Infrastructure Developments: Lessons From Successful Industrial Project Practices IP30 Panel Discussion Sydney Petros Kapoulitsas 21 July 2015
Creating Successful Assets Through Capital Stewardship • Companies are good stewards of capital when they consistently identify and develop the most promising investments and execute them well • Capital stewardship excellence is achieved through a structured, disciplined project development process that ensures capital effectiveness • Successful asset creation is a source of competitive advantage and involves: ‒ Choosing the right opportunity ‒ Then doing everything right CONFIDENTIAL 2 INDEPENDENT PROJECT ANALYSIS
Failure is Common to Large Industrial and Infrastructure Projects • More than 65 percent of industry megaprojects executed over the past decade have suffered disappointing outcomes • Both the successes and failures indicate that lead sponsors largely control the results • The problems these projects face can be controlled and the chances of success improve greatly IPA has investigated the practices and changes sponsors must make to significantly improve the outcomes of these projects Cost overran by more than 25 percent, the cost performance was 25 percent worse than industry average, the execution schedule slipped by more than 25 percent, the schedule performance was more than 50 percent higher than industry average, or the project was suffering from significant operations problems more than a year after startup. CONFIDENTIAL 3 INDEPENDENT PROJECT ANALYSIS
The Reality of Megaprojects: The Effects of Our Choices COST PERFORMANCE What were the causes of failure? 1.4 What drove these successes? ( 65 percent of projects ) ( 35 percent of projects ) 1.3 1.2 COST 1.1 PERFORMANCE GROWTH PROBLEMS 40% 75% 30% 60% 20% 1.0 45% 30% 10% 15% 0% 0% 0% 10% Data from IPA Megaprojects database: >500 industrial and infrastructure projects with $3.6 20% billion average cost, executed during the past decade 30% SCHEDULE SCHEDULE PERFORMANCE SLIP CONFIDENTIAL 4 INDEPENDENT PROJECT ANALYSIS
The Root Causes of Failure • Unrealistic schedule pressure – calendar rather than fundamentals drive the schedule • Shaping errors and omissions ‒ Stakeholder alignment failures ‒ Inadequate definition and understanding of project context ‒ Unclear objectives • Lack of team integration and functional cooperation • Risk transfer to contractors and partners • Poor front end development CONFIDENTIAL 5 INDEPENDENT PROJECT ANALYSIS
Project Management: The Science of Planning Combined with the Art of Reacting to Surprise • Planning process is a science - known and repeatable and can have predictable results • Errors and omissions in the planning process will generate surprises in construction; ‒ Too many surprises and project management becomes overwhelmed and defeated • Large projects are very fragile and not very forgiving of planning errors and omissions They usually fail due to deficiencies in the information generation, flow and consumption process CONFIDENTIAL 6 INDEPENDENT PROJECT ANALYSIS
Defining the Information Streams Perform Adequate Work for Each Phase, In the Right Order Basic Data Development Basic Data Process Science-Driven Complete Select Start Up & Define Project Scope Execute Scope Core Team is Operate FEL 3 FEL 2A FEL 2B Formed Scope Closure Authorisation Project Process Project-Driven Potential Comparative Stakeholder Project Partner Context Value Advantage Alignment Issues Shaping Process Business-Driven About 2/3 of the project cycle is spent producing, using and moving information from one information producer/consumer to another FEL – Front-End Loading CONFIDENTIAL 7 INDEPENDENT PROJECT ANALYSIS
Basic Data: Foundation of Scope Development and Outcomes • A comprehensive set of parameters that govern the design • The development of complete and correct Basic Data may require years of work ‒ If schedule does not allow for adequate basic data development errors and omissions will occur • Basic Data can be very expensive ‒ Compromising on data quality does not make sense for large projects • Accountability for Basic Data package must be established early • Educate all decision-makers that getting the Basic Data right is essential to success CONFIDENTIAL 8 INDEPENDENT PROJECT ANALYSIS
Shaping: Value Creation, Allocation and Alignment on Objectives Project Potential Comparative Stakeholder Project Context Value Advantage Alignment Governance Understand the context Assess the potential value Review the comparative advantage Identify and understand the stakeholders Establish the rules with the partner(s) Each step builds on the previous steps! CONFIDENTIAL 9 INDEPENDENT PROJECT ANALYSIS
Characteristics of Successful Projects Successful projects exist for all industry sectors , all continents , for simple or complex scopes , with or without partners , and across all contracting approaches The most successful asset-intensive companies: Take time to find the right project – define and understand the project context and the gross measures; ensure integrated information flow Avoid marginal projects entering the Scoping Phase Develop realistic early estimates based on understanding of project development and risk Fully staff project teams from start of Scoping Phase; maintain project leadership through execution Don’t finish scoping until Shaping and Basic Data are resolved Respect the innate sequence of work to be done – the project’s needs drive the schedule, not the calendar CONFIDENTIAL 10 INDEPENDENT PROJECT ANALYSIS
Improving Infrastructure Projects (1) • Poor governance, inadequate project selection and planning practices and poor performance outcomes undermine Australia’s infrastructure needs • Infrastructure projects, like many capital investments, are usually viewed within the context of a budget and schedule against a defined scope • Thinking about projects as something we build focuses on the construction side of a project • A more useful way is to conceptualise infrastructure projects as the development, flow, and use of information, culminating (finally) in the physical assembly and startup of the asset CONFIDENTIAL 11 INDEPENDENT PROJECT ANALYSIS
Improving Infrastructure Projects (2) • Key Productivity Commission Inquiry Findings on Infrastructure ‒ ..It is essential to reform governance and institutional arrangements for public infrastructure to promote better decision making in project selection…. ‒ Data problems limit analysis and benchmarking…. • We need a methodology and technology for quickly and effectively assessing the information status of an infrastructure development at any point in its evolution • Improvement in practices and performance can only be realised through effective measurement CONFIDENTIAL 12 INDEPENDENT PROJECT ANALYSIS
How Does the Information Perspective Help? When the sponsor does not want to wait for Basic Data development? When the stakeholders are not on board? When a function does not cooperate? When the Basic Data are incomplete and project pressed to proceed to planning and beyond? When the scope is incomplete When the objectives are not clear? CONFIDENTIAL 13 INDEPENDENT PROJECT ANALYSIS
Petros Kapoulitsas +61 434 201 555 pkapoulitsas@IPAglobal.com www.IPAglobal.com United States Australia United Kingdom Independent Project Analysis, Inc. Independent Project Analysis, Inc. Independent Project Analysis, Ltd. Wellington House — First Floor 44426 Atwater Drive Level 1, 56 Burgundy Street Ashburn, VA 20147 Heidelberg, Victoria 3084 Worton Drive USA Australia Reading RG2 0TG +1 703 729 8300 +61 3 9458 7300 United Kingdom +44 118 920 7800 Brazil Singapore The Netherlands Independent Project Analysis Latin America Independent Project Analysis, Pte Ltd. Independent Project Analysis, Inc. Pesquisa e Consultoria em Projetos Ltda. No. 1 International Business Park WTC The Hague Business Center Rua Pasteur, 463 #10-02 The Synergy Prinses Margrietplantsoen 33 Ed. Jatobá – 12º andar Singapore 609917 2595 AM The Hague 80250-080 Curitiba, Paraná Singapore The Netherlands Brazil +65 6567 2201 +31 70 335 0707 +55 41 3028 9028 China Independent Project Analysis, Inc. #36 Chuangye Middle Road, #502 Haidian District, Beijing 100081 China +86 10 6530 6170
Recommend
More recommend
