major projects - faster better cheaper
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PowerPoint Presentation
Major ProjectsEngineeringconstructionfastercheaperbetterCCPMCollaborationPartneringCritical ChainestimateplanningforecastcontractingBIMLeanRisk ManagementAllianceValue AnalysisEarned ValueContractSelection
These slides are based on a presentation made a the European Public Sector Effectiveness Conference held on 24 October 2013 in Vilnius, Lithuania, a flagship event of the Lithuanian presidency of the European Union (July-December 2013)
Additional words have been added to several slides to make them suitable for reading
Ian Heptinstall
Effective procurement of major projectsOpportunities for major improvements in speed, quality and value
Ian HeptinstallMD PMMS Middle East
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SynopsisThe Situation AddressedProjects where the majority of the work is carried out by companies other than the main client.The ProblemProjects have inconsistent results, many being late, over budget or leaving needs unmet.Traditional methodologies do not seem to guarantee high levels of successSuccess is as much down to the experience of project manager as the methodologyThe PrizeProjects delivered on time in less time, and on budget at lower cost, whilst maintaining or improving quality/scope.Resulting in higher return on investment in the private sector, or more and faster projects in a budget-constrained public sectorUsing methods that can be easily taught, transferred and managedA project team which can implement and exploit other proven & evolving improvement techniques more easily and with higher successThe Direction of the SolutionManage the project using the CCPM approachSelect your project team/supply chain using collaborative selection & contracting
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The Idea:Success Equation for Major ProjectsCCPM+Collaborate=More, sooner, for less & better
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MoneyTime
MoneyTime
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Project Value?Cost Drivers on ProjectsManaging projectsCommercial relationships
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www.pmms-group.comA simple breakdown of a projects cost. The inherent asset represents the goods bought that stay with the completed project. The project element of the costs are the one-off costs necessary to plan, manage and build the inherent asset. To reduce the cost of these elements requires different actions and capabilities. This presentation focuses on reducing the project cost element. There are some reductions in the inherent asset cost, but they are mostly incidental. I am not saying these are unimportant, just not the direct benefit of this proposed approach. One of the benefits of this approach is that it produces a project team environment more amenable to the implementing of other value-improving techniques
The right-hand column shows the impact on cost of this method.A different management approach significantly reduces the project duration, and the quantity of all time-related resources such as design, management, construction, and hired items.The integrated team can also have a contribution to improving the design and this cost of the inherent asset.Even if the supply chain make the same margin from their involvement, the project is significantly less expensive. Is this an example of the elusive win-win?
Procuring Major Projects:There are significant issues today
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Table from report on SAP implementations http://www.zdnet.com/erp-implementation-benchmark-comparing-sap-oracle-and-microsoft-7000000971/
FT: Sep 13 http://www.ft.com/intl/cms/s/2/794bbb56-1f8e-11e3-8861-00144feab7de.html#axzz2hg0uVYC8
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In 2007 the UKs Chartered Institute of Building reported on a study into project delays in construction projects around the world.One standout feature was the lack of even basic planning in the industry. Under 5% of projects had a logically sequenced programme. 50% only had a high-level master plan, with short-term planning done inconsistently or on-the-fly. No one reported a single integrated project plan from initial conception through design to building , commissioning then handover.On the one hand worrying, on the other it shows the enormous potential to improve
Why are large projects a problem?
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www.pmms-group.comIts never been done before you cant copy/learn as easilyThe team hasnt worked together beforeLow skill & awareness of key elements of major project managementLack of trust amongst main players or wrong types of trustUse of the inappropriate techniquesDesign Bid BuildArms-length competitive tenderingSoft-and-fluffy partneringCertainty-based planningManagement by detail & control
Major ProjectsKnown & Defined methodologyBut.Inconsistent delivery datesInconsistent budget performance Better & Faster means more expenseExpensive Control
The new kid on the blockCritical Chain Project Management(CCPM)1995
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www.pmms-group.comLate 1990s CCPM made public
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CCPMCritical Chain Project ManagementA methodology for managing project execution Delivers shorter, more reliable, higher quality projectsUsed around the globeNew Product DevelopmentCapital ProjectsITMaintenance, Repair & OverhaulsServices & Administration3 Core RulesReduce bad multi-tasking and WIPPlan for uncertainty at project-level not task-levelControl execution using buffer penetration/priorities
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The colours represent 4 projects that need to be done. Doing them in sequence produces the best results a steady stream of completed projects, with the shortest time between start & finish.However, many factors in real life conspire to put significant pressure to start projects (multi-task). This is the 2nd line. Even if resources could switch without any waste, project completions are delayed & bunched look when the projects finish & compare lines 1 and 2.But in real life frequent switching is inefficient, and we get the 3rd line everything is laterMajor organisations have cut ongoing projects by 50-90% and seen a dramatic increase in completions!!
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Traditional planning is based on task durations with a high degree of certainty Give me a date you can be sure to achieve. In reality no one can predict the future, and the true answer would be Probably somewhere between 4 weeks and 7 weeks depending. Project planners dont like this answer, so estimators tend to answer 7 weeks. Tasks in the plan therefore have built-in safety to cover uncertainty, shown in the simple programme a the top.CCPM forms the basic schedule as shown below with all this safety removed from the individual tasks. The task duration is based on the 50% chance duration
However, the safety is NOT removed from the project. It is placed in the programme where is can protect the whole project. This is key to CCPM: Protect the project from the variability that you know will happen, not the task. You can be sure that something will happen to delay a task, you just dont know which task will have the delay! Statistics and vast experience shows that you need much less safety of it is in the right place giving a duration around 75% of the traditional project.The main safety is the Project Buffer. Feeding Buffers protect the critical chain from delay on less critical tasks. The critical chain is slightly different to the more common critical path.
The project buffer becomes the main focus for project control and management. Compared to traditional measures is it simple and provides good early warning or issues, allowing them to be tackled when small.Tasks that are underway report frequently the date they expect to be finished. The amount of project buffer used is compared to the overall project progress in a simple graph top left.Green = OK. Yellow = Watch/Prepare. Red = Act to RecoverThe bottom right shows an organisation-wide (or programme) overview. This allows managers to quickly identify projects that require support.
Engineered SystemsA few CCPM users who have reported improvement of 25-95%
Public Works Construction (Japan)
New Product Introduction
IT Systems Implementation
Administrative Processes
Major Product Engineering (Boeing)
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CCPM is proven to workSame ProjectOn-time .. In less timeOn-budget .. At lower cost
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www.pmms-group.comTell me how you measure me and I will tell you how I will behave. If you measure me in an illogical way... do not complain about illogical behaviour.Tell me how you pay me and I will tell you how I will behave. If you pay me in an illogical way... do not complain about my illogical behaviour.Eli Goldratt, Business Guru & Inventor of CCPMIan Heptinstall
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www.pmms-group.comMajor obstacles to exploiting CCPM
Selection
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Collaboration on Capital ProjectsCCPM is very difficult on a traditionally-contracted projectPartnering many tried, many failedWhen done right, and in the right circumstances, collaborative sourcing can beat competitive sourcingCollaboration is customised not one-size-fits all
TogetherEveryoneAchievesMoreIt is amazing what you can accomplish if you do not care who gets the credit.Harry S Truman, 33rd president of the USA
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www.pmms-group.comCollaboration in itself can workbut not consistently
The Construction Industry Institute (CII) researched nearly 300 projects that were completed using the partnering approach and found significant benefits:
Total project costs were reduced by 10% Profitability increased by 25% Overall project completion time was reduced by 20% Schedule changes were reduced by 48% The number of claims were reduced by 83% Lost-time accidents were 1/3rd of industry standard Change orders were reduced by 80% Job satisfaction increased by 30%25
Although it is a slight simplification, the main difference between collaboration and competition is
Completion focuses on battling over the suppliers marginCollaboration focuses on working together to remove unnecessary cost
This shows the potential of the two approachesMany really significant cost reduction achievements have been made by collaboration between buyer and supplier. Its collaborative supply network (keiretsu) helped Toyota to become the lowest cost car manufacturerIf you want to reduce risk you have to understand the risks in your supply chain. Collaboration requires increased honesty & openness prerequisites to identifying supply-side risksCompetition is very unlikely to lead to preferential access to supplier-driven innovation
A few companies that have used and benefited from Collaboration
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www.pmms-group.comCollaboration in ITIBM 2013IT Sourcing1351 Companies40% C-level Executives35% >10,000 staff18 industries12 countries70% from mature marketsRelative results from those (19%) of companies using true collaboration aimed at more than just cost reduction
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www.pmms-group.comThe Pay-off: 300 construction projects studied, those using collaboration got+25% Profit+30%Satisfaction-10% Cost-20% Time-65% Changes-83% Claims-99.8% LTA
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The Construction Industry Institute (CII) researched nearly 300 projects that were completed using the partnering approach and found significant benefits:
Total project costs were reduced by 10% Profitability increased by 25% Overall project completion time was reduced by 20% Schedule changes were reduced by 48% The number of claims were reduced by 83% Lost-time accidents were 1/83rd of industry standard Change orders were reduced by 80% Job satisfaction increased by 30%30
Collaboration Critical Success FactorsAligning interests & sharing riskEnsuring doing the right thing for the client is also the right thing for the supplierBehaviours + Selection + ContractContract is at the heart of the agreement not in the back-officeCollective responsibility for overall contract managementEarly selection of the teamRequirement and freedom to innovate and changeNegotiate the process/relationship
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www.pmms-group.comCollaboration in itself can workbut not consistently
The Construction Industry Institute (CII) researched nearly 300 projects that were completed using the partnering approach and found significant benefits:
Total project costs were reduced by 10% Profitability increased by 25% Overall project completion time was reduced by 20% Schedule changes were reduced by 48% The number of claims were reduced by 83% Lost-time accidents were 1/83rd of industry standard Change orders were reduced by 80% Job satisfaction increased by 30%31
Being Collaborative on Projects.Not a simple addition complete changeCompetitionLate-as-possible selectionDetailed bids based on scheme (Design-Bid-Build)Select lowest/fastest bidA Chain selected one at a timeConflicting commercialsCollaborationEarly-as-possible selectionOutline bids based on capability (Bid-Design-Build)Select best available teamA team selected together
Aligned commercials
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So why isnt collaboration more common?It is unstableIts not how we were trainedRareBetter the devil you knowWe dont know how to do it correctlyIts the rules
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www.pmms-group.comValue-driven ProcurementCompetition is not the only way. and often its not the best wayCollaboration is simple (in concept) but not easy (to do)Apply Collaboration and CCPM on your major projects to give your businessMore projects for the same investmentHigher returnsGreater viabilityGreater profitabilityAnyone can spend their way to betterIs that good enough for you?... Life is boring without challenges
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MoneyTime
In Summary
+On-time .. in less timeOn-budget .. at lower costCollaborative ProcurementCCPM
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Thank youIan Heptinstall
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www.pmms-group.comIan HeptinstallIan helps organisations to improve the value added by their supply base.He is involved in developing new and innovative approaches to major supply issues, and is currently working on opportunities to significantly improve major construction projects and retail supply chains.His career has covered procurement and supply chain management, management consulting, engineering and capital project management. He has worked across many business sectors including construction, engineering, consulting, process and chemicals, pharmaceuticals, manufacturing and retail.Before moving into consultancy, Ian was supply chain director for a leading construction company in the UK. He is a qualified engineer who started his career in the process and pharmaceuticals industries, and is now managing director of PMMS Consulting Groups Middle East operation.
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www.pmms-group.comPMMS Consulting Group
PMMS North AmericaTorontoPMMS EuropeUK, France, Germany, Switzerland, TurkeyPMMS Southern AfricaPretoriaPMMS Asia PacificAustralia, New Zealand, Hong Kong, JapanPMMS Middle EastDubaiGlobal reach and local knowledge with offices across five continents and the capability to deliver in 10 different languages
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A sample of our recent clients
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