How to Create World Class Project Management Organization? By: Dr. Nick Lavingia, P.E. February 27 - March 1, 2020 | Renaissance Indian Wells Resort & Spa
Dr. Nick Lavingia, P.E. Chevron-Retired Project Management Consultant, Advisor & Trainer • Education: BS & MS in Chemical & Petroleum Refining Engineering and PhD in Mineral Economics from Colorado School of Mines, USA. • Experience: Over 40 years of Project Engineering, Management, Consulting and Training in the Energy Industry. Supported more than 100 major capital projects worth well over $ 100 billion in more than 20 countries. • Awards: Chevron Chairman’s award for implementing Value Engineering throughout the corporation and Pathfinder’s award for Outstanding Contribution to the Advancement of Project Management Technology. Published and presented numerous papers at conferences. 2
Agenda 1. Project Management’s Impact on the Bottom Line Improve ROCE and TSR 2. Project Development & Execution Process Effective Communication Between Decision Makers, Multifunctional Project Team and Stakeholders 3. Project Management Best Practices Optimize Safety, Cost, Schedule, and Operability of any project 4. Total Cost Management Plan, Schedule, Estimate, Monitor and Report 5. Training and Certification For Executives, Managers and Project Professionals 3
Offshore Platform 4
Floating, Production, Storage & Offloading 5
Oil Sands -Truck • 400 tons empty • 400 tons load • 800 tons total weight 6
Oil Sands - Shovel & Truck 7
Liquefied Natural Gas Tanker 8
Refinery & Petrochemical Complex 9
1. Project Management’s Impact on the Bottom Line Improve ROCE and TSR 10
Business Case for Improvement Improved Capital Stewardship Lower Costs Better Projects More Projects Improved ROCE Higher Earnings Growth Higher Market Confidence Higher P/E Improved TSR ROCE = Return On Capital Employed, P/E = Price to Earnings , TSR = Total Shareholder Return 11
Project Management Leads to Pacesetter Performance (Cost Efficient, Faster, and More Predictable) 1.25 Industry Average Company X 30% Improvement Facility Cost Industry Average 1 Pacesetter Company 0.75 1 0.75 1.25 30% Improvement Execution Schedule 12
Project Management Vision High Consistent Success Random Success • Good Projects • Good Projects • Good Execution • Average Execution Decision Quality Mid Success Unlikely Random Success • Poor Projects • Poor Projects • Poor Execution • Good Execution Low Mid High Execution Quality 13
2. Project Development & Execution Process Effective Communication Between Decision Makers, Multifunctional Project Team and Stakeholders 14
Project Development & Execution Process FID 1 2 3 4 5 PHASE 1 PHASE 5 PHASE 2 PHASE 3 PHASE 4 OPERATE & IDENTIFY & Assess SELECT from DEVELOP Preferred EXECUTE Evaluate Opportunities Alternatives Alternative (Detail EPC) Produce an Determine Evaluate Asset Finalize Select the Project Operating to Ensure Project Scope, Preferred Feasibility and Asset Performance Cost Project Alignment with Consistent to and Schedule Development with Scope, Specifications Business and Get the Option Cost and Strategy and Maximum Project Schedule Return to the Funded Shareholders FID = Final Investment Decision 15
Project Management’s Impact on Creating Value Value Identification Value Realization Good Project Good Project Execution Definition A VALUE B Poor Project Execution C Poor Project Definition D FID Phase 3 Phase 4 Phase 5 Phase 1 Phase 2 Develop Execute Operate Opportunity Generate & Preferred Identified Select Alternative Alternatives 16
Influence vs. Expenditures Major Influence Rapidly Decreasing Influence Low Influence Final Authorization EXPENDITURES INFLUENCE Front End Planning OPERATE IDENTIFY SELECT DEVELOP EXECUTE Gate Gate Gate Gate Gate Gate Gate Gate & ASSESS DSP DSP DSP DSP DSP DSP = Decision Support Package Front End Loading 17
Project Development & Execution Process (Effective Communication between Decision Makers, Multi Functional Project Team and Stakeholders) FID 1 2 3 4 5 PHASE 1 PHASE 5 PHASE 2 PHASE 3 PHASE 4 OPERATE & IDENTIFY & Assess SELECT from DEVELOP Preferred EXECUTE Evaluate Opportunities Alternatives Alternative (Detail EPC) Clearly Frame Generate Fully Define Operate Asset Implement Scope Alternatives Goal Execution Plan Monitor & Develop Detailed Preliminary Test for Evaluate Min. Changes Execution Plans Development Performance Strategic Fit of Alternatives Finalize Refine Estimate Preliminary Identify New Operating Plan Develop Overall Plan Submit Funding Opportunities Expected for Approval Business Plan Value Preliminary for Phase 5 ~25 % Engng. Assessment Identify Project Review Preferred Phase 3 Est. (+/- ~1 % Engng. Alternative 10 % Accuracy) Phase 1 Phase 2 Est. Estimate FID = Final Investment Decision 18
3. Project Management Best Practices Optimize Safety, Cost, Schedule, and Operability of any project 19
Project Management Best Practices ( Optimize Cost, Schedule and Performance of any project) Phase 1 Phase 2 Phase 3 Phase 4 Phase 5 IDENTIFY & Assess SELECT from DEVELOP Preferred Alternative EXECUTE OPERATE & Opportunities Alternatives (Detail EPC) Evaluate • Decision & Risk Analysis • Project Execution Planning • Lessons Learned (Share) (Seek) • Construction Industry Institute Best Practices • Post Project EPC Reviews Assessment • Peer Review • Pre-Funding Assessment • Business Evaluation $ $ D FID D D PFD D P&ID D EST EST Legend: D = Decision Point, CII = Construction Industry Institute , FID = Final Investment Decision P&ID = Piping & Instrumentation Diagram, PFD = Process Flow Diagram 20
Project Execution Planning - Part A (The Strategic Project Planner by Richard Westney) Defining the business goals that will determine project success 21
Project Execution Planning - Part B (The Strategic Project Planner by Richard Westney) Defining major phases, milestones, risks, organization, staffing and best practices to be used 22
Project Execution Planning - Part C (The Strategic Project Planner by Richard Westney) How time, cost, quality and resources will be managed 23
Construction Industry Institute (CII) Best Practices • Lessons Learned • Advanced Work Packaging • Materials Management • Alignment • Partnering • Benchmarking & Metrics • Planning for Modularization • Change Management • Planning for Startup • Constructability • Project Risk Assessment • Dispute Prevention & Resolution • Quality Management • Front End Planning • Team Building • Implementation of CII • Zero Accidents Techniques Research 24
4. Total Cost Management Plan, Schedule, Estimate, Monitor and Report 25
Total Cost Management ( Plan, Schedule, Estimate, Monitor and Report ) Phase 1 Phase 2 Phase 3 Phase 4 Phase 5 IDENTIFY & Assess SELECT from DEVELOP Preferred Alternative EXECUTE OPERATE & Opportunities Alternatives (Detail EPC) Evaluate • Economic Analysis (NPV, ROR, Payout) • Cost Estimating (Definitive) (Cost Collection / Analysis) (Conceptual) (Funding +/- 10% Accuracy) • Planning/Scheduling (Milestone) (CPM Bar Chart) (CPM Resource Loaded) (Monitor & Update) • Benchmarking (Pre-Funding Assessment) (Post-Project Assessment) (Set Pacesetter Target) (Cost / Capacity) •Contracting/Procurement (Strategy) (Pre-Qualification) (Award / Monitor) (Closeout) Performance Measurement (Earned Value) (Establish Progress Payments) •Cost Control/Forecasting (Establish Cost Accounts & Budgets) (Trend / Forecast) (WBS) •Progress reporting •Finance/Audit (Capital versus Expense) (Asset Accounting) $ $ D PFD D FID D D P&ID D EST EST Legend: FID = Final Investment Decision NPV = Net Present Value PFD = Process Flow Diagram D = Decision Point ROR = Rate of Return P&ID = Piping & Instrumentation Diagram EPC = Engineer, Procure & Construct CPM = Critical Path Method WBS = Work Breakdown Structure 26
5. Training and Certification For Executives, Managers and Project Professionals 27
Training & Certification • Leadership Roles and Behaviors • Project Management Skills from PMBOK -- Project Integration Management --Project Scope Management --Project Time Management --Project Cost Management --Project Quality Management --Project Human Resource Management --Project Communications Management --Project Risk Management --Project Procurement Management • PMP/AACE Certification 28
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