Partnering: Minimize Failure and Enhance the Chance of Success

© 2012 - 2013 SUKAD

Partnering (Minimize Failure/Enhance Chance of Success)

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© 2012 - 2013 SUKAD Group (www.sukad.com) - Partnering

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Project failures and success

CS 1: working across continents/organizations

CS 2: innovative planning/execution techniques

CS 3: project control/stakeholders involvement

CS 4: from adversaries to integrated team

Partnering Topics

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Project failures and success

There are four major categories of project failuresThere are dimensions for measuring project successUnder each of these categories there numerous reasons

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Project failuresProject fails because of one of four categories:

Lack of proper business case, feasibility study, objectives setting

Failure in planning

Failure in execution

Environmental conditions significantly different than anticipated due to abnormal situations

It could be a combination of the above

Understanding failure allows us to proactively seek success

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More on project failuresFailures due to each of the above categories can be due to:

Individuals’ competence, or lack of

Training, professional development, other factors

Lack of proper follow up

Empowerment and accountability

The project management organizational system

No proper methodology and processes in place

No historical project records and lessons learned …

Low level of project management maturity

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Dimensions of project successTopic of another workshop

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D1: Success of the Product

The four dimension of project success

D4: Success of The Idea – Business Objective

D2: Success of Project Management

D3: Success of Project Delivery

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Case studies: setting the sceneThree case studies are from same project

Mega project; two parts

New facilities; revamp of existing refinery

Joint venture; 3 partner (50/40/10)

Main partners are North American, Project is Asia

On a small island; no space or local resources

Contractors mostly European

Labor from various Asian countries

Cost plus (reimbursable) contract + incentive

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CS 1: Working across continents & organizations

Project ManagementOverall responsibility with the project ownerDelegated some PM activities to main contractor

Teams:Owner team mostly North American with a few European and Asian membersContractor management team mostly European with some Asian and other nationalitiesConstruction staff numerous nationalities

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Truly global projectMain owners executive management in USA

Main contractor management in UK

Construction contractor mostly German

Preliminary engineering in USA

Detailed engineering from UK

Procurement led from UK but global sourcing

Construction on four sites in SE Asia

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Procurement & sourcing

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Challenges and success factors (focus on human aspects)

Dispersed teams and management

Frequent online and face to face communications

Island local and limited spacing

Modular construction on four sites

Enhance safety and productivity

Large number of organizations involved

Had to build bridges (cultural and otherwise)

Worked as integrated as possible

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More challenges and success factorsIncentive – cost plus contract

Initially a challenge and caused conflict

Later helped build trust and became an advantage

Language a challenge; especially construction

All signs and safety info in four languages

Every crew had a member that speaks one of the four languages

Labors not used to strict safety standards

Using various techniques including “Models”

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CS 2: Innovative Planning and Execution Techniques

Major challenges due to island limited spaceNew plant has to be on reclaimed landTime constraints due to external factors (government closing the shipping channel)Lack of space did not allow to have all labors on sitePlus not enough labor in nearby countries

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Location, location, location

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Possible solution

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Chosen solutionUse modular construction techniques,

Build the main process unit as modules

At fabrication yards

Ship them to the site on barges

Install them one after the other – like Legos

This was selected option

Resulted in close to 200 modules

Many the size of a four-story building

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Project pictures (the reclaimed site)

Tank Foundation

Crane Foundation

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Channel, Barge, Modules … Closing the Channel

Vessels – Delivered Ready

Pipe Rack Modules

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Fired heaters modules

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The GiantThis is a relatively light module

One of the largest cranes in the world – 10 days to move

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Various Stages of Assembly

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Today

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CS 3: Stakeholders Involvement

Focus is on project control

Contract: threats and opportunities

Stakeholders involvement

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Main contract

EPC Contract (Engineering, Procurement, and Construction)

Construction was to be subcontracted to one general contractor

Which ended up being a joint venture (consortium)

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Contract’s commercialsCost plus (reimbursable cost)

All costs will be reimbursed (owner risk)

Contractor profit is in the form of a fee

The fee was incentive fee with a cap

The fee was in three parts Safety fee: certain amount if project meets clients

safety requirement – on a scale

Schedule fee: same thing – one a scale

Cost component was also on a scale

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Capital Risk Continuum (Contract Types Versus Risk)

Our Project

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Cost component of the feeCost component was largest; 75% of total fee

The fee could grow or shrink based on actual performance

Budget was set by the owner, with input from main contractor

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Project controlOwner team started as four people early in the project

By the team we reached construction became 2 with one doing most of the project control

Main contractor team had more resources

After the rough start early in the project learned to trust each other

Un-officially formed an integrated team to work together

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Dealing with the challengeTeam (project control) divided the project into control accounts

Identified the owners for these accounts

Defined the budgets for these accounts

Analyzed the accounts for potential cost savings opportunities

Simulated possible incentives if we achieved these cost savings

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Stakeholders involvementPC met with control accounts owners; one-on-one

Shared with them PC perspectives

Invited them to work with us in collaboration

Asked them to be cost conscious and identify saving opportunities

Kept them up to date on weekly/monthly basis (depend on account)

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ResultsSome did not truly collaborate well

Most welcomed the initiatives

Did generate some cost savings, in construction, which is not easy

Avoided potential costly variances

Built strong team and stakeholders relations

Did contribute to project success

Project wise: did not cap the cost incentive but came close

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CS 4: Adversaries to Integrated TeamProject characteristicsProject owner and contractorThe contractProject managementThe challengesThe solutions

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Alliance engagement: background

Petrochemical projects @ 5 sites (plants)

Multiple projects from $200 m to $50 mm

Total value at peak ~ $100 mm

Alliance contract

Engineering, Procurement, Construction

4 years term – renewable

True cost plus incentive based contract

Client provided estimate, agreed by contractor

Contractor profit only if we under run projects

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Organization

Client “PMO” housedProject engineersManaging overall project with focus on engineering

Construction supervisionMostly about quality, safety, and coordination with

operation organization

Project control (cost & schedule) responsibility of PE – but not main focus (initially was not on PMO)

Estimating is in home org not on PMO

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Organization, continued

Contractor PMO housed

Project engineers & construction supervision

Like client organization but more direct to work

Project control: cost, schedule, & subcontracting responsibility of Technical Support Team

Most construction labor by contractor and specialty subcontractors

Both contractor and client housed together

Construction at each site

Engineering and Technical Support in common site near the plants

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The situationMost projects over running their budget

Contractor not earning any profit and blaming client for deceptive estimating

Client blaming contractor for lack of management and control

Definitions

> 110% of budget = over run (headache)

100 to 110% of budget = over expenditure

Tolerated – but as long as we stay close to 105%

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Conflict

Both client and contractor losing credibility with the “owner” / i.e. client operations

Trust was destroyed

Client PM – OK but not highly effective

Contractor PM – same way; replaced with a “top gun” from contractor

Two years into a 4-year contract

Contractor no profit and facing losing renewal

Client suffering over runs

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Solution?

Client established a project support officeInitial team consisted of 3 team members

Later increased to 4

Main obstaclesNot enough power or authority

Walked into a confrontational situation

Not enough experience in team

Not directly responsible for control

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Initial results

Contractor huge resistance

Large project control team consisted of close to 40 people at peak

Reduced workload led to drop to ~ 20

But not effective at all

Major confrontation

With every report and monthly status

Struggling with multi-projects environment

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The seesaw effect

90.0%

95.0%

100.0%

105.0%

110.0%

115.0%

120.0%

125.0%

130.0%

135.0%

140.0%

Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10Fore

cast

/ Pl

anne

d B

udge

t

Month

Forecast Movement

Proj 1 Proj 2 Proj 3 Proj 4 Proj 5 Proj 6

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IntegrationContractor new PM not fully aware of issues

Adversaries meeting of the minds

Convinced him to come to a monthly review

He was literally shocked – his pride was hurt

Another meeting – asking us for solution

Proposed concept of team integration

Refused for all PMO

Agreed for PSO – joining both teams

Client organization accepted but with hesitation

Contractor PM insisted – he was the champion

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Integrated, what now

Believe in the team

The issues are in the system

Resistance by contractor support manager

But lack of performance weakened his stand

Overcome through good relations and giving his team confidence and support

Action – multiple meetings one-on-one

Understanding issues and frustrations

With their own organization and client

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Next steps

Team agreed to the various challenges facing the organizations

Paired team members and assigned each pair a challenge

to study, analyze, and develop solution … and

training of other team members

four weeks target completion

fear and lack of confidence – overcome with coaching and mentoring

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Offsite team buildingThree days – team building/offsite event

7 am to 11 pm together

Discussions and presentations about each challenge and solution

Trained each others

Outcome

Major confidence building

Significantly increased trust

Understand that we are on the same side

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Specifics issues

Luck of trust in client estimates

Educated team about it and established feedback process

Forecasting “by asking” around

Explained “client forecasting” and provided tips on how to do it

Cost report issues

Developed standard form with easy use

Subcontracting issues – mostly scope related

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Alliance Engagement: Other Items

The were many other challenges that we did address

Training sessions For all control personnel

Also awareness about project control to

All project engineers – both sides

Construction supervisors – both sides

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Summary

Staged approachFirst – fixed internal systemNext – evaluated contractor systemWorked on “low hanging fruits”Then – made the case for integration

Integrated teamTackled the issue of forecastingMoved on to various accounts: issue by issueWorking toward enhanced control & forecasting

Effort helped renew the Alliance Contract

© 2012 - 2013 SUKAD

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Partnering: Minimize Failure and Enhance the Chance of Success

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Transcript of Partnering: Minimize Failure and Enhance the Chance of Success