Project Recovery Analysis Gets Troubled Capital Projects Back on Track

Although organizations never plan for their projects to go “off the rails,” it is still a fairly common occurrence in the capital project world.

In fact, when IPA looked at globally completed projects costing more than US$50 million that were authorized within the last 10 years, we found that one-fifth of projects experienced at least 25 percent cost growth. Almost 40 percent experienced at least the same amount of schedule slip.

More disappointing, one of every five projects were both 20 percent more expensive and slower than Industry, and half of projects did not meet the business objectives. These abysmal results demonstrate the high rate of projects that continue to be failures.

As IPA’s clients know, in order to achieve maximum value from the portfolio, projects must be both predictable and competitive. While some projects are not set up to succeed, there are others with good front-end planning and strong teams that still suffer unforeseen problems. When organizations find their projects suffering significant issues during execution, IPA is able to help get the project back on track with its Project Recovery Analysis.

Disappointing Outcomes: One of every five projects were both 20 percent more expensive and slower than Industry, and half of projects did not meet the business objectives.

Most IPA project evaluations align with project gate reviews, such as assessing the competitiveness of the project targets prior to the Front-End Loading (FEL) 2 gate or measuring execution risks prior to full funds authorization. However, IPA is also called in to evaluate projects in the middle of execution. Although these are sometimes readiness assessments, such as for Construction Readiness or Production Readiness, other times these IPA assessments are requested because a project is in trouble. IPA’s Project Recovery Analysis has multiple facets:

  • Forensic evaluation to identify the root causes of the current situation
  • Team Functionality Survey to assess the team’s perception across critical project elements including leadership, team communication and alignment, and project development
  • Benchmarking analysis to provide cost and schedule metrics: a “should” cost and schedule estimate (the industry average cost and duration for projects of similar characteristics)
  • Projected cost and completion date (an estimate of the project’s likely final outcomes)
  • A set of actionable recommendations for the remainder of execution, based on the root cause analysis and Team Functionality results, that can be applied to the project to improve its chances for better outcomes

The forensic evaluation reviews the project history from the time the project team formed to the present to understand what led to the current situation. Using detailed discussions with key project team members (both owner and contractor) and project sponsors, we take a deep dive into the root causes of project events, looking for interdependencies or influences among project drivers, practices, and outcomes.

IPA’s Team Functionality assessment quantifies project team members’ perceptions about whether the team is working well together and if the foundation is in place to effectively execute the remainder of the project. Research indicates a strong correlation between team member perceptions and project outcomes. IPA highlights critical gaps at the project level and compares results across various groups, including owner versus contractor, manager versus non-manager, and so on.

Most are familiar with IPA’s standard industry benchmarking using the PES® system; our primary approach for evaluating projects and assessing their performance is quantitative and statistical. We analyze patterns and trends associated with projects of similar scope facing similar challenges. Our primary evidence for assessing a project is the quantified history of similar projects captured in multiple regression models. This information also allows us to identify projected project outcomes based on actual project histories.

Using these PES® tools, we are also able to estimate the cost to finish an “off the rails” project as well as its completion date. An IPA Project Recovery Analysis provides an organization with a clear picture of the projected results based on the status quo and the financial effects if changes on a troubled project are not implemented immediately. Proposed changes can include but are not limited to team and staffing recommendations, schedule modifications, risk management improvements, and identification of the critical path to optimal completion.

Although changing the trajectory of a troubled project is inherently more difficult during execution, it is not impossible. An IPA Project Recovery Analysis provides a set of project-specific actions to both the project team and business sponsors to help the organization recover the project and improve its chances of success. More importantly, understanding the true root cause of a troubled project arms organizations with the knowledge necessary to avoid the same issues in the future.

Originally published in the December 2015 IPA Newsletter (Volume 7,Issue 4)

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