|Choose a project to see how tomorrow drives everything we do.|
M25 widening, London.
ITE College West, Singapore
There is no such thing as a quiet day in the Project Management Office (PMO) where construction is underway for a brand new nuclear power plant. This is the first such project on US soil since the late 1970’s, and a higher-risk, more politically sensitive undertaking is hard to imagine.
Reasons are plentiful enough for the choice of nuclear power. They include a rapidly growing geographic region demanding more electricity; the desire to produce clean energy and balance this particular utility company’s assets; and a national impetus toward energy independence.
But the utility owners faced with this new construction project had concerns. The project would be huge. Unique. Other giant construction projects within the industry had experienced cost overruns that had threatened company assets and wiped out investments. Regulatory and community scrutiny over anything to do with nuclear energy would be at an all-time high. Company stakeholders would want assurances of public safety, environmental compliance and a return on investment.
So the owners looked for an advisor who could help them through a myriad of issues, from financing to the nuanced wording of contracts stretching into the billions of dollars. In choosing PwC, the utility executives gained comfort and an appreciation for having a strong brand on their side and the expertise to help get the job done.
Building a nuclear plant is an example of construction on a grand scale, known by those involved as a “mega-project.” And it takes a special combination of experience, courage, and fortitude to get it done right. PwC’s Capital Projects and Infrastructure (CP&I) practice professionals will be among the minds helping drive this special project to completion.
In 2008, when the firm was first invited to offer an assessment of the client’s control environment, the utility owners knew of PwC’s financial expertise, But they didn’t know that PwC had real-world experience in mega-construction projects—more specifically, in nuclear power plant construction and operation. It was a welcome surprise.
“From the beginning, our clients knew exactly what they wanted,” said PwC Principal Daryl Walcroft, “They just hadn’t known that PwC delivered it.”
What the utility investors sought went beyond strategy, beyond audit and controls, beyond even traditional project management services. They wanted a team of advisors who could provide hands-on execution help for the biggest, riskiest, most politically charged construction project many of them had ever tackled.
It wasn’t that the owners were inexperienced. They knew the utility business very well, but their primary concerns were with power generation and distribution. Physical plant is a critical part of power distribution, but new construction of this scale is not business as usual. The passing of time tends to limit the direct experience on staff.
And the project would be fraught with risk. As a regulated public service entity, utilities are allowed to factor the cost of physical infrastructure into the rate base, or the amount customers pay for power. But utility regulators take their responsibility to constituents seriously and are not inclined to pass imprudent costs on to consumers. Thus when a utility builds a new plant, its construction plans and budgets need to be accurate. Without accuracy, the utility could fail to realize the desired return on a construction effort for which the cost-recovery timeline stretches into decades. That kind of risk scenario makes investors shudder.
Add to these risks the stringent regulatory and community stakeholder environment surrounding nuclear energy, and the result is a staggering degree of risk and complexity. Once construction began, tensions could escalate further. Would there be unseen forces to cause delays? Would contractors and others in the supply chain be reliable? On time? On budget?
PwC’s team of professionals brought to this unusual project the firm’s Integrated Risk Framework, an approach used to model and inform decisions on aspects from regulatory matters to contracts to a continual projection of the end costs. “To put in perspective the magnitude of the undertaking,” Walcroft explained, “Consider that managing this effort is comparable to running a Fortune 500 enterprise. Or a city.” The scope, he said, is more than a project; it’s a business. And it has to be viewed as a business.
In its role as project advisor, PwC is doing exactly that—providing contract review and insight on project governance, among other things. The firm’s experienced professionals with backgrounds ranging from nuclear industry, large-scale construction, civil engineering, project controls, finance, transactions and contract law are all involved, helping spot risks so the owners can make informed decisions.
Walcroft understands intuitively what his client is facing. “There are four things that matter to a utility owner in this situation,” he said, "Getting the project built safely, to the right level of quality, on time and within budget.” The owners, he pointed out, feel like pioneers. That’s because it has been so long since a nuclear power plant has been constructed in the US, and because of the innovative way the utility has chosen to proceed with PwC at its side.
“It’s why we’re here,” he explained. “We not only understand the financing and regulatory issues behind this kind of thing, we understand how it’s built.”