Abstract
This white paper is designed to give project management practitioners, major project decision makers and stakeholders an overview of the challenges in managing major projects and the high-level mechanisms needed to be best possible equipped to handle them. It does not address all features needed by a project management system, but rather focuses on the key aspects needed to have a Real Project Management System that provides you with real competitive advantage.
Introduction
Energy companies realize their value through execution of projects, and the global rise in demand for natural resources has driven the need for additional projects at bigger and bigger scale. The amount of labor, coordination and integration needed to complete these projects is staggering. Without sound project management and decision-making practices in place these projects can put the future of entire companies in danger. In short, if projects aren’t properly managed, they can quickly turn into value destroyers. Companies without an appropriate project management system in place operate at a higher level of operational risk than necessary. By focusing on streamlining your project’s organization structures, processes, technology and information you can reduce your operational risk and be better positioned to outdo your competition in the long run.
The Challenges
Cost Overruns
Every year Ernst & Yong publishes a report that lists the major risks that oil and gas companies face. To produce this list they gather input and opinions from leading industry players and academia globally, by using surveys and interviews. The top two risks were in 2012 identified as being access to reserves and uncertain energy policy. Granted, many would argue that most oil and gas companies have limited influence over these two. However, third on the list we find Cost Containment – an area we believe companies have ample opportunity to influence.
Further to this point, Edward Merrow, founder and CEO of Independent Project Analysis, Inc. (IPA), points to that as many as 65% of industrial projects over $1 billion failed to meet their business objectives. Notably, he points to that these results “are not inherent in the nature of activities. They are instead, caused by human decisions, ignorance, and uncontrolled, but controllable, human failings. These projects can be fixed.”
Increased Project Size and Complexities
Projects are becoming bigger and more complex and large projects fail twice as often as smaller projects. With increasing size comes increasing risk – imagine incurring a 25% cost overrun on a $20 billion project versus the same percentage overrun on a $100 million project. Furthermore, with increasing complexities come increasing need for communication and advanced technological solutions. Projects are now truly global, with contractors participating from all parts of the world – increasing the need for coordination and planning to ensure all the parts come together in the end and meet the business objectives.
Increased Dependency on Contractors
The industry has seen a growing trend to hand more and more of the project work to large EPC(M) contractors who often are required to provide a fixed price. This trend can partly be attributed to the recurring boom and bust cycles of the industry and an increased focus on company specialization rather than diversification. This trend has led to some contractors being overleveraged – a problem further amplified by the ongoing talent crisis caused by increasing workforce retirements in the industry. As a consequence, contractors will attempt to shift more and more of the risk back to the owners, and the fallacy that the fixed price represents an upper limit of the cost to perform the scope of work becomes evident. This conundrum must be managed.
Increased Oversight and Regulation
The industry is facing increasing reporting requirements from governments, partners and other stakeholders. The ability to provide complete auditable trails of decisions and changes, as well as local content compliance is becoming increasingly important and challenging.
Information Overload
A major project may include thousands of people from hundreds of companies in multiple geographic locations. Each and every one of these team members generates magnitudes of data, including e-mails, tasks, reports, drawings, specifications and registers. Each and every one of these team members communicate and share information with other team members. All this information is stored in personal and corporate e-mail boxes, shared drives, intranet sites, ftp sites and on print-outs on their desks. In fact, there is so much information that most team members struggle to find the information relevant to them – in short, they can’t see the forest for the trees.
Overreliance on Rudimentary Systems
Most people today will use a GPS to get directions to go from A to B in a city they are not familiar with, rather than going to a nearby service station and buying a printed map book and charting out their course. Ironically, a number of projects are executed in a fashion that would be the equivalent of using map books – although the situation is improving, many large-scale projects are still managed with rudimentary information systems and manual processes. For example, many projects are still relying on shared drives as their primary “document control system”. Even more projects still rely on Microsoft Excel as their “cost control system”. While the usage of spreadsheets can be very useful, relying on them as your primary cost control system tends to isolate the cost control processes with a single individual and runs counter to many of the objectives of project management – like controlling change, promoting transparency and holding the team accountable.
The Solution
A Real Project Management System
A common definition of a system is “a set of principles or procedures according to which something is done”. Consequently, a Project Management System is the principles and procedures for how you manage your projects. Principles and procedures is a great start, however to excel you also need to bring the right organizational capabilities, detailed processes, information and technology to enable the delivery of decision-grade data and information to management.
In order to allow your project management capabilities to make a real positive difference to your project performance you need to take advantage of the technology that is available today. This will enable your team to be more efficient and free up time to focus on analytics rather than data gathering, report generation and manual work.
In other words, you need to implement a Real Project Management System. In the next couple of pages we will highlight the key aspects of a Real Project Management System that enables it to deliver real, tangible value.
Key Aspects
Many project management systems focus on financial cost reporting and simple task management. A Real Project Management System must go further to ensure the real status of the project is communicated to management. In fact, the relationship between the Real Project Management System and the practitioner is like that between the car and the driver – it should not slow you down; rather, it should give you all the information you need and enable you to get from the starting point to the finish line faster and safer than you would have done otherwise.
One-Stop Shop
A Real Project Management System is a one-stop shop for everything related to the project. It pulls information from a number of different sources but brings it together in a single environment that is easy-to-use. While “best-of-breed” has been used to describe many systems covering slivers of disconnected functional areas that a project management system must address, most companies implementing those too narrowly focused systems fail to realize the benefits. For example, while you can purchase a system that only focuses on cost management it will fail to address a number of areas that end up driving your cost; like for example problems in the mechanical completion/commissioning phases, construction based on outdated revisions of drawings, and misunderstandings caused by poorly managing communication and interfaces between the project parties. In contrast, a Real Project Management System takes a holistic approach to managing your projects. It enables the project team members to stay focused on doing the job, rather than working in a number of partially overlapping systems.
Transparency and Accountability
A key policy in a Real Project Management System is the “Nothing to Hide” policy – the system achieves transparency by enabling secure information sharing between project team members and other stakeholders. In addition it enables accountability by providing access to information about project deliverables, who is responsible to complete documents, tasks, and activities, and allows for an auditable approval process.
Efficient Change Management
In today’s energy projects it is practically impossible to develop a scope of work where there is no room for change. The increasing project sizes and technological complexities combined with the globalization of project teams contribute to an increasing number of changes on major projects. However, remember that not all change is bad – some changes happen because you want to take advantage of new opportunities that have surfaced since you started. In short, change will happen on your project, and a Real Project Management System will have efficient ways of dealing with identification, documentation and approvals of changes, as well as the identification, handling and reporting of contingency funds utilization.
Team Integration and Communication
A Real Project Management System functions as the “glue” that keeps your team together and fully focused on successful project completion. It integrates different functional groups, like:
- Risk Management with Project Controls, in order to ensure risks are properly accounted for in the project cost and schedule
- Contracts Management and Procurement with the Cost Engineers, in order to ensure that contractual and performance-related information is reflected in the project cost and schedule
- Management and Everyone, in order to ensure management has the capability to drill-down into low-level project performance details to spot trouble areas
- Owner and Contractors, to handle formal exchanges of technical information between the parties through Interface Management and Document Control
A Real Project Management System goes beyond generic collaboration tools and provides specific processes and tools tailored to the critical workflows and information exchanges a major project needs to handle.
Focus until Completion
A Real Project Management System will keep your team focused on the end-point throughout the project. It will ensure efficient communication between engineering, construction, mechanical completion, commissioning and operations teams and enable a progressive hand-over of completed work. It will also keep track of all carry-over work and enable detailed work package planning and tracking. Attention to detail is paramount – only by focusing on the detailed activities, tags and quantities that need to come together towards the end will you get a real picture of the status of your project, what it will cost and when it will be completed.
Automate Manual Processing
Many major projects report today that their project controls teams spend too much time assembling reports. In many cases this is driven by using the wrong tools for the job: Although in many cases it gets the job done, most people wouldn’t use a hammer to tighten a screw. Likewise in project management; a Real Project Management Systemautomates tedious reporting and frees valuable time for the project controls team to analyze and interpret the information and provide decision-grade recommendations and forecasts to upper management.
Speed and Flexibility
Major projects are executed in highly diverse environments, both geographically and politically. As a consequence you have a number of different stakeholders with different expectations and reporting needs and requirements. For example, some projects have to deal with extensive local content reporting requirements, while others operate in highly regulated industries. In addition, projects tend to be fast-paced, with limited time and resources. While a Real Project Management System will seek standardization where it makes sense, it will also let you adapt the system to your project environment quickly and effectively. This enables you to quickly deliver positive impact to your project, while remaining lean and keeping your team focused on the job at hand.
Capture Experience and Benchmarking Data
A Real Project Management System will enable you to capture experience and benchmarking data from your projects and provide ample opportunities for normalizing, analyzing and comparing the information. The system will support separate coding structures for these purposes, while allowing project flexibility in terms of work breakdown structures. Capturing experience and benchmarking data is a critical step in maturing an organization’s project delivery capabilities.
The Benefits
By implementing a Real Project Management System you increase the control and predictability of executing projects. In turn this reduces your company’s operational risk, which makes you more competitive in both the short- and long-run.
Establish a Performance Baseline
A Real Project Management System enables you to quickly establish a documented performance baseline that you can measure against. This reduces confusion and increases transparency, which in turn leads to a higher degree of accountability from all parties involved.
Enable a Learning Organization
A Real Project Management System is a critical component to turn your organization into a learning organization. First, by capturing and reporting your own experience and benchmarking data you can measure performance and more easily compare how you are doing. Second, by capturing and re-using relevant project documentation and work processes you avoid reinventing the wheel every time you start a new project. Third, by making lessons learned an ongoing process rather than a one-off exercise at the end of the project you avoid repeating old mistakes
Optimize Team Time
Team members spend less time searching for information relevant to them, and reduce time spent on repetitious tasks, like data reporting and formatting. This frees up significant time that can be better spent analyzing the information and provides a higher quality decision support to management.
Provide Decision-Grade Information
Better information means better decision support and can lead to better decisions. By capturing detailed project performance information and providing access to such information your project team members and management are aware of the real state of the project’s cost, schedule, risk and performance and can collaborate to ensure you stay on track.
Prevent Problems
An organization with a Real Project Management System implemented will prevent a number of problems from occurring. Everyone’s familiar with the saying “When the cat’s away, the mice will play” – just by the fact that your extended team members know that you have a proper system in place, they are likely to sharpen their performance. Through access to information, properly measured performance, and efficient change processes you can prevent a number of problems in the first place.
Treat Problems
If problems do occur, and they most likely will, you will be better equipped to actually handle them, as they are now visible and transparent, and you can take a proactive stance towards addressing them.
Consistent Reporting
Reports can be standardized across a portfolio of projects, or tailored to an individual project’s needs. This saves management and other stakeholders’ time as it allows for comparison across projects, and there is consistency in how information is used and presented.
Compliance
A Real Project Management System enables full permission control on all information elements and can apply efficient workflows and automated processes where needed. Complete audit trails can be produced by the system, providing complete peace of mind in terms of ensuring compliance with established change procedures.
Omega Pims R4
A fellow Project Manager in the energy industry summarized to me a while back the challenge he was faced with when addressing the technology element:
“In the late 90s there was only a handful of project management software systems out there, in the mid-2000s dozens, and now hundreds, or even thousands. How am I supposed to know which one to choose?”
Many project managers share the same challenge once or several times in their career. After 25 years in the business it is our belief that we have the only Real Project Management System on the market.
The Pims R4 suite consists of the following core products:
- Cost Management – for controlling and managing project and portfolio cost performance, as well as change management
- Contract Management – for contract lifecycle management, including planning, tendering, award and ongoing performance monitoring and maintenance
- Completion Management – for engineering registers, mechanical completion, commissioning and preservation
- Document Control – for document lifecycle management, from creation, to review and distribution
- Risk Management – for identification, action and control of project risks
- Health and Safety – for increasing safety, reducing risk and ensuring compliance
- Interface Management – for efficient information exchange between project parties
- Quality Management – for planning audits, planning and follow-up of non-conformance reports and other quality events
- Team Documents – for informal collaboration between team members in a shared workspace.
- Experience and Benchmarking – for detailed analysis of project performance compared to your own experience and benchmarking information
The suite can be implemented on a modular basis, or for best results, as a holistic Real Project Management System.
The Pims Difference
Some of the key differentiators between our Pims R4 Real Project Management System suite and other project management systems are:
- Proven: Our product has been on the market since the early 1990s and has been used to manage 10,000+ projects ranging from $100k to $10+ billion worldwide.
- Ease of Use: Our solutions are available through a web-based front-end, as well as a Windows client. Our solutions are fast and intuitive to use, and require limited training.
- Solution Completeness: We take a holistic approach to addressing major project needs and cover all the different phases a major project goes through.
- Leveraging Latest Technology: We are always at the forefront of new technology adoption and leverage the latest technologies in hardware, security and web/windows technologies to provide the best possible user experience.
- Allows for Standardization while maintaining Flexibility: We are project-centric and have built in flexibility to the core of our systems, allowing us to act quickly to changing project needs. At the same time, we have also built flexible methods to ensure standardization across different projects in your portfolio.
- Streamlined Status Reporting Process: Our system will make you team more efficient through automated reporting, distribution and notifications.
- Scalable and Integrated: We realize that many companies have narrower-focused solutions in place to cover certain discipline needs, so we do support implementing only parts of our product suite to fill gaps where you need. We have been scaled from small projects to large projects ranging from a few users to global roll-outs with 10,000+ users.
The Omega Difference
At Omega we don’t believe in leaving the systems implementation to third-party partners and independent systems integrators. The easy part of a software project is to make the software – it is in the implementation where the challenges lie. For this reason we implement our software together with our clients. Software is not implemented in a vacuum – projects are still done for people by people, which is also why we have a large consulting group dedicated to addressing all the functional needs your project may have. Our business is based on providing tangible value to our clients and we have expanded our business through our customers’ success stories. This has enabled us to grow from 119 team members in 2002 to more than 1,050 team members today located in more than 15 offices worldwide – all dedicated to solving your challenges. Lastly, we are not venture capital backed – we are a privately owned company with the founders still actively leading the company. This has allowed us to stay true to our motto: “Small enough to care, big enough to deliver”.
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