If you could design your ideal capital project delivery organization, what characteristics would it have?
Here are a few suggestions. It would deliver the right projects on time and on budget. It would spend capital efficiently, maximizing ROI. It would involve a minimal number – and the smallest magnitude – of changes over its lifecycle. And it would use efficiency gains to progressively drive down project management costs.
This is a great wish-list. But all too often, a wish-list is what it remains. Or worse, just wishful thinking.
Here’s a case in point. We were called in to help stabilize a multi-year, multi-billion dollar capital project that was in trouble. Project costs and estimated time to completion were rising by the week. There were real risks that an announcement of an overrun could erode shareholder confidence and negatively impact the stock price.
By the time we were called in, it was too late for us to influence the capital strategy and allocation decisions – those had already been made. But the big problem was how difficult it was to gauge where the project stood in terms of schedule and cost to completion. Management didn’t have information available to help them understand where the bottom was, let alone if it had been reached yet.
So our immediate priorities were to establish clear lines of communication and ascertain the facts. Our team hit the ground running, implementing robust project governance, controls, analysis and reporting to give management the granular financial and operational insight they needed to make the right decisions and communicate openly with external stakeholders. In short, restoring trust and confidence was key.
With our help, the project – while late and over budget – was managed through to completion in a controlled and transparent way. But what created this situation in the first place? In fact, while each major capital project failure may look unique in itself, most projects that run into problems do so for a small handful of reasons that are remarkably consistent and well understood. Issues like poor cost estimating and cost forecasting, a lack of clear scope definition, inexperience in managing large construction projects, unclear contract terms, and a failure to implement appropriate integrated governance, reporting and technology.
Similarly, the factors that help ensure project success – from inception to completion – are also remarkably consistent. In fact, our global wealth of experience in capital projects over decades has enabled us to boil the success factors for any major capital project down to a set of six key capabilities.
They’re shown in the schematic above. And while each capability is distinct from the others and can be tackled separately, it’s vital to appreciate that they’re all interconnected and interdependent – and that they must work together in a holistic and coordinated way to deliver project success.
In combination, these six capabilities form a framework we refer to as the Project Excellence System. All the capabilities in the system are both organic and evolving, and reflect improvements in systems, analytics, construction methods and emerging technologies. In particular, they take account of the massive volumes of data available to support decisions. Collecting and using this data in the right ways will be critical to the future success of capital projects, turning capabilities around analytics, data and AI into vital enablers.
We use this framework to guide projects to their optimal end state – benefiting from the kinds of positive characteristics that I outlined at the start of this blog. And even if a project is under way and has already run into trouble, applying the principles of the Project Excellence System helps us identify the areas where rapid action will yield the biggest and fastest benefits to get it back on track.
What’s more, my view is that the Project Excellence System has never had a more important role to play than it does now, as we look forward to what may be a US$1 trillion boost to US infrastructure spending as a result of the Trump Administration’s Infrastructure Plan. It is in the interests of everyone in society that this next wave of projects is brought in efficiently and with the right governance – and the Project Excellence System can help to ensure this is the case.
Against this background, I’ll use the remaining blogs in this series to take a close look at each of the six segments of the Project Excellence System.
Here’s a closing thought: Failed projects get into the news all the time, while the successful ones are never mentioned. I want to help you keep your project out of the headlines. Follow this entire series and read my next post on Integrated Project Technology.