mckinsey & company report on cu construction
DESCRIPTION
McKinsey & Company report on CU constructionTRANSCRIPT
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Pre-Decisional - Proprietary and Confidential
Developing Capital Excellence
Full report January 2016
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1 Pre-Decisional - Proprietary and Confidential |
Executive summary (1/2)
1 Budget performance based on initial Vice-chancellor approval limit for projects, not legislative approval 2 Compared to original estimated completion date in program planning
Diagnostic CU Boulder makes significant investments in capital projects and is exploring ideas and opportunities to improve efficiency and effectiveness in the execution of these projects
Completed 1900+ Minor and Outlay projects over the past five years routinely fall under budget similar to other public organizations, accounting for about 18% of total budget value
Completed 30 Major projects (those above $2M), which account for 80%+ of the total spend. Approximately 8 projects requiring additional spending limit were typically those impacted by accelerated timeline, scope changes, or decision delays
Interviews with over 40 personnel across all stakeholder groups, review of selected projects, and analysis of available documentation on processes surfaced opportunities for increased excellence: a) Capital planning: Right-time commitment of funds in the project planning stage to align with available information
on scope and schedule b) Contracting methodology: Provide clear guidelines for the project delivery method or contracting terms to
manage owner risk c) Communication: Proactively manage risks through increased project tracking and clarity in communicating
progress with appropriate stakeholders d) Project Manager workforce: Enhance PM workforce execution through structured training and onboarding
processes Recommendations four themes have emerged as opportunities for increasing capital excellence based on the
above diagnostic: Develop a clear, well-documented, and scalable stage gate process to drive capital investment success Adopt clear guidelines in contracting strategy to address project risk based on project scope, target cost, expected
delivery schedule, market conditions, and internal capability Deploy project controls to drive transparency of cost, schedule, and milestones during project execution thus
increasing consistency Train and retain the Project Manager workforce to ensure best practices adoption and execution in project delivery
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2 Pre-Decisional - Proprietary and Confidential |
Executive summary (2/2)
Implementation CU Boulder has the opportunity to transform its capital program and potentially capture up to 15% in planned capital spend
In addition to the efficiencies captured, the implementation of the recommendations would bring other performance and health benefits to CU Boulder including: Performance: improve pipeline management; ability to attract best contractors; ability to anticipate and
resolve performance issues Health: improve relationships across stakeholders; increase in morale, accountability and ownership;
heighten value proposition to current and potential workforce
Though current recommendations focus primarily on streamlining project delivery, CU Boulder can engage in a broader set of available strategies for capital excellence which could potentially result in even higher savings
Athletics Complex project review reveals that the Athletics Complex faced several challenges in scope and schedule management due to complex, often unclear, multi-party interactions at an accelerated pace
Scope misalignment between Athletics, designer, and PD&C resulted in ongoing changes and cost escalations throughout the project lifecycle
High staff turnover both internal and external to PD&C created coordination and communication challenges given lack of continuity in an already fast-tracked project
In order to prevent future costs, project closeout and quality assurance is an important final step and may require additional support to supplement capacity of existing team structure
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3 Pre-Decisional - Proprietary and Confidential |
Over the past 5 years, CU Boulders capital spend has been concentrated on Major projects with a valued budget of ~$870M
302
980
957
Total budget on projects1 Number of projects
Projects over $2M Athletics Complex Systems biotechnology
building Recreation facilities
improvements
Projects between $25k-$2M Food service renovation Replace boilers, roof Lab renovation
Projects under $25k Sound proofing Temporary cooling Fire alarm upgrade
Examples
PRELIMINARY
Project size range Total value
1,967 Total $1,046M
Outlays $8M
$867M
Range $25k-$500K Total value $91M
Range $1-$2M Total value $39M
$171M
Category I Range $2-$50
Total value $318M Major
Minor
Range $500K-$1M Total value $42M
Category II Range $50-$100
Total value $240M
Category III Range $100+
Total value $308M
Source: PD&C, Team analysis
1 Representative project scale but not exhaustive. Current budget for projects from March 2010 after the implementations of the CP module to September 2015 across all stages of development from planning (~$30 M) to closed. Budget defined as most recently approved budget in FAMIS as of mid-September 2015
2 Two grants listed as separate projects were merged with their associated projects. Three projects out of the 30 are ESCO with combined project value of USD ~21 M
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4 Pre-Decisional - Proprietary and Confidential |
Projects requiring additional spending limit were typically impacted by accelerated timeline, scope changes, or decision delays
Source: Team Analysis, PD&C
SB Academic Wing1
Campus Utility1
SPSC - Data room
Ekeley Middle Wing
13
22
12
Ketchum1
JILA 60 SEEC1
12
28
75
System Biotech 113
Athletics Complex1 142
% Change in legislative spending limit
Initial legislative spending limit2
1 Ongoing project | 2 Initial legislative approval | 3 Current legislative approval
PRELIMINARY
18
14
Stad - Video Board
5 GIPF Bldg (Athletics) 1
Bball/ Vball Practice 11
IBS
Wilderness1 EUCLID1 (CASE)
7 Wilderness - Recom
4
4
Hallett Renovation
Atmospheric Lab
Glenn Miller Ballroom
7
3
Rec Facilities 64 43
USD Change in legislative spending limit
N/A
16
56
18
2
10
6
10
53
0
0
0
0
0
0
2
0
0
3
0
17%
35%
21%
75%
28%
88%
12%
50%
N/A
0%
10%
0%
2%
0%
0%
0%
13%
14%
0%
0%
Current legislative spending limit3
N/A
169
23
28
37
91
160
14
112
4
43
64
4
20
5
7
11
16
3
7
USD Million
Projects impacted by significant scope or timeline fluctu-ations
Normal projects
Observed difference in performance between projects which are pursued as expected and those impacted by: Accelerated
scheduling Significant or
constant scope changes
Delayed timing in decision-making
NON-EXHAUSTIVE Detailed next
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Based on 40+ interviews, select project reviews, data analysis, and focus groups we identified a set of opportunities
Opportunities to increase efficiency and effectiveness
Cap
ital
Plan
ning
More consistent Program Planning efforts, aligned with paced project schedule to decrease owner risk
Address backlog in maintenance through improved capital allocation Enhance integrated portfolio view with clear project prioritization Rethink approval process to match the release of funds to the maturity level of the project
Des
ign Augment alignment between PD&C and administration in regards to project budget estimates
and timelines Continue with recently launched effort for early engagement of Project Manager in project
lifecycle
Con
trac
t- in
g
Refine choice in contracting strategy (choice of delivery model, contract type, award process) to align to scope, project schedule, market conditions, and owner execution capability
Consistently enforce contract terms in the field leading to lower owner risk
Proj
ect
exec
utio
n Standardize project execution processes Adopt and enforce tools and as a standardization method Increase ownership of project controls (i.e., cost and schedule tracking)
Enhance communication on project progress Celebrate success Leverage performance monitoring (e.g., lessons learned at project completion) as source of
insight Provide training for onboarding new employees and continuous development
Cro
ss-c
uttin
g
Emerging themes for developing excellence
Develop a clear, well-documented, and scalable stage gate process to drive capital investment success
Adopt clear guidelines in contracting strategy to address project risk based on project scope, target cost, expected delivery schedule, market conditions, and internal capability
Deploy project controls to drive transparency of cost, schedule, and milestones during project execution thus increasing consistency
Train and retain the Project Manager workforce to ensure best practices adoption and execution in project management
Source: Interviews
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6 Pre-Decisional - Proprietary and Confidential |
CU Boulder can adapt best practices in capital management across the four themes to continue to pursue excellence
Emerging theme Description Best practice
Stage-Gate process: how do projects move through multiple fund and scope approval gates through the lifecycle?
Stage-gate process matches the release of required funds to the maturity level of project definition; specifically, it ensures projects do not progress without an adequate evaluation of the underlying business case, completion of key deliverables, and mitigation of critical risks
Single and comprehensive capital investment framework
Transparency: how do project controls allow for right information at the right time?
Project controls dashboards enable PMs and Project Coordinators to: Proactively identify issues Ensure relevant information is at hand to
contribute to the decision making process in a timely manner
Tracking information on cost, schedule and milestones for each project
Contracting: how project delivery and contracting methods are selected
Selecting contracting strategy (delivery model, contract terms, award process) based on project specifications (size, cost, delivery schedule, complexity), market conditions, and internal capability
Clear guidelines on contracting strategy to best manage owner risk McKinsey & Company
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Contracting strategy entails defining 3 linked elements of a project
Delivery model (How do I determine optimal contracting scope?) Should I own the asset or are other ownership structures more
suitable, e.g., lease?
Which project value chain steps should be done internally and which ones by contractor(s)?
Into how many contracts should the project scope be split? What is the optimal split of scope between the contractors?
Contract terms (How do I ensure most optimal contracting terms?) What are the key project cost, performance, and schedule risks? Who is the natural owner of the risks? What mechanisms exist to transfer or share risk? How can objectives be aligned between owner and contractor to
ensure an efficient execution through compensation elements such as incentives, penalties, warranties, etc.?
Key dimensions of contracting strategy Key questions to be considered
Award process (How do I select my contractors?) How can the effectiveness of existing award process be enhanced ? How many and which suppliers/contractors should be invited? How do we get the suppliers interested? What is the criteria for evaluation various suppliers?
Deliverymodel
Awardprocess
Contract terms
2
1
3
Project Managers: how well is project management best practice followed?
Establishing standardized methods, training for PM staff on consistent approaches, and support from key decision makers which allow PM team to increase success in delivery of projects
Standardized processes with capability building training to ensure consistent execution
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5
4 Planning and scheduling process
Planning team
Create WBS Identify critical
milestones Create/ update
plan Publish plan
Monitor & report project progress
Recommend focus actions/ area
Publish report
Recommend & perform required analyses
Publish analysis report
Process step
Users
Create/ update plan
Provide timely, accurate inputs
Help in identifying critical milestones
Progress measurement
Provide timely, accurate inputs
Execute recom-mended focus actions
Customized analysis
Identify required analyses
Provide timely, accurate inputs
Roles
A
B
C
D
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7 Pre-Decisional - Proprietary and Confidential |
Adding stage gates to existing Capital Project Process will focus University resources and increase control for Major projects
# Funding gate # Review-only gate
STAGE GATE PROCESS A
to
Operations From...
Project Initiation/ Concept
Development
Project Obtains Board Approval and is Funded
Schematic Design
Construction Documents
Bidding and Negotiation
Program Planning
Consultant and
Contractor Selection
Design Development Construction Close Out
PD&C Planning Led Process PD&C Project Manager Led Process
Cabinet Review and Authorization
2 1
Consultant and
Contractor Selection
Project Initiation/ Concept
Development
Develop feasible options. Release seed money.
Design Development
Start-up/ Commission-
ing Close Out
Program Planning/
Scope Selection
Schematic Design Construction
Is this needed? Is it a priority?
PD&C Planning Led Process PD&C Project Manager Led Process
Is the best option still viable after scoping? Freeze Scope. Release full budget. Is the project ready to begin operation?
Is option still viable given the refined estimate?
Any outstanding accounts or issues? Is the project ready to be turned over?
6
Construction Documents
Bidding and Negotiation
2b 1 2a 3 4 5
Source: PD&C process, Expert interviews, Team Analysis
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8 Pre-Decisional - Proprietary and Confidential |
Proposed contracting process establishes a consistent risk based approach to enhance project outcomes
CONTRACTING PROCESS
Steps Select a Delivery Model
Goals
Integrate Contractor selection process into Contracting Strategy Playbook to best utilize process to meet cost, schedule or quality based outcomes
Establish a Contracting Strategy Playbook for optimizing cost/schedule/quality aligned with State regulations and CU Boulder past experience
Understand how alternative models (bundling, PPP, IPC) could be utilized to better spread risks
Understand CU Boulder desired role (skill building)
Transfer project risks to align objectives between owner and contractors, not to outsource them
Ensure the terms of the performance contract are pragmatic, clear, and measurable
Who to involve
PD&C Legal Procurement Vice Chancellor Contractor Rep Design Team Rep
PD&C Legal Procurement Vice Chancellor Contractor Rep Design Team Rep
PD&C Legal Procurement Vice Chancellor
Select a Contractor Determine Contract Terms and Sign
Actions
Develop Contracting Strategy Playbook working group to explore best delivery options of CU Boulder projects
Integrate contractor selection methods into Contracting Strategy Playbook Formalize Contractor Score
Card
Develop standard language added to State contracts to provide a fair and equitable balance of risk on large Capital Projects
B
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9 Pre-Decisional - Proprietary and Confidential |
CU Boulder requires a systematic approach to building transparency among stakeholders in project delivery
TRANSPARENCY
Description
Define key data and clear KPIs for project delivery
CU Boulder should define Key Performance Indicators (KPIs) at a project level based on project categories defined (i.e. Major, Minor, and Outlays) with clear targets across each
An individual should also be identified as a responsible party for reporting and meeting the KPI target (may be different individuals)
Clear direction and training should be provided on how to calculate and report the KPI
C1
Create an accessible KPI dashboard
KPI dashboard should be accessible at multiple levels (e.g. project level and portfolio level) to the relevant stakeholders
The accessible dashboard can be communicated widely to build transparency among all stakeholders (e.g. users, administration, PD&C) and increase project accountability
C2
Provide a forum for decision making
KPI dashboards can be used as a tool in a regular forum of stakeholders (e.g. a Project Review Board) to discuss project progress
Project Review Boards will also help resolve issues proactively as it will: Enable decision makers to have the right information Allow PMs to raise concerns at right time
C3
KPI dashboard is designed at both project and portfolio level
Source: Expert interviews, Team Analysis
C
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10 Pre-Decisional - Proprietary and Confidential |
Project manager performance is the single most influential driver of construction project profitability
We have found that project performance is highly correlated with project manager capabilities Project performance is not correlated with: Geography Asset class Complexity Customer Project manager age or tenure
(grey hair)
D
High performing PMs excel at these skills
Org
ca
pabi
litie
s
I
Fina
ncia
l as
tute
ness
C
omm
erci
al
orie
ntat
ion
Mgm
t ca
pabi
litie
s
II
III
IV 1. Managing client needs (e.g. change orders)
1. Optimizing schedule, scope, and cost dimensions
1. Leveraging organization resources
1. Understanding financial statements
1. Mitigating project risk
1. Maintaining project lifecycle view
1. Overseeing contractors effectively
1. Mastering contract details
1. Planning & tracking project performance
1. Managing internal and external teams
10
9
4
3
6
5
8
7
1
2
We have run an analysis of 10,000 projects, checking the correlation of project performance with different factors
Source: Interviews, Team analysis
Highest priority
Sustain Train Skills
PROJECT MANAGER PERFORMANCE D
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11 Pre-Decisional - Proprietary and Confidential |
A field and forum format ensures appropriate balance between effort, effectiveness, and reach
Source: Team analysis
2015 2016
Q2 Q3 Q4 Q4 Q1
Forum Classroom
setting where skills are taught by
experienced PMs and standard setters
Field Practice
application of lessons and
coaching sessions to help PMs
operate with excellence
Field work (~12 weeks) Field work
(~12 weeks)
#1 (1 day) #4 (1 day) #3 (1 day) #2 (1 day)
Field work (~12 weeks) Field work
(~12 weeks)
Preparation for forums Select
partici-pants
Plan curricu-lum and field work
Set expectations through program overview
Deliver first series of workshops combining activities and pure lecture modules
Outline field work assignments
Celebrate stories of success from field work
Establish forum for PMs to discuss what worked and what was challenging
Deliver next set of lectures and field work
Repeat defined forum format ILLUSTRATIVE
Provide workshops for clients on PD&Cs processes
Perform project kick-off with client
Use transparency tools throughout project
Fill out KPIs and use to have discussions with management, clients, and contracts on the progress and performance of projects
Leverage contracting playbook during contracting
Create risk assessments before project on critical areas and develop mitigation plans
Coach new PMs in process
Engage with internal/ external teams to develop improved working processes
Session sequence Forum 1 Overseeing contractors
effectively and Mitigating project risk Forum 2 Planning & tracking project
performance Forum 3 Managing client needs Forum 4 Managing internal & external
teams
Sustain Train Skills
Partnering with training provider can help reduce timeframe required for field work
PROJECT MANAGER PERFORMANCE D
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12 Pre-Decisional - Proprietary and Confidential |
Applying capital productivity levers can increase CU Boulders effectiveness and improve its organizational health in the project delivery functions
Source: Expert interviews, Team Analysis
Applying capital productivity levers can achieve substantial efficiency in capital deployment.
in addition to multiple other benefits to University of Colorado, Boulder
Estimated savings of 15% of the overall capital spend based on select levers of streamlining project delivery: Stage-Gate process: move through multiple
fund and scope approval gates across lifecycle allocating full funding when with a higher degree of cost certainty
Contracting: select the project delivery method and contract terms to match the project goals and share risks
Transparency: add project controls and tracking to provide right information at the right time
Project Managers: spread project management best practice to create consistent approach
Estimated savings of 30% based on all capital levers across project prioritization, streamlining delivery, and making the most of existing facilities
Grow a transparent and trust-based relationship across all stakeholders (Board of Regents, Administration, Planning, Design & Construction, and Users) involved in project delivery
Increase morale, accountability, and ownership of projects in project delivery functions
Better able to attract and retain top talent in the project delivery functions at CU Boulder
Better able to manage the pipeline of upcoming projects from an internal resource perspective
Attract best contractors to engage in project delivery of complex and base projects
Better able to anticipate and resolve project performance related issues
Maintain and enhance the beauty of the unique campus architecture in a cost effective manner
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13 Pre-Decisional - Proprietary and Confidential |
CU Boulder has started initiatives that address aspects of the four recommendation focus areas
Source: CU Boulder Master Plan and Interviews
Initiative
Creating Key Performance Indicators dashboard
Developing preliminary set of project KPIs dashboards with Office of Performance Improvement
Detailing project plans through Project Charter
Providing an executive summary of Program Plan covering agreed budget, schedule, and scope, signed by PD&C and Administration
Simplifying campus design formats
Redeveloping campus design standards to more concise format
Description Involving PM earlier in the process
Involving PM earlier at project conceptualization instead of Design Development phase
Investing in software tools and solutions
Undergoing an evaluation of software options to be used across Facilities Management (e.g. developing database for smaller projects to provide better cost estimates)
Stag
e ga
te
Con
tr-
actin
g Tr
ansp
aren
cy
PM
Tool
s
Leverage technology for permitting and inspections
Implementing electronic permitting technology to ensure tracking of permitting and inspection
Engaging contractors with performance specifications
Investigating use of performance-based specifications to transfer risk to contractor and design team
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14 Pre-Decisional - Proprietary and Confidential |
Overall implementation plan
2015 2016 Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
E. PMO for implementation
Launch field and forum trainings Define & implement policy to ensure sustainment (e.g. training refreshers, assessments, etc.)
Activity
Complex Minor and Outlays
Define stage-gate process for CU (roles, deliverables, etc @ each gate)
B. Contracting strategy
Launch: pilot, adjust, scale to all complex projects
Create contracting strategy playbook
Share plan and create SG working group
Identify CS working group
Syndicate with key stakeholders
Workshop(s) to share recommendations and future plan
Assess results and define next steps (e.g. extend to base Minor and Outlays projects)
Major projects
A. Stage gate process
Assess results of PMs and define next steps
Scale v2.0 to all projects
Map needed PM skills (and current state)
C. Transparency
Design, pilot, and adjust PRB & dashboard v2.0
Assess results and define next steps
Assess results and define next steps
Launch: pilot, adjust, scale to all projects Syndicate with key stakeholders
Implement version 1.0 for all Major projects
Identify mode for PM trainings (internal/external)
Syndicate version 1.0 of transparency measures (dashboard and PRB)
D. Project Managers
Implementation of 1.0 continues until v2.0 is scaled to all
Design program (curriculum and format)
PRELIMINARY
Phase 3: sustaining excellence Phase 2: building excellence Phase 1: quick wins & critical actions Phase 4: future considerations
Source: Team analysis
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15 Pre-Decisional - Proprietary and Confidential |
Appendix
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16 Pre-Decisional - Proprietary and Confidential |
Organization context Athletics project review Overall diagnostic Recommendations Value at stake Implementation plan
Contents
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17 Pre-Decisional - Proprietary and Confidential |
Planning Design & Construction is a ~65 FTE organization within Facilities Management that manages project delivery for CU Boulder Department of Facilities Management Planning, Design and Construction
Facilities Management
PD&C
Facilities Engineering (12)
Reviews designs for compliance with codes, UCB standards, good engineering practices
Provides engineering support to the facilities maintenance and operations staff, design guidance to UCB project managers, and design-oversight of consultants.
Develops and maintains university standards, design guidelines, and construction-requirements lists in cooperation with maintenance staff.
Ensures code compliance
Facilities Planning (7)
Manages and directs the planning and design of campus facilities and grounds
Maintains the space database
Processes official requests for space
Performs space utilization/needs analyses
CAD/Document Management/ CASP (6)
Maintains library of campus site and building engineering drawings
Catalogs and archives campus project documents and related materials
Updates achieve drawings accurately reflect the campus and its structures.
Develops and maintains campus GIS and maps database
Design & Construction (37)
Provides administrative, management and professional services required to facilitate and accomplish projects on the campus
Coordinates the bidding process procuring consulting services
Administers and maintains contracts, budgets, and schedules
Office Administration (3)
Supports PD&C
Source: CU Boulder organizational chart and PD&C website
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18 Pre-Decisional - Proprietary and Confidential |
PD&C uses the following capital construction process for Major projects (1/2) BCPC = Boulder Campus Planning Commission CCHE = Colorado Commission on Higher Ed.
FM = Facilities Management
Defines the basic scope and likely cost of the project
Informs the administration about the project
Secures campus administration approval to proceed with development of a program plan
Project Initiation and Feasibility
Outcome: Approval to prepare a Program Plan
Program Planning
Defines the programmatic requirements for the designer
Defines limits of work, including site and infrastructure requirements
Builds consensus as to scope, cost and time line of the project
Defines the financial plan and sources of funds
Outcome: Campus agreement on scope of project and a funding plan identifying sources of revenue
Approvals
Secures Approval from Board of Regents and CCHE
Incorporates project into larger capital financial planning of university and state
Develops support for the project at all levels of state government
Secures funding for State-funded project
Outcome: Authorization to begin expending money on a capital construction project
Architect Selection
Selects the most-qualified architect and engineering firms to do the project
Encumbers money to begin the project
Contractors are selected for some delivery methods
Outcome: A design team is contracted to design the entire project
Concept and Schematic Design
Confirms and enhances program plan requirements
Generates concept for final building
Provides room by room layout of spaces
Secures approval of DRB and review by BCPC of schematic plans
Outcome: Schematic design is approved and project budget is confirmed
Source: Colorado.edu
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19 Pre-Decisional - Proprietary and Confidential |
PD&C uses the following capital construction process for Major projects (2/2)
Develops detailed room requirements
Integrates infrastructure systems into the building design
Provides pricing documents for contractor
Secures final DRB approval and other entitlements
Design Development
Outcome: Design Develop-ment is approved within the contract budget.
Construction Documents
Translates the design intent into documents from which a builder can construct the project
Describes the quantity and quality of the materials to be provided by the contractor
Provides final estimates of the project prior to bidding
Outcome: A complete set of plans and specifications is produced that describes the design fully.
Bidding & Negotiation
Initiates procurement processes for all trades
Produces a final construc-tion price
Contracts with builders to construct the project
Outcome: Final contract for construction
Construction
Contractor constructs the project
FM ensures that the building is built per plans and specs and meets building codes
Outcome: The project is realized
Occupancy and Warranty Period
The building is occupied by the users for which it has been designed
FM monitors the project to identify and correct any construction defects
Outcome: The building is accepted and available to move in
Source: Colorado.edu
BCPC = Boulder Campus Planning Commission CCHE = Colorado Commission on Higher Ed. FM = Facilities Management
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20 Pre-Decisional - Proprietary and Confidential |
Organization context Athletics project review Overall diagnostic Recommendations Value at stake Implementation plan
Contents
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21 Pre-Decisional - Proprietary and Confidential |
Athletics Complex has been a challenging program and continues to be a source of concern for CU Boulder
Source: PD&C, Team analysis
Original Program Plan called for a phased approach and was envisioned to be completed August 2016/17 Accelerated timeline and performing all phases concurrently has created additional
stress on delivery model
Internal misunderstanding in early phases between Athletics and PD&C resulted in ongoing project changes and cost escalations
Lack of team continuity, both internal and external, created hand-off challenges and eventually coordination and communication challenges
GMP was not executed, despite constant assurance provided by Mortenson and an agreed upon scope and budget that led to an agreement in GMP GMP agreement of USD 141 M achieved in April 2015 In May 2015 Mortenson refused to sign
Quality assurance during project closeout is an important final step in Athletics Complex project in order to prevent future costs and may require additional support to supplement capacity of existing team structure Current closeout process is mainly safety focus and user has already discovered
some closeout issues
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22 Pre-Decisional - Proprietary and Confidential |
Introduction to the Folsom Field Athletic Complex upgrade plan
1 Includes Space for Olympic Sports teams and their support spaces, training table, and renovated and expanded academic support center
Last major construction effort in 1991 with addition of Dal Ward Upgrade to the facilities was an effort to increase recruitment
success of top-performing student athletes which were being drawn to nearby schools with more advance facilities
Original Program Plan (and original cost) called for a phased approach with the following phase split: Phase 1: 4th Floor Build-Out to serve as Olympics Sports
Offices (USD 6.1 M) Phase 2: Indoor facility, practice fields, site development, and
above ground parking lot (USD 117.9 M) Phase 3: Dal Ward renovation1 (USD 15.8 M)
Original occupancy date was estimated August 2016/17
Contract was drafted as a Design/Build with a Guaranteed Maximum Price (GMP) but clause was not executed
Under design/build contract, lead contractor is tasked with developing designs for the end building and executing on that design
GMP clause is a clause which sets an upper budgetary limit which project is expected not to surpass. Costs which exceed that limit are not to be paid by the client and is an effective risk mitigation tool GMP clause was never formally executed by Mortenson
Contract form is ideal for fixed and known project scope, situations similar Folsom Field Athletic Complex with evolving scope is not best suited
Athletic Complex project was intended to modernize and advance CUs facilities among growing talent competition
Phases were intended to help reduce cost and inconvenience of a full blown construction site but would have taken longer
Winners of contract were contractor Mortenson and architectural engineering firm Populous
Phase 1: 4th Floor Buildout
1
Phase 2: Indoor facility, practice field, and parking
2
Phase 3: Dal Ward
3
1 2
3
Team Governance
Final decision-maker for build team
Made recommenda-tions which needed Mortensons approval
Site presence
Multiple staff flying in as needed
Select staff moved to Boulder, others
Winning contractor, led contractor relationship with CU
Design part of bid team, essentially worked for Mortenson
Role on project
Source: Interviews, Athletic Complex Program Plan
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23 Pre-Decisional - Proprietary and Confidential |
Athletics Complex has been impacted by high rates of personnel turnover both at CU and Mortenson
Source: Interviews
Lack of continuity has significantly impacted progress of the project
2013 2015 2014
Group Position Active period
Present
Athletics Department
Planning, Design, & Const-ruction
Mortenson
Populous
AD 1 AD Athletic Director
Assistant AD AAD 1 AAD 2
Adminis-tration User Rep UR 1 No replacement
CA 1 CA 2 Campus Architect, Director of PDC
Project Manager PM 1 PM 2
Lead estimator LE 1 and CDL 2
C&D Liaison CDL 1
PM 1 Project Manager
Lead Designer LD 1
VP, Gen Manager VP 1
Dir 2 Dir 1 Dir of Project Dev
SR Proj Manager PM 1 Multiple PMs
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24 Pre-Decisional - Proprietary and Confidential |
Changes represented a significant upward budgetary push, which were offset by cost cutting initiatives in other areas of the project
Source: Interviews
PRELIMINARY
Increases driven by twelve significant scope evolutions, but those increases were controlled by three reductions
701
3
012
11
Total Apr Jan
-2
Dec Sep Jul Jun May Mar Feb
1
8
Dal Ward -6
IPF2 Height Reduct
-1
IPF2 Track
Total
24Indoor Parking1
1 Separate project but had schedule and cost implications on Athletics Complex 2 IPF = Indoor Practice Field
2014 2015
USD millions
1
3
2
4
2
1
1
Total
Grounds Temp
Foot- print
1
1
Total
Kitchen
Total 0.2
Brand 0.2
3
1
Total
IPF2 Sprink- lers
-0
Aud/ Vis 2
Rooftop Design
1
1
Total
Tenant Finish
0
0
Total
DAS Systems
0.7
0.4
0.3
Total
Rooftop bridge
5th Floor Add-on
-2
-2
Total
Value Eng
5
6
7
8 9 10 13
11
12
14 15 16
Focus of changes only on significant changes to scope
Does not include required changes to schedule, manpower, and other changes required to support scope change
-
25 Pre-Decisional - Proprietary and Confidential |
Going forward, there are three important considerations for the Athletics Complex project
1
2
3 Throughout the project, Mortenson provided constant assurance to CU personnel that project was on track with agreed upon budget and timeframe
Current closeout process has strong administrative and safety focus, no identifiable quality assurance closeout plan is in place and may require additional support capacity
As of December 2015, the project is 93% of budget (USD 140 M) has been released to Mortenson
Source: Interviews, Press Search, Mortenson
-
26 Pre-Decisional - Proprietary and Confidential |
Organization context Athletics project review Overall diagnostic Recommendations Value at stake Implementation plan
Contents
-
27 Pre-Decisional - Proprietary and Confidential |
Overall capital program diagnostic
Quantitative performance on CU Boulders capital portfolio over the past 5 years shows overruns and delays for a set of Major projects as well as underruns for Minor and Outlay projects
Major projects (projects above $2M) comprise of 80% of the spend. Approximately 8 projects requiring additional spending limit were typically those impacted by accelerated timeline, scope changes, or decision delays
Significant portion of the spend, ~$250M, is still outstanding and provides an opportunity to improve project delivery in on-going projects
Though market conditions impacted the overall cost of projects since 2009, there is no immediate impact on attractiveness of CU projects based on bid analyses
More than half (>1000 projects) of all Minor and Outlay projects are completed at 5% or more under the original target cost, similar to other public agencies
Qualitative analyses and review of select Major projects show that CU Boulders capital program faces challenges in both strategy and project delivery with the following key opportunities: Capital planning: Meet target costs by rethinking approval process to match the release of funds to
the maturity level of the project Contracting methodology: Manage owner risk through clear guidelines on selection project delivery
method or contracting terms Communication: Manage risks proactively by increasing project tracking and clarity in
communicating progress with appropriate stakeholders Project Manager workforce: Increase consistency in PM workforce through structured training and
onboarding processes and a decrease in turnover
-
28 Pre-Decisional - Proprietary and Confidential |
Over the past 5 years, CU Boulders capital spend has been concentrated on Major projects with a valued budget of ~$870M
302
980
957
Total budget on projects1 Number of projects
Projects over $2M Athletics Complex Systems biotechnology
building Recreation facilities
improvements
Projects between $25k-$2M Food service renovation Replace boilers, roof Lab renovation
Projects under $25k Sound proofing Temporary cooling Fire alarm upgrade
Examples
PRELIMINARY
Project size range Total value
1,967 Total $1,046M
Outlays $8M
$867M
Range $25k-$500K Total value $91M
Range $1-$2M Total value $39M
$171M
Category I Range $2-$50
Total value $318M Major
Minor
Range $500K-$1M Total value $42M
Category II Range $50-$100
Total value $240M
Category III Range $100+
Total value $308M
Source: PD&C, Team analysis
1 Representative project scale but not exhaustive. Current budget for projects from March 2010 after the implementations of the CP module to September 2015 across all stages of development from planning (~$30 M) to closed. Budget defined as most recently approved budget in FAMIS as of mid-September 2015
2 Two grants listed as separate projects were merged with their associated projects. Three projects out of the 30 are ESCO with combined project value of USD ~21 M
-
29 Pre-Decisional - Proprietary and Confidential |
Projects requiring additional spending limit were typically impacted by accelerated timeline, scope changes, or decision delays
Source: Team Analysis, PD&C
SB Academic Wing1
Campus Utility1
SPSC - Data room
Ekeley Middle Wing
13
22
12
Ketchum1
JILA 60 SEEC1
12
28
75
System Biotech 113
Athletics Complex1 142
% Change in legislative spending limit
Initial legislative spending limit2
1 Ongoing project | 2 Initial legislative approval | 3 Current legislative approval
PRELIMINARY
18
14
Stad - Video Board
5 GIPF Bldg (Athletics) 1
Bball/ Vball Practice 11
IBS
Wilderness1 EUCLID1 (CASE)
7 Wilderness - Recom
4
4
Hallett Renovation
Atmospheric Lab
Glenn Miller Ballroom
7
3
Rec Facilities 64 43
USD Change in legislative spending limit
N/A
16
56
18
2
10
6
10
53
0
0
0
0
0
0
2
0
0
3
0
17%
35%
21%
75%
28%
88%
12%
50%
N/A
0%
10%
0%
2%
0%
0%
0%
13%
14%
0%
0%
Current legislative spending limit3
N/A
169
23
28
37
91
160
14
112
4
43
64
4
20
5
7
11
16
3
7
USD Million
Projects impacted by significant scope or timeline fluctu-ations
Normal projects
Observed difference in performance between projects which are pursued as expected and those impacted by: Accelerated
scheduling Significant or
constant scope changes
Delayed timing in decision-making
NON-EXHAUSTIVE Detailed next
-
30 Pre-Decisional - Proprietary and Confidential |
Specific context of building projects reveal important details about on the dynamic process of design and construction (1/3)
Source: Team Analysis, PD&C
Athletics Complex
Driver for cost change: Accelerated project timeline, insufficient time for program planning complex project
Additional context Accelerated timeline provided limited time for
planning efforts to which external consultant was hired to supplement
Inadequate familiarity/attention to capital process and requirements by new campus staff
Important changes and decisions were being made as late as construction
System Biotech
Driver for cost change: Unforeseen construction escalation in laboratories and need to master plan the building site for East Campus
Additional context Efforts were required to master plan the site for
East Campus impacting the budget and schedule Laboratory facilities required more advanced
features than expected Additional design fees for LEED certification
Campus Utility
Driver for cost change: Delayed approval and new environmental requirements
Additional context Original program plan developed in 2007 which
set budget in dollars for that market Original plan called for $134 M project but
program was only approved for $75 M plan was reworked
Approved 2011 plan operated in a more expensive market; student support for continued CoGen
SEEC
Driver for cost change: Delayed funding, changed site and program fluctuation
Additional context Program planning efforts began in 2002 and were
paused, restarted and finalized in 2008 Series of approval delays and program plan
amendments led to the escalation of cost compared to original budget request
Nature of the building and the market costs changed significantly from 2008 to 2015
-
31 Pre-Decisional - Proprietary and Confidential |
Specific context of building projects reveal important details about on the dynamic process of design and construction (2/3)
Source: Team Analysis, PD&C
JILA
Driver for cost change: Delayed federal funding and unforeseen construction needs
Additional context Original project cost estimated in 2007 but federal
funding was not available until 2009 Unforeseen existing conditions around hazardous
materials were discovered underground (e.g. aged plant fuel storage tanks)
High sensitivity of research equipment required advanced vibration-prevention features
Systems Biotechnology Academic Wing
Driver for cost change: Delayed funding availability Additional context
Educational wing of this facility delayed from 2006 to 2015-16 due to the demand for state capital construction funding and economic hardship
Original cost was completed before the construction upswing in the Denver area
Increase of cost driven by higher market demand and inflationary cost which occurred between 2008 and present day
Ketchum
Driver for cost change: Scope significantly evolved from original capital renewal scope
Additional context First state funding request was in 1998 which was
only for capital renewal of the building; Circa 1938 building
Appropriated design funds rescinded along with construction phase funding in 2007-08
2014 funding was granted for a complete overhaul with an expanded program plan
Ekeley
Driver for cost change: Delayed funding and inflationary impact of costs
Additional context Project plan originally scoped in late 1990s Appropriated design funds rescinded along with
construction funding in 2007-08 Inflationary cost pressures from the original
funding approval impacted the budgetary needs of the project
-
32 Pre-Decisional - Proprietary and Confidential |
Specific context of building projects reveal important details about on the dynamic process of design and construction (3/3)
Source: Team Analysis, PD&C
SPSC Data Room
Driver for cost change: Cost decreased significantly due to dramatic technological innovation in market
Additional context Original plan was to develop a facility to hold data servers
to back-up crucial university information Popularization of online cloud memory capabilities
significantly drove down the need to purchase devices to support data needs of university
Project costs were dramatically reduced
-
33 Pre-Decisional - Proprietary and Confidential |
Denver market conditions impact project performance (both positively and negatively) and need to be accounted for in planning
4,450
4,3424,317
4,178
7,0787,0106,9856,890
6,341
3,900
3,950
4,000
4,050
4,100
4,150
4,200
4,250
4,300
4,350
4,400
4,450
4,500
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
5,500
6,000
6,500
7,000
7,500
3,975
6,384
4,092
Observations: Denver area market
experienced growth increase in prices over the past five years
From June 2009 to July 2010 the compound aggregated growth rate was 1.91% for BCI and 3.04% for CCI
Further pricing pressure may existing due to scarcity of labor at subcontracting levels and increasing project demands coming online
CCI
BCI
2010 2011 2012 2013 2014 2015
Recession recovery
Growth period
NOTE: The ENR indexes measure how much it costs to purchase the following hypothetical package of goods compared to what it was in the base year. The CCI uses 200 hours of common labor, multiplied by the 20-city average rate for wages and fringe benefits. The BCI uses 68.38 hours of skilled labor, multiplied by the 20-city wage- fringe average for three tradesbricklayers, carpenters and structural ironworkers. For their materials component, both indexes use 25 cwt of fabricated standard structural steel at the 20-city average price, 1.128 tons of bulk portland cement priced locally and 1,088 board ft of 2x4 lumber priced locally.
Source: Engineering New Record, Team analysis
-
34 Pre-Decisional - Proprietary and Confidential |
Analysis of bids reveal CU projects are attractive to general market
Source: PD&C, Team Analysis
Total interested bidders
Second Lowest Lowest Spread (%) Project
Construction start
Highest Lowest Spread (%)
Total qualified bidders
Project budget (USD M)
32
43
211
22
7
4
91
3
4
1386
64
7
432
4
7
11
13
148
143 IBS Jun 09
6
5
210
8
3
1410
9
4
4
148
10
4
613
6
7
89
6
8
3
5
24
3
64
4
35
5
5
4
6
24%
32%
41%
12%
12%
17%
23%
32%
23%
23%
14%
40%
40%
13%
6%
13%
35%
18%
10%
11%
23
46%
15%
3%
1%
17%
6%
8
4%
4%
3%
5%
6%
0%
0%
5%
3%
1%
40%
25%
2%
3%
6%
22%
Sys biotech Sep 09
B/V Ball Apr 10
WLRD Rec May 10
E-wing Jan 161
Euclid Oct 15
Ecme Hvac Sep 15
Wilderness Mar 15
Ketchum Jan 15
GIPF Blg Sep 14
GM Ballrm May 14
Athletics Apr 14
MAC Dec 13
Atmos lab Aug 13
Comp data Aug 13
EKLC Apr 12
Utility syst Aug 12
Rec facility Jun 12
Video board Apr 12
East Elect May 11
Jila May 10
HLET May 10
1 Expected construction start
No discernable trend can be identified when reviewing past history of Major bids, while total number of interested bidders is trending lower in 2nd half of 2015
-
35 Pre-Decisional - Proprietary and Confidential |
Minor and Outlay projects are routinely under budget
Source: PD&C, Team Analysis
106
214
342
105
20-50 50+
1092
-5-5 -20- -5 5-20 >-20
1 Includes Substantial Completion, Post Construction, and Closed Representative from March 2010 after the implementations of the CP module to September 2015
2 Excludes projects with USD 0 spend, Minor = 11 and Outlay = 12 3 Excludes 215 closed projects with a budget of USD 0 but representing USD 890 K of actual spend
99122
176186
1524
50+ 20-50 >-20 5-20 -5-5 -20- -5
Percentage over/under budget Percentage over/under budget
Minor projects1 N = 7862
Outlay projects1 N = 6102,3
-0.1 0 0 0.2 0.5 0.8 -0.2 0 0.6 3.1 3.1 14.7
# Total budget over/underrun USD Millions
55% of projects USD 20.2 M
underrun
64% of projects USD 1.5 M
underrun
Majority of projects were under budget by more than 5% (55% of Minor and 64% of Outlay)
Underruns in Minor and Outlay projects amount to ~$22M, less than 2% of overall capital budget over five years
Underruns are expected given low project values and lack of knowledge on existing field conditions
PRELIMINARY
-
36 Pre-Decisional - Proprietary and Confidential |
Potential to unlock limited value by tightening budget estimation processes or employing staged release of funds during project execution Lower underruns may allow greater budget to
perform more projects Performance metrics need to capture user
satisfaction, delivery schedule, and execution cost
Among other public organizations, regular underruns for Minor and Outlays are not uncommon but may constrain user access to capital
Source: PD&C, Team Analysis, Press search
PRELIMINARY
Underrun represents approximately 18% of total budgeted amount for Outlay and Minor projects1
120
21 1078
Underrun
0 0 1
Overrun
-22 2
Budgeted
129
Spend
Minor
Outlay
which is in line with other public organizations setting budgets for similar projects
Public org 1
18%
14-18%
CU
Public org 2 Up to 30%+
USD Millions Average % budget underrun
1 Includes Substantial Completion, Post Construction, and Closed Representative from March 2010 after the implementations of the CP module to September 2015
-
37 Pre-Decisional - Proprietary and Confidential |
Rapid diagnostic evaluates the effectiveness of CU Boulders Capital program across the following dimensions
Organization Mindsets and capabilities Processes and tools
Strategy translation Risk/return appetite estimation Capital headroom calculation
Portfolio review Portfolio allocation Ongoing returns tracking
Opportunity Origination Business case optimization and concept selection Design, procurement, & contracting Construction & Execution Comm. & Ramp-up Project control
Best practice area Description
Organization structures and standards applied to capital Personnel attitudes and skill sets devoted to capital Enabling systems applied to capital budgeting and delivery
Formal mechanisms for ensuring corporate strategy implementation Establishing corporate/group level risk and return expectations Calculation/simulation of cash generation and investment ability Top down review of project portfolios, including improvement
potential
Selecting projects for execution, understanding interactions, risk Evaluating how results match to risk/return appetite Initial scoping of opportunities and preparation for project success Development and testing of concepts against a reference case for
most effective selection
Detailed project design, planning, and procurement
Tactical project execution including scope changes Startup and handoff to ongoing operating team Assessing project outcomes, establishing feedback loops
Enablers
Capital Strategy
Portfolio Strategy
Project Delivery
Source: McKinsey Capital Productivity Practice
-
38 Pre-Decisional - Proprietary and Confidential |
Rapid diagnostic based on interviews and select project reviews reveals that strategy as well as project delivery are below industry average at CU Boulder
0.0
1.0
2.0
3.0
4.0 Organization
Processes and tools
Mindsets and capabilities
Strategy translation to asset base
Risk/Return appetite
Capital headroom calculation
Portfolio review
Portfolio allocation Ongoing returns tracking
Opportunity origination
Business case definition and concept
Design. procurement. and contracting
Construction and Execution
Commissioning and ramp-up
Project control Opportunity origination Concept selectionProject definition and approval
Project ramp-up
Project execution
Opportunity origination
Concept selection
Project definition and approval
Project ramp-up
Project execution
Portfolio Strategy
Capital Strategy
Project delivery
Source: Based on 40+ interviews with PD&C
PRELIMINARY
Enablers
Industry average = 2-3
-
39 Pre-Decisional - Proprietary and Confidential |
Based on 40+ interviews, select project reviews, data analysis, and focus groups we identified a set of opportunities
Opportunities to increase efficiency and effectiveness
Cap
ital
Plan
ning
More consistent Program Planning efforts, aligned with paced project schedule to decrease owner risk
Address backlog in maintenance through improved capital allocation Enhance integrated portfolio view with clear project prioritization Rethink approval process to match the release of funds to the maturity level of the project
Des
ign Augment alignment between PD&C and administration in regards to project budget estimates
and timelines Continue with recently launched effort for early engagement of Project Manager in project
lifecycle
Con
trac
t- in
g
Refine choice in contracting strategy (choice of delivery model, contract type, award process) to align to scope, project schedule, market conditions, and owner execution capability
Consistently enforce contract terms in the field leading to lower owner risk
Proj
ect
exec
utio
n Standardize project execution processes Adopt and enforce tools and as a standardization method Increase ownership of project controls (i.e., cost and schedule tracking)
Enhance communication on project progress Celebrate success Leverage performance monitoring (e.g., lessons learned at project completion) as source of
insight Provide training for onboarding new employees and continuous development
Cro
ss-c
uttin
g
Emerging themes for developing excellence
Develop a clear, well-documented, and scalable stage gate process to drive capital investment success
Adopt clear guidelines in contracting strategy to address project risk based on project scope, target cost, expected delivery schedule, market conditions, and internal capability
Deploy project controls to drive transparency of cost, schedule, and milestones during project execution thus increasing consistency
Train and retain the Project Manager workforce to ensure best practices adoption and execution in project management
Source: Interviews
-
40 Pre-Decisional - Proprietary and Confidential |
Organization context Athletics project review Overall diagnostic Recommendations Value at stake Implementation plan
Contents
-
41 Pre-Decisional - Proprietary and Confidential |
CU Boulder can adapt best practices in capital management across the four themes to begin developing excellence
Emerging theme Description Best practice
Stage-Gate process: how do projects move through multiple fund and scope approval gates through the lifecycle?
Stage-gate process matches the release of required funds to the maturity level of project definition; specifically, it ensures projects do not progress without an adequate evaluation of the underlying business case, completion of key deliverables, and mitigation of critical risks
Single and comprehensive capital investment framework
Transparency: how do project controls allow for right information at the right time?
Project controls dashboards enable PMs and Project Coordinators to: Proactively identify issues Ensure relevant information is at hand to
contribute to the decision making process in a timely manner
Tracking information on cost, schedule and milestones for each project
Contracting: how project delivery and contracting methods are selected
Selecting contracting strategy (delivery model, contract terms, award process) based on project specifications (size, cost, delivery schedule, complexity), market conditions, and internal capability
Clear guidelines on contracting strategy to best manage owner risk McKinsey & Company
VGI-AAA123-20090508-
Working D
raft -Last Modified 9/7/2011 3:32:09 A
MP
rinted 4/6/2011 4:32:15 PM
| 3
Contracting strategy entails defining 3 linked elements of a project
Delivery model (How do I determine optimal contracting scope?) Should I own the asset or are other ownership structures more
suitable, e.g., lease?
Which project value chain steps should be done internally and which ones by contractor(s)?
Into how many contracts should the project scope be split? What is the optimal split of scope between the contractors?
Contract terms (How do I ensure most optimal contracting terms?) What are the key project cost, performance, and schedule risks? Who is the natural owner of the risks? What mechanisms exist to transfer or share risk? How can objectives be aligned between owner and contractor to
ensure an efficient execution through compensation elements such as incentives, penalties, warranties, etc.?
Key dimensions of contracting strategy Key questions to be considered
Award process (How do I select my contractors?) How can the effectiveness of existing award process be enhanced ? How many and which suppliers/contractors should be invited? How do we get the suppliers interested? What is the criteria for evaluation various suppliers?
Deliverymodel
Awardprocess
Contract terms
2
1
3
Project Managers: how well is project management best practice followed?
Establishing standardized methods, training for PM staff on consistent approaches, and support from key decision makers which allow PM team to increase success in delivery of projects
Standardized processes with capability building training to ensure consistent execution
McKinsey & Company
Working D
raft -Last Modified 07-S
ep-11 6:35:55 PM
Printed
|
SJO-AAA123-20110525-
5
4 Planning and scheduling process
Planning team
Create WBS Identify critical
milestones Create/ update
plan Publish plan
Monitor & report project progress
Recommend focus actions/ area
Publish report
Recommend & perform required analyses
Publish analysis report
Process step
Users
Create/ update plan
Provide timely, accurate inputs
Help in identifying critical milestones
Progress measurement
Provide timely, accurate inputs
Execute recom-mended focus actions
Customized analysis
Identify required analyses
Provide timely, accurate inputs
Roles
A
B
C
D
Source: Interviews, Expert interviews, Team analysis
-
42 Pre-Decisional - Proprietary and Confidential |
Existing CU Boulder approval process for Major projects does not match project maturity with funding commitments
x
Current Process
Observations
Unclear project pipeline prioritization process leads to suboptimal use of resources in developing Program Plans Consensus must be built across many campus departments to develop a Program Plan which requires considerable investment
of time and effort from the PD&C planning staff
100% of project target cost is established and committed before design is adequately developed Length of time from project approval at funding gate 2 to project bidding exposes CU Boulder to market conditions as project
estimates no longer reflect the current market conditions
Project Managers enter the process after critical project decisions regarding scope and schedule are made Continued scope development occurs in the schematic design and design development stage through user input
Program Planning
Close Out and Warranty Period
PD&C Planning Led Process PD&C Project Manager Led Process
Schematic Design
Construc-tion Docu-ments
Bidding and Nego-tiation
Con-sultant and Contractor Selection
Design Develop-ment
Construc-tion
Project Initiation/ Concept Develop-ment
Cabinet review and authorization
Project obtains board approval and is funded
2 1
Source: CU Boulder PD&C website and interviews
STAGE GATE PROCESS A
# Funding gate # Review-only gate
-
43 Pre-Decisional - Proprietary and Confidential |
Operations
Adding stage gates to existing Capital Project Process will focus University resources and increase control for Major projects
Consultant and
Contractor Selection
to
From...
Project Initiation/ Concept
Development
Project Obtains Board Approval and is Funded
Schematic Design
Construction Documents
Bidding and Negotiation
Program Planning
Consultant and
Contractor Selection
Design Development Construction Close Out
PD&C Planning Led Process PD&C Project Manager Led Process
Cabinet Review and Authorization
2 1
Project Initiation/ Concept
Development
Develop feasible options. Release seed money.
Design Development
Start-up/ Commission-
ing Close Out
Program Planning/
Scope Selection
Schematic Design Construction
Is this needed? Is it a priority?
PD&C Planning Led Process PD&C Project Manager Led Process
Is the best option still viable after scoping? Freeze Scope. Release full budget. Is the project ready to begin operation?
Is option still viable given the refined estimate?
Any outstanding accounts or issues? Is the project ready to be turned over?
6
Construction Documents
Bidding and Negotiation
2b 1 2a 3 4 5
Source: Expert interviews, Team analysis
STAGE GATE PROCESS A
# Funding gate # Review-only gate
-
44 Pre-Decisional - Proprietary and Confidential |
Proposed process splits the funding gate and provides an opportunity to develop the design prior to committing total funds
Project Initiation and Concept Development
Program Planning Schematic Design
Design Development
0
5
10
15
20
25
30>50
50
40
30
20
10
0
-10
-20
-30
-40
-50
Share of total Percent
30%
10% 5-15%
2%
5%
0.5%
Estimate Accuracy1 Percent
Estimate accuracy Engineering complete Funding required (percent of total investment cost)
Consultant and Contractor Selection
Cabinet Review and Authorization pre-design
Release full project funds with stronger confidence
100% of funding committed
Select best option or set of alternatives to further develop
2a 1 2b
0.5 10% of funding
committed
Source: Expert interviews, Team analysis
STAGE GATE PROCESS A
# Funding gate # Review-only gate
1- Cost estimate accuracy increases (narrows) as design progresses, even as the cost estimate mid-point fluctuates as design progresses.
-
45 Pre-Decisional - Proprietary and Confidential |
Stage-Gate Process for complex projects at CU Boulder will help manage resources and provide more financial control (1/2)
Stag
es
Act
iviti
es
Someone identifies a project Options are generated
with order of magnitude estimates
Design Team and/or Contractor Selected either in a temporary (Paid competition/initial design phase contract) or permanent basis depending on project and delivery method selected Basic engineering is conducted to create a
decision-worthy estimate
Project Initiation and Concept Development
Program Planning Schematic Design
A/E and/or Contractor Selection
2a 1 2b
Review gate 1
Gate questions: Is the project need legitimate? Is it a priority?
Funding gate 2a
Gate questions: Do feasible options exist that
match the intended purpose?
Funding gate 2b
Stakeholders: User PD&C (Planning) Vice Chancellor, Administration Board of Regents (Informed)
Stakeholders: User PD&C (Planning and PM) Vice Chancellor, Administration CFO Finance BCPC (Informed)
Stakeholders: User PD&C (PM, Eng., Shops) Design Team & Contractor Vice Chancellor, Administration BCPC Board of Regents
Gate questions: Is the best option still viable after
scoping?
Final approval authority: Vice Chancellor
Final approval authority: CFO
Final approval authority: Board of Regents
The best option is selected and funds are allocated to complete preliminary engineering
Source: Expert interviews, Team analysis
# Funding gate # Review-only gate
STAGE GATE PROCESS A
-
46 Pre-Decisional - Proprietary and Confidential |
Stage-Gate Process comparison for the Wildlife Place project Ex
istin
g Pr
oces
s Pr
opos
ed P
roce
ss
Program Planning 2 1
Contractor Selection/Sche-
matic Design Design
Development Construction Documents
2b Program Planning 2a 1 Contractor
Selection/Sche-matic Design
Design Development
Construction Documents
Funding Required
Program Plan Funding
Board of Regents
Project Estimate
% Design Complete
Funding Required
Board of Regents
Project Estimate
% Design Complete
--
0%
--
Program Plan Funding
--
0%
--
After Funding: Increase to $22.4M at 100% DD estimate VE and ESCO engaged, schedule slips Board of Regents approves additional $2.5M (Total $20.4M) Additional funding required to achieve project scope
100% of project estimate
$17.9M
5%
Board approves full capital spend
$20.2M (mid-point of estimate less $2.2M from Stage 2a funding gate)
Project estimate tightens through SD ($19M - $25.8M ) VE to reduce cost, based on need and function, retain quality
30-50%
Board of Regents approves capital spend for remaining unfunded portion of project (~80-90%)
$2.2M (12.5% of Estimate)
$9M - $26.9M ($17.9M)
5%
Board informed of design start
Source: Expert interviews, Team analysis
# Funding gate # Review-only gate
STAGE GATE PROCESS A
-
47 Pre-Decisional - Proprietary and Confidential |
An internal stage gate working group of stakeholders can design processes and develop necessary documentation
Stage Gate documentation: suggested table of contents
Gate 2b
Gates 3-6
Appendix
Objectives for Gate Key Deliverables for Gate
By Function Timeline
Critical Functions of Team Summary Process Map for Gate Project Managers Roles in completing Gate How to ensure success at Gate 2b
Alternative Gates for Special Projects CU Boulder Standard forms
Objectives for Gate Key Deliverables for Gate
By Function Timeline
Critical Functions of Team Summary Process Map for Gate Project Managers Roles in completing Gate How to ensure success at Gate 2b
Gate 1
Stage Gates
Gate 2a Objectives for Gate Key Deliverables for Gate
By Function Critical Functions of Team Summary Process Map for Gate Project Managers Roles in completing
Gate How to ensure success at Gate 2a
Objectives for Gate Key Deliverables for Gate
By Function Timeline
Critical Functions of Team Summary Process Map for Gate Project Managers Roles in completing
Gate How to ensure success at Gate 1
Decision and funding gates for: Base Projects Complex Projects
Stage Gate Playbook creation process
Activities: Conduct a series of
workshops to address each section of the stage gate playbook
Review playbook with key stakeholders to validate approach
Suggested working group: PD&C (3)
Planning Representative
Project Manager Engineering
Vice Chancellor Potential Participants (at
key intervals): Users Legal
Source: Expert interviews, Team analysis
Detailed next (sample)
STAGE GATE PROCESS A
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48 Pre-Decisional - Proprietary and Confidential |
Stage 1 Project Initiation and Concept Development Objectives, key deliverables, and critical functions
Select best scope alternative that meets the CU Boulders needs and objectives
Define all scope elements to a level enabling sound decision making
Define project execution plan to meet targets as required
Explicit reconciliation of variances against project requirements
Complete scope identification and selection of a single option for all scope elements
Complete draft of a project execution plan
Initial risk assessment Cost estimate with an accuracy of
50%; and a first estimate at an operations expenditure budget
Develop an initial schedule through completion, including resources for next phase
Objectives Critical functions Key deliverables
Planner - lead Users Engineering Operations / Shop support Outside support:
Estimating Scheduling
Support functions
Finance Vice Chancellor
STAGE GATE PROCESS
ILLUSTRATIVE
Source: Expert interviews, Team analysis
A
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49 Pre-Decisional - Proprietary and Confidential |
Function Deliverable
Stage 1 Project Initiation and Concept Development (1/2) Deliverables by function
PD&C (Planning and Project Manager)
Project charter Issue record of decision for alternative selection Provide detailed scope Conduct analysis to facilitate key decision points(e.g., site, execution
strategy) Develop initial project execution plan (scope / change management plan;
project team and resources; contracting strategy; risk management; project controls (KPIs); estimate (50%), quality, procurement, testing and close out, schedule; communication plan; contractor management
Engineering lead
Evaluate technical alternatives analysis and provide recommendation Complete basic engineering data requirements (e.g., load requirements,
equipment sizing, energy use, etc.) Implement optional value improving practices (VIPs):
Types of plant and equipment Concept optimization Constructability reviews
Regulatory Assign code representative, if applicable Assign environmental representative, if applicable
STAGE GATE PROCESS
ILLUSTRATIVE
Source: Expert interviews, Team analysis
A
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Stage 1 Project Initiation and Concept Development (2/2) Deliverables by function
STAGE GATE PROCESS
ILLUSTRATIVE
Function
Contracting Strategy
Define delivery method, contract award method, and contract terms
Operations and Maintenance
Provide OPEX cost estimate, if applicable Assign operations representative for next phase, if applicable Define maintenance requirements, if applicable
Quality assurance
Define quality oversight
Finance Review estimate, validate financial view calculation Input project into the budget
Legal Provide support, as required
Deliverable
Source: Expert interviews, Team analysis
A
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51 Pre-Decisional - Proprietary and Confidential |
Stage 1 Project Initiation and Concept Development (1/2) Summary process map
STAGE GATE PROCESS
ILLUSTRATIVE
Form core project team Review
business case Clarify roles and
responsibilities Identify targets
as per CU Boulder needs
Review project charter
Identify additional resources required
Project manager assigned
Initiate conceptual engineering User
requirements Preliminary
massing Assess
infrastructure requirements
Narrow down potential sites (if applicable)
Narrow down building concept and potential MEP systems
Update conceptual engineering Include massing Process control
strategies
Identify financial and logistical issues
Apply value improvement practices Finalize
programmed areas
Agree on standards and specifications
Conduct process simplification and/or value engineering
Conduct early constructability analysis
Scope and document the best option: Conduct formal
evaluation of alternatives including fatal flaws analysis, and select best available option for application
Document record of decision
Source: Expert interviews, Team analysis
A
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52 Pre-Decisional - Proprietary and Confidential |
Stage 1 Project Initiation and Concept Development (2/2) Summary process map
Confirm basic engineering requirements Develop renderings
Review engineering requirements for permits
Decision Gate
Confirm business objectives, risks and uncertainties and confirm compliance with both CU Boulder and user requirements and strategies
Confirm scope to be developed and compliance with University objectives
Present cost and schedule
Confirm project objectives, priorities, trade-offs
Summarize project execution strategy and plans
Identify resource requirements for next phase and through project completion
Issue record of decision
STAGE GATE PROCESS
ILLUSTRATIVE
Develop schedule to reach Stage 2a and detailed milestone schedule for execution phase
Prepare factored estimate (50%)
Develop Plans for Completing: Basic
engineering Detailed
engineering Procurement Construction Contracting Project controls
Develop detailed risk matrix
Conduct preliminary equipment sizing
Reconcile project objectives
Develop resource requirements for Stage 2a
Update Campus project budget
Finalize and review scope of work
Estimate OPEX
Develop operations and maintenance strategies Recycle
Proceed to Stage 2a Cancel/postpone
Source: Expert interviews, Team analysis
A
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Though the proposed stage-gate process is currently defined for Major projects, CU Boulder can extend the process to complex and eventually all Minor and Outlay projects (1/2)
STAGE GATE PROCESS
Rough cost of project
150,000
500,000
Low Med/High
Complexity
Base projects
Complex projects
2,000,000
Major Project Threshold
Source: Team analysis
A
Base Projects can continue to utilize existing stage gate process, potentially adding key QA/QC steps
Complex and Major Projects should use proposed stage gate process
Definition of thresholds should be agreed through Stage-Gate working group
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54 Pre-Decisional - Proprietary and Confidential |
Though the proposed stage-gate process is currently defined for Major projects, CU Boulder can extend the process to complex and eventually all Minor and Outlay projects (2/2)
Source: Team analysis
STAGE GATE PROCESS
Phase 3 (2 months)
All Minor/Outlay Projects: Applicable processes from
Phases 1 and 2 New processes, etc. with a
focus for streamlining
Phase 2 (3 months)
Develop and Implement Process for Complex Minor Projects ($0.5M-2M): Applicable processes from Phase 1 New processes, templates, agendas,
reviews required for Phase 2
Phase 1 (4.5 months)
Develop and Implement Stage Gate Process for Major Projects ($2M and over) including: Pre-work required for each gate Templates Agenda for stage gate meetings Reviews required
Expansion of stage gate process
Time line of stage gate rollout
A
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University capital project funding thresholds vary widely but are typically higher than CU Boulders
Source: Press Search
Initial project approvals thresholds
Change approval thresholds
CU Boulder has low approval thresholds even after accounting for expected regional cost variations (e.g. UC expected $/sqft costs are 1.6-1.8x CU expected costs, but UC initial approval thresholds are 10x CU thresholds)
Delegated approval systems require up-front Board approval of Long Range Development Plans and thereafter allow Campuses to act autonomously up to a larger cap
Percentage of budget expansion varies widely, with common aim to keep projects moving in uncertain circumstances
Smaller campuses networks
have smaller thresholds
20101052
40
60
15 5
25% 30%
5% 10% 10%
USD Millions
Percent of initial cost
# of academic campuses
Expected $/sqft1
4 1 8 10
185-305 185-305 265-395 340-490
1
1 Hard construction costs $/GSF for University buildings in select US cities, Rider Levett Bucknall Quarterly Construction Report, 2nd Quarter 2015
NA
Delgated budget threshold
Observations
A STAGE GATE PROCESS
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CU Boulder can adapt best practices in capital management across the four themes to begin developing excellence
Emerging theme Description Best practice
Stage-Gate process: how do projects move through multiple fund and scope approval gates through the lifecycle?
Stage-gate process matches the release of required funds to the maturity level of project definition; specifically, it ensures projects do not progress without an adequate evaluation of the underlying business case, completion of key deliverables, and mitigation of critical risks
Single and comprehensive capital investment framework
Transparency: how do project controls allow for right information at the right time?
Project controls dashboards enable PMs and Project Coordinators to: Proactively identify issues Ensure relevant information is at hand to
contribute to the decision making process in a timely manner
Tracking information on cost, schedule and milestones for each project
Contracting: how project delivery and contracting methods are selected
Selecting contracting strategy (delivery model, contract terms, award process) based on project specifications (size, cost, delivery schedule, complexity), market conditions, and internal capability
Clear guidelines on contracting strategy to best manage owner risk McKinsey & Company
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Contracting strategy entails defining 3 linked elements of a project
Delivery model (How do I determine optimal contracting scope?) Should I own the asset or are other ownership structures more
suitable, e.g., lease?
Which project value chain steps should be done internally and which ones by contractor(s)?
Into how many contracts should the project scope be split? What is the optimal split of scope between the contractors?
Contract terms (How do I ensure most optimal contracting terms?) What are the key project cost, performance, and schedule risks? Who is the natural owner of the risks? What mechanisms exist to transfer or share risk? How can objectives be aligned between owner and contractor to
ensure an efficient execution through compensation elements such as incentives, penalties, warranties, etc.?
Key dimensions of contracting strategy Key questions to be considered
Award process (How do I select my contractors?) How can the effectiveness of existing award process be enhanced ? How many and which suppliers/contractors should be invited? How do we get the suppliers interested? What is the criteria for evaluation various suppliers?
Deliverymodel
Awardprocess