
A Process that Facilitates the Optimal
Use of Resources (Dollars, People and
Technology) Over the Life of an Asset /
Project to Maximize Value.
Desired Outcome• Select the Right Projects by Improving Decision
Making • Improve Project Outcomes through Excellence
in Execution of Decisions
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High
HighLow Mid
Random Success• Good Projects• Average Execution
Consistent Success• Good Projects• Good Execution
Success Unlikely• Poor Projects• Poor Execution
Random Success• Poor Projects• Good Execution
Decision
Quality
Execution Quality
Mid
Project Management Vision
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PHASE 2SELECT fromAlternatives
Determine Project Feasibility andAlignment withBusiness Strategy
Project Development & Execution Process
PHASE 1IDENTIFY & Assess
Opportunities
Finalize Project Scope, Cost and Schedule and Get the Project Funded
Select thePreferred Project Development Option
Evaluate Asset to Ensure Performance to Specifications and Maximum Return to the Shareholders
PHASE 3DEVELOP Preferred
Alternative
PHASE 4EXECUTE
(Detail EPC)
PHASE 5OPERATE &
Evaluate
Produce an Operating Asset Consistent with Scope, Cost and Schedule
1 2 3 4 5
AFE
AFE = Appropriation For Expenditure
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VA
LU
EProject Management’s Impact on Creating Value
Phase 1Opportunity
Identified
Phase 2Generate &
Select Alternatives
Phase 4Execute
Phase 5Operate
Value Identification Value Realization
Phase 3Develop
Preferred Alternative
Poor Project Definition
Good Project
Definition
Poor Project Execution
Good Project
ExecutionA
B
C
DAFE
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PHASE 2SELECT fromAlternatives
Clearly Frame Goal
Test for Strategic Fit
Preliminary Overall Plan
Preliminary Assessment
~1 % Engng.
Phase 1 Estimate
Project Development & Execution Process
PHASE 1IDENTIFY & Assess
Opportunities
Fully Define Scope
Develop Detailed Execution Plans
Refine Estimate
Submit Funding for Approval
~25 % Engng.
Phase 3 Est. (+/- 10 % Accuracy)
Generate Alternatives
Preliminary Development of Alternatives
Develop Expected Value
Identify Preferred Alternative
Phase 2 Est.
Operate Asset
Monitor & Evaluate Performance
Identify New Opportunities
PHASE 3DEVELOP Preferred
Alternative
PHASE 4EXECUTE
(Detail EPC)
PHASE 5OPERATE &
Evaluate
Implement Execution Plan
Min. Changes
Finalize Operating Plan
Business Plan for Phase 5
Project Review
1 2 3 4 5
AFE
AFE = Appropriation For Expenditure
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INF
LU
EN
CE
Front End Loading
Major Influence Rapidly Decreasing Influence Low Influence
EX
PE
ND
ITU
RE
S
Final Authorization
IDENTIFYDSP
Gate
DSP
GateSELECTDSP
GateDEVELOPDSP
GateEXECUTE OPERATEDSP
GateGateGateGate
Influence vs. Expenditures
Front End Loading DSP = Decision Support Package
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Key Players
• Decision Makers
• Multifunctional Project Team
--Business, Technical, Operations and Maintenance
• Stakeholders
• Contractors
• Vendors / Suppliers
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Management’s Role (1)
Accountability—Business evaluation should be conducted 1 to 2 years after project completion and Project Sponsor should be held accountable for the financial outcome.
Accessibility—Management should actively participate in gate keeping meetings at the end of each phase of the Project Management Process and communicate frequently with the project team.
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Management’s Role (2)
Leadership—Management should establish clear expectations and objectives for the project team.
Resources—Provide resources of right people and funding to support the project team.
Behaviors—Demonstrate visible support and provide positive consequences for following Project Management Process, Best Practices and sharing Lessons Learned.
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Step 3. Application of Value Improving / Best Practices
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Value Improving / Best Practices
Value Improving / Best Practices are tools to improve project planning and execution. In conjunction with a structured Project Management Process they can optimize:
• Cost
• Schedule
• Performance
• Safety
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• Pre-Funding Assessment
• Value Improving Practices by IPA
• Peer Review
(Share)
• Decision & Risk Analysis
• Project Execution Planning
• Lessons Learned
(Seek)
Legend: AFE = Appropriation for Expenditure D = Decision Point PFD = Process Flow Diagram IPA = Independent Project Analysis, Inc. P&ID = Piping & Instrumentation Diagram
P&ID$
EST AFEPFD D D D D D$
EST
Phase 1IDENTIFY & Assess
Opportunities
Phase 2SELECT fromAlternatives
Phase 3 DEVELOP Preferred Alternative
Phase 4EXECUTE
(Detail EPC)
Phase 5OPERATE &
Evaluate
Value Improving / Best Practices
• Post Project Assessment
• Business Evaluation
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Step 4. Total Cost Management
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•Contracting/Procurement (Strategy)
•Cost Control/Forecasting (WBS)
•Progress reporting
•Finance/Audit
Total Cost Management
Phase 1IDENTIFY & Assess
Opportunities
Phase 2SELECT fromAlternatives
Phase 3DEVELOP Preferred Alternative
Phase 4EXECUTE
(Detail EPC)
Phase 5 OPERATE &
Evaluate
• Economic Analysis (NPV, ROR, Payout)
• Cost Estimating (Conceptual)
• Planning/Scheduling (Milestone)
• Benchmarking (Cost / Capacity)
Legend: AFE = Appropriation for Expenditure NPV = Net Present Value PFD = Process Flow DiagramD = Decision Point ROR = Rate of Return P&ID = Piping & Instrumentation DiagramEPC = Engineer, Procure & Construct CPM = Critical Path Method WBS = Work Breakdown Structure
P&ID$
EST AFEPFD D D D D D$
EST
(Funding +/- 10% Accuracy) (Definitive)
(CPM Bar Chart) (CPM Resource Loaded) (Monitor & Update)
(Pre-Funding Assessment) (Post-Project Assessment)
(Pre-Qualification) (Award / Monitor)
Performance Measurement (Establish Progress Payments)
(Earned Value)
(Establish Cost Accounts & Budgets) (Trend / Forecast)
(Closeout)
(Cost Collection / Analysis)
(Set Pacesetter Target)
(Asset Accounting) (Capital versus Expense)
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Step 5. Training and Certification
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Training
• Project Management Skills from PMBOK--Project Integration Management--Project Scope Management--Project Time Management--Project Cost Management--Project Quality Management--Project Human Resource Management--Project Communications Management--Project Risk Management--Project Procurement Management
• Business Decision & Risk Analysis • Leadership Roles & Behaviors
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Certification
• All Decision Makers should be certified in:-- Overview of PMBOK Areas -- Business Decision & Risk Analysis-- Leadership Roles & Behaviors
• All Project Professionals should be certified in:-- PMBOK Areas-- Business Decision & Risk Analysis-- Leadership Roles & Behaviors
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Summary
Common Language, Common Project Development & Execution Process, Application of Value Improving / Best Practices, Total Cost Management and Training / Certification can help create a World-Class Project Management Organization that Delivers:
• Better
• Cheaper
• Faster
• Safer
PROJECTS