A Southeast Asian-based chemicals company developed a capital investment portfolio for rapid organic growth. The company’s strategy is to exploit its cost advantage in a key precursor used for specialty chemicals by expanding production of the precursor and building new specialty chemicals plants.
However, the company CEO recognizes the company is not capable of executing a portfolio of larger, more complex projects, some using unfamiliar technology. The company has struggled just to deliver its recent set of less complex projects on time and on budget. IPA was hired to build the capability to implement the CEO’s investment strategy.
IPA’s first step was a comprehensive diagnosis of the project system’s strengths and weaknesses using a range of activities, including evaluations of two recently completed projects; a desktop review of project system documentation; and stakeholder interviews of business, operations, and engineering personnel.
Our analysis revealed several systemic weaknesses that had to be addressed to improve project performance. The biggest gap was the poor cross-organizational integration during project development, which meant that the business requirements were not clearly defined or communicated at the start of a project, leading to rework and recycle later in project definition. Also, the system lacked accountability for project performance from multiple leadership handovers. After the launch, the business organization handed the project over to engineering to develop the FEED package and lead the EPC contractor selection. The project was then handed to site construction to complete.
Multiple handovers, combined with the incomplete set of business requirements at the start, led to changing priorities through the project life cycle and overall poor project governance.
IPA made two key IPA recommendations to improve the cross-organization integration. The first was to improve the handover from the business to project organization with three actions:
- Expanding and formalizing the documentation to be prepared by the business before handover, including a project charter
- Adding a step to review the documentation quality
- Using a handover workshop to ensure the project organization understands the information
These actions are to ensure the business statement of requirements and priorities are clearly defined and understood by the project organization before the work of evaluating alternatives and scoping the project begins.
The second recommendation eliminated the handover from Engineering to Site Construction by appointing a project manager just after the business requirements are set to lead project definition and the EPC phase. Maintaining project manager continuity will improve the integration because now one person is accountable for assembling a project team with all functional representation needed to do the project successfully. Continuity also makes the accountability for project success or failure much clearer.
IPA then worked with the client to implement these changes and others to the project system to realize the CEO’s business strategy.
Delivery and Future Work
Client interest in fixing project system weaknesses has increased as capital investment in the Asia-Pacific region continues to grow, particularly as some of the advantages the region has enjoyed in the past have diminished. Companies rely on their project systems to implement business strategies that create shareholder value. Assets that cost too much, take too long to build, or do not operate reliably destroy value and hurt long-term competitiveness.
IPA Asia-Pacific has the experience to diagnose the root causes of systemic weaknesses and guide clients to implement the changes that result in significantly better capital project performance.
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