Pmi Pifg Presentation Nov2011
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Transcript of Pmi Pifg Presentation Nov2011
Troubled Project Turnarounds
Presented by Paul Allen, OIM, PMP
Old Turkish Proverb…
“He who fails has no friends.”
Troubled Project Turnaround Presentation PMI Process Industry Focus Group PMI Houston Energy Corridor – Nov. 1, 2011
When YOU KNOW you have a problem…
SOME BEHAVIOR CHANGES! , i.e.
• Everything is becoming TOO QUIET…
• COMMUNICATIONS are being reduced…
• People don’t return e-mails or telephone calls…
• Project Teams are quietly digging their FOXHOLES…
• More time around the coffee pot and water fountain…
• Folks are starting to throw, or a least leave, some grenades…
• Folks not on the team are starting to avoid those that are…
• Vendors and subcontractors are starting to complain…
• Management is forgetting about the project…What project?
• Evidence of CYA, SML and CLM concerns start or grow…
• The BLAME GAME starts… no one can focus on fixing problems!
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Troubled Project Turnaround Presentation PMI Process Industry Focus Group PMI Houston Energy Corridor – Nov. 1, 2011
Some Troubled Projects Sources & Causes
• Introduction to Cost Engineering
• Estimate Accuracy
• Estimating Approaches/Classes
• Estimating Methods
• Computerized Estimating
• Labor Productivity
• Indirect Costs
• Data Collection and Management
• Estimate Coding and Documentation
• Predicting Future Escalation
• Contingency - A Provision for Uncertainty
• Estimating a Project
• BUT…YOU came here to learn HOW TO FIX THEM, RIGHT?
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Troubled Project Turnaround Presentation PMI Process Industry Focus Group PMI Houston Energy Corridor – Nov. 1, 2011
Troubled Projects – Assessment & FIXING!
1. Failure to … Learn, Anticipate, Adapt
Any one of the first two above (Single FAILURE – usually recoverable
Combination of first two (Aggregate FAILURE) – usually recoverable
Presence of all 3 (Catastrophic FAILURE) – usually NOT recoverable
2. People, Process, Technology or Combination
3. External Unpredictable, External Predictable, Internal Non-Technical, Technical, Legal
4. Org: Corporate, Business Unit, Project Management, Project Team, etc.
5. Decision: Corp Policy, Strategic, Tactical, Indecision, Bad Decision, etc.
STOP & SHOW: Troubled Project Workshop Spreadsheet Results
ACTIONS – Range of FIX Possibilities
• Adjust, Realign, Stopgap, Partial Salvage, Full Salvage, Abandonment
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Troubled Project Turnaround Presentation PMI Process Industry Focus Group PMI Houston Energy Corridor – Nov. 1, 2011
Shipping (Non E&C)
Gas Supply (Non E&C)
SUC
6 mos
Project Finance – PPMS – 54 Months Plus 4 Months for SUC and 2 Months Ramp Up AFTER 1st Lift
Dredging–Breakwater– Jetty & Trestle (E&C)
1st Lift
Gas Trains (E&C)
Financing Activities
E&C Contracts
• Early Site Work
• Site Work
• Gas Trains
• Utilities & Off-sites
• Permanent Buildings for Owner
• Tanks
• Dredging & Breakwater
• Jetty & Trestle
Critical Path INCLUDING KEY MILESTONES for FINANCIAL CLOSING
Near Critical Path
Overall Project
Schedule Overview
Pre- and Post-
Financing Defined
Tankage (E&C)
Potential Critical Path
Financial
Closing
Mo Year
1st Lift
Mo Year
Business Systems (3)
Other Critical Path/s
Financing IS the Critical Path post FEED completion
Troubled Project Turnaround Presentation PMI Process Industry Focus Group PMI Houston Energy Corridor – Nov. 1, 2011
Normal Structured Project Finance Requirements
to Get to Financial Closing
LSTK or Design-Build Contract for E&C
Gas Supply Agreements in Place
Shareholder Agreement Completed
Shipping Agreement Completed
Environmental Approved
Land Acquisition Completed
Host Country Agreements in Place
Financial Closing
Sustainable Development Plan Agreed
Community Agreements in Place
Technology Agreement Executed
Key Project Financing Agreements in Place PF Documentation Complete
E&C Subcontracts
• Early Site Work
• Gas Trains
• Dredging & Breakwater
• Jetty & Trestle
• Site Work
• Utilities & Off-sites
• Tanks for Storage
• Permanent Buildings for Owner
• SUC (within Contract)
Project Finance Risks Neutralized
Offering Memorandum Business Plan with
Financial Pro-forma
Contracts & Structure Documentation & Securitization
$$$
Project Schedule Overview
Pre- Financing Defined
Critical Path post FEED – Structured Project Financing Requirements Troubled Project Turnaround Presentation PMI Process Industry Focus Group PMI Houston Energy Corridor – Nov. 1, 2011
Shipping (Non E&C)
Gas Supply (Non E&C)
SUC
Project Finance – PPMS (Project Payment Milestone Schedule)
Dredging–Breakwater– Jetty & Trestle (E&C)
1st Lift
Gas Trains (E&C)
Gas Supply Agreements in place
Shareholder Agreement Completed
Shipping Agreement Completed
Environmental Approved
Land Acquisition Completed
Host Country Agreements in Place
Financial Closing
Sustainable Development Plan Agreed
Community Agreements in Place
Technology Agreement Executed
Key Project Financing Agreements in Place
PF Documentation Complete
EPC Contract with GC
Other E&C Contracts
• Early Site Work
• Site Work
• Utilities & Off-sites
• Permanent Buildings for Owner
• Tanks
• Dredging & Breakwater
• Jetty & Trestle
Critical Path
Near Critical Path
Project Schedule Overview
Post-Financing Defined
Cryogenic Tanks (E&C)
Potential Critical Path
Business Systems
Other Critical Path/s
It is all about
Schedule!
Troubled Project Turnaround Presentation PMI Process Industry Focus Group PMI Houston Energy Corridor – Nov. 1, 2011
Introduction to Turnarounds - Comparing
Company Turnaround
Cash Management • Rescuer OR Grave Dancer
• CASH is usually the problem.
• Usually made PUBLIC! WHY?
Project Turnaround
Time Management • Usurper OR PM Team Developer
• TIME is usually the problem.
• Usually kept PRIVATE! WHY?
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Troubled Project Turnaround Presentation PMI Process Industry Focus Group
PMI Houston Energy Corridor – Nov. 1, 2011
Outcomes, Phases, Timelines Company Turnaround Project Turnaround
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Possible Outcomes 1. Bankruptcy: 11,etc., even 7
2. Turnaround, no bankruptcy, with management change
3. Turnaround, no bankruptcy, no management change
4. Disposal of the company
Phases 1. Analyze the Situation – days
2. Triage – Immediate – days
3. Develop/Implement Plan - weeks
4. Restructuring – months
5. Stability – over time as needed
Possible Outcomes 1. Adjustment to the project
2. Alignment to the project
3. Stop-gap measures
4. Partial salvage
5. Complete salvage
6. Abandonment
Timeline (Overlap Phases) Triage – 24-72 hours - MAX
Crisis Plan/Begin Execute < 2 weeks
Stabilization – 1-90 Days
Maintenance – as needed
YOU have a 2-WEEK Honeymoon!
Troubled Project Turnaround Presentation PMI Process Industry Focus Group
PMI Houston Energy Corridor – Nov. 1, 2011
Rules of Engagement for Project Turnaround Managers
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1. Do NOT replace the project manager out of hand. 2. REINFORCE the Project with a Turnaround Team
• Turnaround (Engagement) Project Manager & Assistant/s • Most the time, an engagement manager – NOT a camper • Larger, more complex, can require one to two project controls
and possibly a documentation person 3. The Turnaround Manager as Lead, Coach & Mentor to Team 4. The Turnaround Manager DOES NOT get involved in daily project
management activities, but focuses on the crisis at hand and managing the recovery or salvage of the project.
5. Usually moves into PT support role after MAX 2-week Planning 6. May leave one project controls “boots on the ground” for the
“Stability” and possibly the “Maintain” phase of the turnaround. 7. Very large projects may require extensions of time and the other
personnel previously mentioned above for longer.
Troubled Project Turnaround Presentation PMI Process Industry Focus Group PMI Houston Energy Corridor – Nov. 1, 2011
Troubled Project Turnaround Management - OVERVIEW
The Importance of Stealth Assistance and Bedside Manner. Stealth Assistance Phases of SILENT ASSISTANCE. Smoothing the Waters, Silently! I. Triage PLUS II. Crisis Plan Execution III. Stabilizing Plan Execution IV. Stability Maintenance
Bedside Manner
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Troubled Project Turnaround Presentation PMI Process Industry Focus Group PMI Houston Energy Corridor – Nov. 1, 2011
Turnaround Processes Groups & Timeline Expectations
TRIAGE
CRISIS PLAN EXECUTION
STABILIZING PLAN EXECUTION
STABILITY MAINTENANCE
1-3 Days
1-14 Days
1-90 Days
OVERLAPPING, NON-Sequential, Phases
The Honeymoon is OVER. You must take ACTIONS.
Validate Turnaround.
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Troubled Project Turnaround Presentation PMI Process Industry Focus Group PMI Houston Energy Corridor – Nov. 1, 2011
I. Triage PLUS
Triage PLUS - Substitute “patient” with “Scope and Tasks” - Stop the hemorrhaging, determine vital signs, take action - Time: usually hours, within 24-72 hours maximum - Triage PLUS activities - immediate assessments and actions taken
Definition of Triage - A Verb. Source: Wikipedia Triage is the process of determining the priority of patients' treatments based on the severity of their condition. At its most primitive, those responsible for the removal of the wounded from a battlefield or their care afterwards have divided victims into three categories: 1. Those who are likely to live, regardless of what care they receive; 2. Those who are likely to die, regardless of what care they receive; 3. Those for whom immediate care might make a positive difference in
outcome. THESE ARE THE ONES YOU SPEND TIME ON!
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Troubled Project Turnaround Presentation PMI Process Industry Focus Group PMI Houston Energy Corridor – Nov. 1, 2011
II. Crisis Plan Execution
Definition of Crisis - A Noun. Source: American Heritage Dictionary 1. A crucial or decisive point or situation; a turning point. 2. An unstable condition, as in political, social, or economic affairs, involving an
impending abrupt or decisive change. 3. An emotionally stressful event or traumatic change in a person's life. 4. A point when a conflict reaches its highest tension and must be resolved.
Crisis Plan Execution - Surgery where necessary, decisive actions and plan - Time: days or within two weeks maximum - Crisis Plan Execution activities - Overall Project Viability Assessment - Recovery or Salvage? - Project Integrity Validation - Project, Technical, Business aspects
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Troubled Project Turnaround Presentation PMI Process Industry Focus Group PMI Houston Energy Corridor – Nov. 1, 2011
Crisis Mgt Skills
Do YOU Understand Crisis Management
Crisis management = Clear Your Calendar…we have a crisis!!
– A crisis is a major, unpredictable event that threatens to harm an organization and its stakeholders. Although crisis events are unpredictable, they are not unexpected (Coombs, 1999).
– Crises can affect all segments of society – businesses, churches, educational institutions, families, non-profits and the government and are caused by a wide range of reasons.
– Although the definitions can vary greatly, three (3) elements are common to most definitions of crisis:
1. a threat to the organization
2. the element of surprise, and
3. a short decision time (Seeger, Sellnow & Ulmer, 1998).
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Troubled Project Turnaround Presentation PMI Process Industry Focus Group PMI Houston Energy Corridor – Nov. 1, 2011
III. Stabilizing Plan Execution
Definition of Stability – A Noun. Source: American Heritage Dictionary The state or quality of being stable, especially:
1. Resistance to change, deterioration, or displacement. 2. Constancy of character or purpose; steadfastness. 3. Reliability; dependability.
Stabilizing Plan Execution - Assist Project Team and Project Manager - Time: 30 to 90 days maximum - Stabilizing activities development and execution, aligned team
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Troubled Project Turnaround Presentation PMI Process Industry Focus Group PMI Houston Energy Corridor – Nov. 1, 2011
IV. Stability Maintenance
Definition of Maintenance The act of maintaining or the state of being maintained. The work of keeping something in proper condition; upkeep.
• Provision of support or livelihood: took over the maintenance of … • Means of support or livelihood: was ordered to pay maintenance for …
Stability Maintenance - Oversight Role (part-time validation of activities) - Time: duration of the project until completed and closed out - Determine and implement Stability Maintenance Management; Ensuring project remains stabilized and actions sustained for results - Delivering results with the new or adjusted project plan
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Troubled Project Turnaround Presentation PMI Process Industry Focus Group PMI Houston Energy Corridor – Nov. 1, 2011
Troubled Project Turnaround Training
• This program presents the skills necessary to professionally troubled projects with a business mindset and focus. There is heavy emphasis on when and how to use the tools and techniques of the professional troubled project turnaround specialist and provides a valuable set of tools and skills every project management professional should have before they need it! Participants will gain a comprehensive appreciation and understanding of the importance of quickly "assessing and fixing" troubled projects, whether they are capital projects or systems projects...they all need the professional skills to turn them around via recovery or salvage.
• http://projectexecutive.com/Training33OutlineSyl.html
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Troubled Project Turnaround Presentation PMI Process Industry Focus Group PMI Houston Energy Corridor – Nov. 1, 2011
Troubled Project Turnarounds
IF you would like an electronic copy of
1. This Presentation
2. The Annual Troubled Project Workshop 2009 Presentation
3. The Rice Troubled Project Workshop Spreadsheet Results
… please drop your “business card” on the way out
QUESTIONS?
Troubled Project Turnaround Presentation PMI Process Industry Focus Group PMI Houston Energy Corridor – Nov. 1, 2011