Unlocking the power of SAP PS, PM and BI to improve capital project management John Blodgett, PG&E Rick Siegfried, PwC Paul Lawrence, PwC Barbara

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1 Unlocking the power of SAP PS, PM and BI to improve capital project management John Blodgett, PG&E Rick Siegfried, PwC Paul Lawrence, PwC Barbara Sootkoos, PwC Session ID#

2 UNLOCKING THE POWER OF SAP PS, PM AND BI TO IMPROVE CAPITAL PROJECT MANAGEMENT In this session we will cover: SAP PS project (SPSI) overview, business drivers and benefits Solution architecture that enabled improving the use of SAP Project Systems (PS), Plant Maintenance (PM) and Business Intelligence (BI) to support the business drivers and benefits Key design decisions and integration touch points that were developed to support the end to end business process from capital project planning through execution How organizational change management and reporting played a critical part in the success of the project Critical success factors and lessons learned 2

3 JOHN BLODGETT BIOGRAPHY Degree: Political Science and Environmental Studies University: University of Southern California Years of Experience: 19 years in Project Management/Project Controls Professional Field: Senior Manager in the Enterprise Project Governance group Project Controls Leadership Civil Construction and Demolition Environmental Remediation Management Telecommunication Site Development 3

4 RICK SIEGFRIED BIOGRAPHY Degree: Bachelor of Accountancy BBA in Management Information Systems University: University of Oklahoma Years of Experience: 25 years IT consulting/utilities 16 years SAP projects Professional Field: SAP Program and Project Management, including: Enterprise Asset Management Implementations Customer Relationship and Billing Implementations Organizational Change Management Business process transformation IT/SAP Technology Roadmap Development 4

5 PAUL LAWRENCE BIOGRAPHY Degree: Mechanical Engineering (Hons), Professional Engineer (South Africa) University: Sunderland, UK Years of Experience: 35 years, 26 with SAP projects Professional Field: ERP and EAM implementations in the Utilities Industry Utility business process optimization Utility finance transformation projects Utility supply chain optimization Outage and shutdown management optimization and planning 5

6 BARBARA SOOTKOOS BIOGRAPHY Degree: B.S., Petroleum Engineering M.Sc., Sloan Degree in Management P.E., California (Civil) University: UC Berkeley London Business School Years of Experience: Over 20 years in Capital Construction/Engineering Controls Professional Field: Capital Projects & Infrastructure, including: - Capital project governance, cost, schedule and risk controls - Project technology and integration with ERP systems - Civil engineering design & construction - Program management, policies and procedures - Business process transformation 6

7 PWC OVERVIEW Creating value for our clients, people and communities in a changing world. SAP Global Partner Expanded global coverage with the full suite of delivery capabilities Substantial increase in market awareness of our SAP knowledge and experience with significant market share gains Dedicated industry & horizontal competency specialization Dramatic increase in our tools, templates and accelerators as we continue to focus on quality, risk management and business impact 7 Offices in 157 countries and 756 locations Global network of 208,000 employees Among the leading professional services networks in the world We help organizations and individuals create the value they re looking for, by delivering quality in assurance, tax and advisory services.

8 COMPANY OVERVIEW Regulated utility, carrying out the transmission and delivery of energy One of the largest combination of natural gas and electric utilities in the United States Multi-billion dollar capital project portfolio Service Area 70,000 square miles Electric Lines 140,00 miles (distribution) 19,000 miles (transmission) Natural Gas Pipelines 42,000 miles (distribution) 6,000 miles (distribution) Customer Base 5.4 million (electric) 4.3 million (natural gas) Employees 20,000 people 8

9 BACKGROUND AND TIMELINE Internal Audit of small projects <$20m Status: Projects <$20m Informal Projects >$20m Standard Adoption of AACE EPM Initiative Kick-off Formation of EPC & PMIT 2009 Establish PM Standard & Procedure 2010 Establish DOE, PM position, and LOB procedures Beginning of standardization of major projects >$20m including governance and procedure requirements Status: Projects <$20m Informal Projects >$20m Informal 2011 Earned Value implemented and Internal Audit of LOB adherence to major project procedures 2012 Primavera selected as scheduling tool of choice 2013 SPSI initiative and Internal Audit report on projects <$20m 2014 Enterprise PM Maturity Assessment Timeframe for SAP Project Systems Integration Project (SPSI) 2015 Development of integrated EPM roadmap $6.0 $5.0 $4.0 $3.0 $2.0 $5.2 $4.6 $4.9 $4.0 $3.7 $4.0 $3.8 Capex Expenditures ($ billions) ~65% of Capex is estimated as project expenditures Capex ramps up from $5.7B in 2015 to $6.6B in

10 SPSI IMPLEMENTATION TIMELINE The SAP Project Systems Integration (SPSI) project spanned over a 2-year implementation period, from Design through Deployment A unique aspect of the implementation was an iterative design/build phase, which included three waves of design and validation workshops with Subject Matter Experts 10

11 DRIVERS FOR CHANGE Enhance affordability for customers and return for shareholders Needed more detailed project plan/actual costs Required better data quality/visibility to support business decisions Gain cost savings from reducing system redundancy Corporate Budgeting Gap: corporate budgeting reporting vs. project management needs Off-line Excel spreadsheets This gap has resulted in a proliferation of tailored tools and processes across LOBs Custom LOB Custom LOB Custom LOB Custom LOB Custom LOB Customized databases and SAP applications Project management teams want the ability to manage capital projects based on how work is actually executed. They also want help in addressing other pain points such as manual processes, disconnects between systems, and other gaps in project management practices Capital Project Work Execution (Tasks, Milestones, Job Estimates) Job Files 11

12 KEY BUSINESS REQUIREMENTS DROVE CORE SAP SOLUTION ELEMENTS Over 80 priorities and constraints associated with managing capital projects were identified and grouped into the following key business requirements Key business requirements Improved control Standard industry practices and process to plan/execute/monitor capital projects Consistent milestone/progress measurement with common work breakdown structure (WBS) Core SPSI solution elements Standardized Processes via Common Work Breakdown Structure (WBS) Improved transparency Tracking of costs at a detailed activity level, as project tasks get completed Earned Value (EV) capability to provide early warning of cost/schedule performance risks More efficient operations Single source of truth for project data Automation of project tasks and reporting Improved accuracy & reporting timeliness Operation/ Activity Level Costing and Earned Value Integrated Systems and Standard Reporting 12

13 SPSI PROJECT GOAL AND BENEFITS SUMMARY Integrated Systems Standard Processes A key project goal was to develop an enterprise solution for project management balancing the needs of the business with leveraging of standard SAP capabilities. Institute standardized processes that enable more detailed reporting and project tracking capabilities Benefits Common work breakdown structure (SAP WBS) Enabling operational level costing and KPI s (e.g. Earned Value) Integrated systems and consistent/standard reporting (SAP Business Objects) Bridge key project portfolio planning, project execution, scheduling, and cost/forecast management applications More projects on time / on budget Better decision making capability Access to better, more timely information Ability to course correct earlier in the project lifecycle Better informed future estimates Improved employee engagement by replacing administrative tasks with more interesting work Primavera P6 (Project Planning, Execution) SAP PS (Project Costs) SAP PPM Future State (Portfolio Planning and Management) Reduction in one-off spreadsheets 13

14 SPSI FINANCIAL BENEFITS Predictability of portfolio performance indirectly produces a benefit because fewer projects will need to be shut down or deferred Savings realized by avoiding significant project overruns or underruns thus translates into a greater number of capital project throughput For example, if 2-8 percent of projects performed closer to expected plan, approximately $60M in capital would be freed up to do more work Projects that complete >10% UNDER Budget Projects that complete within +/- 10% of Budget Projects that complete >10% OVER Budget Reduction in over-spend and Reduction in underspend = increase in portfolio predictability 14

15 Standardized processes enabled by the technical solution

16 SOLUTION GOALS Goal: Create additional transparency by enabling the ability to track and forecast project costs and resources at a work-package/task level consistent with the Primavera-based work breakdown structure (WBS) To support improved project controls (including earned value management). Key design principles Standardize the enterprise process and design as much as possible, while allowing for limited LOB variances Leverage as much SAP standard functionality as possible Identify one system of record or source of truth for each type of data (e.g. data such as authorized budgets, actual costs, cost forecasts, schedules) 16

17 GOVERNANCE AND LEADERSHIP STRUCTURE Jointly-led effort Enterprise project governance IT business technology System integrator Cross-LOB governance structures to ensure leadership support Executive Steering Committee Director Steering Committee 17

18 OVERALL ENTERPRISE PM TOOLS PROGRAM Executive Budget Planning BPC BW BOBJ Reporting Project Mgmt. Team Core SAP Business/ Portfolio Planner Portfolio Planning & Management In House PPM (RC Data Center) Operational Account Assignment Work Breakdown Structure PM CO MM PS (Project System) ECC HR FI Integration Middleware Project Scheduling & Execution Hosted P6 (DR McNatty) 18

19 SPSI SOLUTION ARCHITECTURE Documentum Budget Forecast Analysis Office (Gated Auth.) SAP BPC SAP BW SAP BOBJ Others Canis Concur Microsoft Excel Plan version target information Plan version Actuals (all modules) Inbound AP interfaces Assets AFUDC PowerPlan Click PS WBS PM (OAA) Orders and Operations SAP ECC CO Planning Order MM Cost Element Planning/Forecasting Authorization Amount Actuals Resource definitions (work centers) EV calculation and reports Ventyx Key Green text = indicates proposed system of record SAP to P6 WBS details PM Order details Work Center master data Primavera P6 P6 to SAP New Activity Summary Level entries Date changes Work Center consumption % complete (WBS Level) SAP SCM (ewm, GATP) SAP SRM Schedules Critical path determination % complete entry (earning rules) 19

20 ALIGNING BUSINESS PROCESSES FIRST Several foundational business processes were developed from an enterprise viewpoint, and were used to guide the solution design Standard capital project phases Project Phase Gates Project Management Process Flow WBS Milestones Earned Value 20

21 WBS AND ROLLUP STRUCTURE IN SAP PS AND SAP PM (USING OAA) Level 1 G Install New T-Line from A to B Level 2 Asset Group Level 3 Project Oversight Initiate Plan/Analyze Design Execute/ Construct Close Project Management Other Project Setup Scoping Environmental Management Scope Development Design Encroachment Permitting Ministerial Permitting Site Restoration Land Management Design Closure Environmental Closure Land Survey Land Mgmt Inspection Test/ Commission Level 4 Construction Support Environmental Compliance Mobilization/ Setup Execution Linked OAA enabled Order Operations Engineering Oversight Training Order Operations Cost Collectors Create Project Operations can be developed based on LOB specific requirements; however, they must be assigned to the WBS in accordance with the enterprise standard capital project management process. Kickoff Walkdown Clearance Planning Detail Engineering Cost Estimate Encroachment Permits Land/Env. Ministerial Permits Staging Mobilization Site Preparation Operations are resource loaded with materials and internal or external labor. Civil Construction Electric Construction Gas Construction As-Builts Mapping Operations track both Plan and actuals $/units for labor, materials and contracts. 21

22 WBS STRUCTURE LEVELS AND DESCRIPTIONS The WBS structure in SAP PS is a core element of the solution Provides a common structure for the configuration of data transfer between the SAP PS and Primavera P6 systems WBS Level in SAP PS 1 Project 2 Name Description Example Operational/asset category Project name and unique identification number Asset-based classification of work 3 Project phase Project lifecycle phases 4 N/A High-level work category Operations Standardized breakdown of project phase elements Project-specific detailed work activities T City X Substation T Substation Capacity T Initiate T Scoping Detailed work activities needed to scope the project 22

23 Key Design Decisions

24 KEY DESIGN DECISION #1 Key Design Decision 1: Type of cost collector or cost object Choice between two SAP cost collectors: a. SAP Project Systems (PS) Network & Activity b. SAP Plant Maintenance (PM) with Operational Account Assignment (OAA) Networks & Activities Functionality vs PM Order OAA 24

25 KEY DESIGN DECISION #1 (CONT D) Key Design Decision 1: Type of cost collector or cost object Capabilities comparison between a. SAP PS Networks & Activities and b. SAP PM with OAA OAA, selected due to asset maintenance-intensive environment Functionality comparison between PS Networks & Activities vs. PM Order OAA 25

26 KEY DESIGN DECISION #2 Key Design Decision 2: Choice of integration middleware After considering several options, Maxavera was selected as the integration middleware for SAP and Primavera P6, for the following reasons Speed to deliver (Maxavera ipack provided plug-and-play integration between SAP PS and Primavera P6) Technical issues associated with integrating an externally hosted Primavera P6 instance with the company s internally hosted SAP environment Scalability capability as P6 usage increases across the company (specifically, ease in performing integration on a massive scale batch process) 26

27 SAP TO P6 INTEGRATION OVERVIEW Five different integrations (or Maxavera transport jobs) were required to align key information between SAP and Primavera P6 Critical to enforce one system of record for key project attributes, and eliminate manual data entry and validation checks 27

28 SAP TO P6 DATA FLOWS/INTERFACES SAP Project System (PS) Maxavera Integration Primavera P6 WBS Level 1 Project M0 Project Create Project 2 Operational/ Asset Category M1 Create Schedule M4 Operational/ Asset Category Descope Schedule 3 Phase Phase 4 High-Level Work Category M2 Update Activity Information High-Level Work Category N/A Operations (PM Order) M3 Update Forecast Activities Resources, Services, Dates, Milestones, % Complete Forecast Hours, Forecast Dollars 28

29 2. Operation Account Assignment Order (OAA) WBS WALKTHROUGH 1. Work Breakdown Structure (WBS) Plan Actuals Dates 3. P6 Schedule Integration Percent Complete 29

30 ADDITIONAL DESIGN CHALLENGES 1. Cost forecasting Ability to do a time-phased transfer of resource and cost loading, from P6 to SAP Ability to forecast on the OAA operation Operation did not have the ability to plan resources and costs using curves or future bucket planning 2. One-to-one project schedule to PM Order Ability for schedulers to have one Primavera P6 schedule file for multiple PM Orders, versus forcing them to have one schedule file per PM order 30

31 Change Management Strategy

32 CHANGE LEADERSHIP Change Ownership Ownership Commitment Support Engagement Understanding Awareness Change Commitment Curve This is the way I work now This is the way we work now This will be good for me I ll try it the new way I understand what s changing I know something is changing 350 People Trained Common Approach & Vocabulary Emphasis on Leadership Role in Driving Change Activities Span Beyond Project Lifecycle 32

33 CHANGE LEADERSHIP STRATEGY The change strategy was based on shared responsibilities for the internal project team and for LOB stakeholders 33

34 CHANGE LEADERSHIP ACTIONS Key actions included: Case for change Assessment of organizational readiness and capacity Assessment of leadership s capability to lead the change Creation of leadership action plans Feedback loop during solution roll-out Training based on when users started to use the solution Hyper-care support model Future actions: driving and measuring adoption 34

35 Enhanced Reporting

36 COMBINED DATA SOURCES TO PROVIDE MULTI- LAYERED REPORTING 36

37 SAP DASHBOARDS 37

38 SAP WEB INTELLIGENCE REPORTS Re-conductoring project 38

39 SAP ANALYSIS FOR OFFICE REPORTS Best for ad hoc reporting tools for analysts and power users 39

40 Takeaways and Closing

41 KEY SUCCESS FACTORS Thorough requirements gathering Integration of business process and technology teams throughout the full Design/Build phase Co-development with stakeholders Validation workshops User-friendly documentation of the business process and technology (solution handbook ) Enterprise System of Record as the Project Management core system Master data strategy 41

42 KEY LESSONS LEARNED Allow time for conversion of existing projects to the new system Focus on the core solution but plan for future enhancements Consider projects to include in the scope large vs. small projects and scalability Change leadership effectiveness: the right resources can make a big difference Do not underestimate the field impact and time charging Reporting requirements and scope input should be a priority with leadership/key stakeholders as early in the project as possible and throughout report development Unwinding and replacing legacy processes will be a challenge and should be planned in to the business case and scope of the project 42

43 QUESTIONS? John Blodgett, PG&E Rick Siegfried, PwC Paul Lawrence, PwC Barbara Sootkoos, PwC

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