South Florida PMI Chapter Dinner Meeting

The 3 Projects of the Panama CanalLessons Learned from one of the engineeringwonders of the world or how a Mosquitocan kill your project!Roberto Toledo, MBA, PMP

Alpha ConsultoríaMéxico and Latin America

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Agenda

• Some history and the importance of the Canal

• The French project and its lessons learned

• The American project and its lessons learned

• The Panamanian project and its lessons learned

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The importance of Lessons Learned

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The importance of the Canal

• Technically it is one of the greatest engineering achievements of humankind.

• It longs 80 km from the Atlantic to the Pacific Ocean.

• Its width ranges from 91m to 300m. • It possesses two terminal piers, three

sets of twin locks and one of the largest artificial lakes in the world: Gatún Lake, which covers 425 square kilometers

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Beyond engineering is about economics

• It’s the second primary route for imported goods to the USA (first customer)

• It’s a main route for exported goods for China (second customer)

• It grossed 1.3 Billion USD in 2008• Gathered 2.3 Billion USD for the

Expansion ProgramOut of 5.2 budgeted

• Holds A2 investment rating

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Panama, the Nation of the Canal

25% of the Government ‘s income comes from the Canal’s EconomyDirect and Indirect Contribution of the Canal as a percentage of the Government’s current

income

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What does it mean to the World?

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Some History…

• First “suggestion” of a canal by Charles V, King of Spain in 1534

• The Spanish Camino Real for transporting Peru’s gold

• Feasibility study in 1793 by Italian-born Malasspina

• US construction of the Panama Railway in 1855• In the 1870’s due to the Suez Canal Construction success, Ferdinand de Lesseps envisioned a new great endeavor: The Panama Canal

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The French Project

• Started in 1880 by Ferdinand de Lesseps

• Lacked prior studies of the geology and hydrology of the region

• Facts and experiences ignored: There was a level difference between the oceans

(known since 1590) The Darien Expedition by the Scots in 1699 The somewhat successful American Railway

experience, considering a dead toll of 12,000 workers by malaria and yellow fever

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The French Project

• Work continued trough 1889, when the French abandoned the project

• Heavy machinery was insufficient and not working properly

• More than 22,000 people died due to diseases like malaria and poor living conditions

• The digging made by the French were vast and used though

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Lessons Learned

• Prior failing -extreme disaster- experiences were dismissed due to a seemingly recent successful experience -the Suez Canal-

• Prior technical knowledge was not reviewed nor verified

• Environmental conditions were not considered as part of the Construction Management Plan

• Sanitary conditions were not considered as part of the Construction Management Plan

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The American Project

• Foreign landowners in Panama lobbied the US Congress to chose Panama over Nicaragua for a canal The Cromwell scam

• The access-granting treaty to the Canal Zone was not ratified by Colombia prompting Panama’s independence

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Experiences considered

• The American Railway construction through the Isthmus (1885)

• The Spanish-American war in the Caribbean (1898)

• “Tropicalized” heavy machinery• The mosquito vector and disease control• How they did it???????

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Lessons Learned

• Political issues got involved into a technical decision Panama vs. Nicaragua Panama’s secession from Colombia Some technical studies were postponed due to political

pressures• Proper housing and sanitary conditions for workers

are a must.- People are your most valuable resource!

• The adaptation of the tools (heavy machinery) avoided delays

• Thorough planning and tight control allowed finishing the project two years ahead of time PM did not formally existed as a discipline

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The handover to Panamanians

• The treaty of the canal was signed in 1903

• The new canal was finished in 1914, two years ahead of schedule

• A new agreement was signed in 1977 named the Torrijos-Carter Treaty

• In 1999 the US government gave Canal’s control to Panama

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The Panamanian Project

• Only 25 ships can go through the Canal every day (reservation slot needed)

• Ships’ size has steadily increased since WWII

• Heavier traffic is expected in the following years

• Two competing projects challenged the Canal’s supremacy (Mexico and Nicaragua)

• Panama’s economy dependence on the Canal increases every year

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Bigger is better

More larger-than-Panamax-size ships are being built in the world

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Contribution to Panama’s Economy

Direct and Indirect Contribution of the Canal as a percentage of the Government’s current

income

The impact of the Canal’s contributions to Panama’s economy grows every year.

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The Strategic Plan

Strategic Stages at the Panama Canal

Maximize Benefit of

Transit Business

Expand Transit Business

Create Options for Growth

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From past lessons…

• Political gambling has been reduced to a minimum

• A wide, extent communication plan has been established

• Economical benefit -our business, our country, our customers, our people- is the guideline

• Technical feasibility included: Heavy Industry studies, TI, Marketing, Engineering, Hydrogeology, Economic and Project Management and 6-Sigma

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From past lessons…

• Human feasibility includes: Healthcare, Personal and Professional Development, History and Sociology

• Stakeholders considered are quite more in number and interests than in the past

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Where is PM contributing?

• Some unrefined PM practices were used during the American Project (still for many years remained isolated practices)

• The building of a new Canal implies using state of the art PM tools

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Portfolio Management

• Managing new construction technologies developed ad hoc for this endeavor

• Managing Canal operations in parallel to construction activities

• Managing interfaces.- where construction and daily operation activities meet

• Managing millionaire budget coming from external sources

• Managing several complex stages at different levels, zones and stages

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Time Management (Top Level)

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Cost Management

• Multimillionaire Budget handling coming from diverse sources implies a strict expense control and detailed accounts reporting

• Financing: 2.3 billions

• Own cash flow: 2.9 billions

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Cost-Schedule Alignment

• Modern PM allows for proper alignment of budget and schedule for every subproject within the portfolio

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Risk Management

• The development, construction, and start-up of new high-tech facilities, while the system is still working requires an adequate risk management

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Quality Management

• Technological developments must live-up beyond their expectations, and good quality management is the key

• Quality standards are required for all components. Project Quality Management aligns planning, control and assurance.

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Resource Management

• Adequate procurement, supply, and human capital, coming from everywhere in the world must be properly managed, with the necessary planning, controlling and executing.

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Project running as expected…

• Canal Expansion Project seems to be online according to the macro-schedule

• Everyday operations at the Canal are running as usual

• Fine control over smaller projects and subprojects is vital to remain on line

• The ACP and its governance bodies seem to be covering properly their roles as sponsors and stakeholders

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• Success must be repeatable!!• By using a consistent methodology

efficiency and consistency are guaranteed

• Don not brag about your successesAvoid the French Syndrome: One great success

does no guaranty another greater success!

• We know some new surprises will emerge in the future for the Panama Canal… be wise and be prepared…

Last words…

¡Thank you!

¿Questions?

Roberto Toledo, MBA, PMPManaging Partner of Alpha Consultoría

rtoledo@alpha-consultoria.com(+52.55) 5211.6828