Independent Project Analysis (IPA) has a well-established reputation of supporting multinational corporations and regional companies of all sizes in their commitment to continuously improve their capital project systems. Under IPA’s guidance, owners in many industrial sectors, as well as the information technology and public domains, have been successful in creating and implementing project systems that deploy Best Practices to drive better outcomes for their capital investments. In striving for excellence, IPA’s clients recognize that a standalone project risk analysis or system evaluation is just one part of a plan for meaningful and lasting change management and capital effectiveness gains.
So how does IPA go beyond single-engagement project evaluations to establishing continuous improvement systems for its clients? A recently completed client engagement helps illustrate IPA’s partnership approach. IPA was asked by a mid-sized infrastructure company with an annual capital spend of about $300 million to help understand how it could deliver assets with better cost and schedule predictability. The client, who had never worked with IPA before, believed its estimating capabilities were at the root of its project predictability disappointments. IPA’s initial benchmark evaluation made it possible to identify work process gaps—issues not with the people on projects, but within the stage-gated process. The case study that follows reviews what the first benchmarking evaluation found and how additional IPA-led analyses empowered the owner’s business and project managers to begin the process of adopting industry recognized capital project system Best Practices.
Gap Analysis: Comparing the Delivery Process With Industry Best Practices
At the request of the client, IPA conducted an initial project system benchmarking, which involved a sample set of 10 projects that were indicative of the overall project system. The benchmarking results established a baseline of where the client’s project system stood in regard to fundamental industry project management concepts such as stage gates, governance, and pre-authorization definition. None of the projects were considered excessive failures, nor were any massive success stories. All 10 were considered to be average and typical projects executed under the current project system.
The results of the benchmarking gave IPA a good understanding of a wide variety of project inputs and outcomes, particularly in regard to average cost and schedule predictability and cost and schedule effectiveness. This baseline also provided IPA with a detailed understanding of where the owner deviated from industry Best Practices in delivering those projects.
Project processes should facilitate an owner’s efforts to maintain or boost its competitive advantage in the marketplace. In this client’s case, speed was a project delivery imperative. Many of the owner’s projects are initiated in response to its customers’ demands. Therefore, IPA concentrated on project development durations including the timing and depth of gate reviews, review time required for full-funds authorization, and the potential for an early start of execution (i.e., starting detailed engineering before full-funds authorization). In addition, sequencing of construction completion, commissioning, startup, and handover to operations were all important in the context of requirements within the project process and the stage-gated system.
All of these system practices and processes were reviewed in-depth within the context of speed to delivery. In particular, certain practices could not be so prohibitive as to erode the owner’s ability to maintain its leadership position in speed to its customers.
Gap Analysis: Comparing the Baseline With the Existing Process
Good work process is only effective if it is actually followed. The next step was to look at the baseline of projects and compare what actually happened on those projects with the owner’s existing project implementation process. This kind of analysis offers crucial insights into existing system processes. IPA worked with the client to understand which deviations were the result of project-specific issues and which were systemic. In many instances, managers knew they were deviating from the system, although they regularly claimed they did so out of necessity. Indeed, IPA did not uncover many instances of project managers simply deciding to skip or bypass the system. Bringing forth the differences between “what we say we are doing” and “what we are actually doing” was the objective.
A good example of the identification of forced and unforced deviations involved the operational health and safety reviews of the engineering function. Best Practice is to complete a preliminary evaluation of the basic engineering deliverables (general arrangement drawings, plot plans, electrical single line drawings, pipeline and piping routing drawings, etc.) prior to submitting for project approval, or full funds authorization. This is because, for most organizations, all recommendations that are generated from the safety review must be incorporated into the project scope, schedule, and cost. If the safety review is done after the project has passed the authorization gate, implementing those recommendations would necessitate a design change. For this client, due to perceived schedule constraints, many projects pushed their preliminary safety review off until the middle of the detailed engineering phase—a point after which changes become costly in both time and schedule.
Closing the Gaps on the Existing Process
IPA then worked together with the client to identify the areas in the current-state project implementation process documentation that either differed from the identified Best Practices or were not clearly written out, creating confusion. One interesting result of this detailed evaluation was that there were many industry Best Practices specified within the implementation documentation (i.e., the stage-gated process), but the timing or sequencing was incorrect. In many cases, the project managers for the organization knew what Best Practices should be implemented on projects, and in what sequence. They implemented practices in the order they understood rather than the company’s documented project implementation process.
The gap analysis was a step-by-step evaluation of the internal owner documentation/project process and a comparison directly to what IPA’s data-based research has identified as industry Best Practices for project definition for all three phases of Front-End Loading (FEL 1, FEL 2, and FEL 3) and readiness for construction gates.
It is worth noting that without the original baselining of the project system, this part of the system evaluation would not have been as productive. The baseline showed that in many instances the project managers were going above and beyond what was specified within the documentation. Some managers had studied and incorporated modern project management theories and techniques on an ad-hoc basis, but others followed the flaws in the existing process. These gaps were very simple to add in to the owner’s stage-gated process as practices required going forward.
Each organization is unique and has its own competitive advantage or perceived strength, and therefore the establishment of a new project system and subsequent improvements on the system requires an understanding of the specific organization. In this case study, the organization held itself as the “fastest in industry” to take projects from conception to completion—it was also significantly driven by customer demand and requirements versus internal research and development driven capital projects. Therefore, it was crucially important for IPA to have a detailed understanding of a variety of the client’s completed projects to fully understand the external drivers and stakeholders for the project system—to enable IPA to help the client in laying out a roadmap for improvement of the existing project system.
Estimating capabilities were at the root of its project predictability difficulties. Beginning with the end in mind, IPA’s benchmarking of 10 of the client’s projects at the start of the engagement gave IPA a definitive understanding of how the project system was working “in the field” and what was being followed, ignored, by-passed, or improved upon in reality. The detailed exposure to these projects and the teams also helped to build a trusting relationship between IPA and the client wherein the client became comfortable that IPA truly understood the particulars of its projects and its organization.
Today, the client has a 3-year project system improvement roadmap to follow. The start of the improvement plan involves minor and easily implementable modifications to the system, while the medium-term goal is a redefining of phases, gates, and deliverables to industry standards. The long-term goal is to be first quintile in predictability and effectiveness for safety, schedule, and cost, which IPA believes is a reasonable and achievable goal.
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*Case study by Greg Ray, IPA Senior Project Analyst