Business Success through Excellence in Project Management (Better, Cheaper, Faster and Safer Projects)

Transcription

1 Business Success through Excellence in Project Management (Better, Cheaper, Faster and Safer Projects) Process and Tools that Enable Project Teams to Achieve World-Class Performance and thereby Improve Profitability of the Company Dr. Nick J. Lavingia, P.E. Project Management Consultant 1

2 Dr. Nick J. Lavingia, P.E. Project Management Consultant Chevron Nick has over 30 years of Global Project Engineering, Management, Consulting and Training experience in the Chemical, Petroleum and Air Pollution Control industry. As a Project Management Consultant at Chevron, he provides Consultation and Training to Project Professionals worldwide. Nick has a B.S. and M.S. in Chemical & Petroleum-Refining Engineering and a Ph.D. in Engineering Economics & Management from the Colorado School of Mines. He is a registered Professional Chemical Engineer in the State of California. Nick has published and presented many papers at technical organizations and is a recipient of industry award from Pathfinder for outstanding Contribution to the advancement of Project Management Technology and Chevron Chairman s award for implementing Value Engineering throughout the corporation. 2

3 Agenda I. Project Management s Impact on the Bottom Line Improve ROCE and TSR II. III. IV. Project Development & Execution Process Effective Communication Between Decision Makers, Multifunctional Project Team and Stakeholders Value Improving and Best Practices Optimize Cost, Schedule, Performance and Safety aspects of any project Total Cost Management Plan, Schedule, Estimate, Monitor and Report 3

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7 Business Case for Improvement Improved Capital Stewardship Lower Costs Better Projects More Projects Improved ROCE Higher Earnings Growth Higher Market Confidence Higher P/E Improved TSR 7

8 Project Management s Impact on the Bottom Line Project Management Improves ROCE by Increasing Revenues, Decreasing Expenses, and Reducing Capital Employed REVENUE MINUS EXPENSES CAPITAL EMPLOYED = ROCE 8

9 Project Management Leads to Pacesetter Performance (Cheaper, Faster, and More Predictable) 1.25 Facility Cost 1 Pacesetter Company Industry Average Company X Industry Average 30% Improvement % Improvement Execution Schedule 9

10 Project Development & Execution Process A Process that Facilitates the Optimal Use of Resources (Dollars, People and Technology) Over the Life of an Asset / Project to Maximize Value. Desired Outcome Select the Right Projects by Improving Decision Making Improve Project Outcomes through Excellence in Execution of Decisions 10

11 Project Management Vision High Decision Quality Random Success Good Projects Average Execution Mid Success Unlikely Poor Projects Poor Execution Consistent Success Good Projects Good Execution Random Success Poor Projects Good Execution Low Mid Execution Quality High 11

12 Project Development & Execution Process AFE PHASE 1 IDENTIFY & Assess Opportunities Determine Project Feasibility and Alignment with Business Strategy PHASE 2 SELECT from Alternatives Select the Preferred Project Development Option PHASE 3 DEVELOP Preferred Alternative Finalize Project Scope, Cost and Schedule and Get the Project Funded PHASE 4 EXECUTE (Detail EPC) Produce an Operating Asset Consistent with Scope, Cost and Schedule PHASE 5 OPERATE & Evaluate Evaluate Asset to Ensure Performance to Specifications and Maximum Return to the Shareholders AFE = Appropriation For Expenditure 12

13 Project Management s Impact on Creating Value Value Identification Good Project Definition Value Realization Good Project Execution A VALUE Poor Project Execution B C Phase 1 Opportunity Identified Poor Project Definition Phase 2 Generate & Select Alternatives Phase 3 Develop Preferred Alternative Phase 4 Execute Phase 5 Operate D 13

14 Influence vs. Expenditures Major Influence Rapidly Decreasing Influence Low Influence Final Authorization INFLUENCE EXPENDITURES Front End Loading IDENTIFY Gate Gate SELECT Gate DEVELOP Gate Gate EXECUTE Gate Gate OPERATE Gate DSP DSP DSP DSP DSP Front End Loading DSP = Decision Support Package 14

15 Project Development & Execution Process AFE PHASE 1 IDENTIFY & Assess Opportunities Clearly Frame Goal Test for Strategic Fit Preliminary Overall Plan Preliminary Assessment ~1 % Engng. Phase 1 Estimate PHASE 2 SELECT from Alternatives Generate Alternatives Preliminary Development of Alternatives Develop Expected Value Identify Preferred Alternative Phase 2 Est. PHASE 3 DEVELOP Preferred Alternative Fully Define Scope Develop Detailed Execution Plans Refine Estimate Submit Funding for Approval ~25 % Engng. Phase 3 Est. (+/- 10 % Accuracy) PHASE 4 EXECUTE (Detail EPC) Implement Execution Plan Min. Changes Finalize Operating Plan Business Plan for Phase 5 Project Review PHASE 5 OPERATE & Evaluate Operate Asset Monitor & Evaluate Performance Identify New Opportunities AFE = Appropriation For Expenditure 15

16 Project Performance Drivers per IPA 1. Use of Multifunctional Integrated Teams 2. Best Practical Front End Loading (Phases 1, 2 and 3) 3. Use of Applicable Value Improving / Best Practices 4. Scope Management and Control 16

17 Management s Role (1) Accountability Business evaluation should be conducted 1 to 2 years after project completion and Project Sponsor should be held accountable for the financial outcome. Accessibility Management should actively participate in gate keeping meetings at the end of each phase of the Process and communicate frequently with the project team. 17

18 Management s Role (2) Leadership Management should establish clear expectations and objectives for the project team. Resources Provide resources of right people and funding to support the project team. Behaviors Demonstrate visible support and provide positive consequences for following Process, Best Practices and sharing Lessons Learned. 18

19 Key Players Decision Makers Multifunctional Project Team --Business, Technical, Operations and Maintenance Stakeholders Contractors Vendors / Suppliers 19

20 Value Improving / Best Practices Value Improving / Best Practices are tools to improve project planning and execution. In conjunction with a structured Process they can optimize: Cost Schedule Performance Safety 20

21 Impact of FEL & VIPs (from IPA) 1.2 RELATIVE CAPITAL COST AS A FUNCTION OF FEL Relative Capital Cost FEL Improvement Only Industry Average Cost = FEL Improvement plus VIPs Best Practical Good Fair Poor FEL Rating 21

22 Value Improving / Best Practices Phase 1 IDENTIFY & Assess Opportunities Phase 2 SELECT from Alternatives Phase 3 DEVELOP Preferred Alternative Phase 4 EXECUTE (Detail EPC) Phase 5 OPERATE & Evaluate Decision & Risk Analysis Project Execution Planning Lessons Learned (Seek) $ EST Value Improving Practices by IPA Peer Review Pre-Funding Assessment (Share) Post Project Assessment Business Evaluation $ D PFD EST D P&ID D AFE D D Legend: AFE = Appropriation for Expenditure D = Decision Point IPA = Independent Project Analysis, Inc. PFD = Process Flow Diagram P&ID = Piping & Instrumentation Diagram 22

23 Project Execution Planning--Part A (The Strategic Project Planner by Richard Westney) Defining the business goals that will determine project success 23

24 Project Execution Planning--Part B (The Strategic Project Planner by Richard Westney) Defining major phases, milestones, risks, organization, staffing and best practices to be used 24

25 Project Execution Planning--Part C (The Strategic Project Planner by Richard Westney) How time, cost, quality and resources will be managed 25

26 Total Cost Management Phase 1 IDENTIFY & Assess Opportunities Phase 2 SELECT from Alternatives Phase 3 DEVELOP Preferred Alternative Phase 4 EXECUTE (Detail EPC) Phase 5 OPERATE & Evaluate Economic Analysis (NPV, ROR, Payout) Cost Estimating (Conceptual) Planning/Scheduling (Milestone) Benchmarking (Cost / Capacity) Contracting/Procurement (Strategy) (Funding +/- 10% Accuracy) (Definitive) (CPM Bar Chart) (CPM Resource Loaded) (Monitor & Update) (Set Pacesetter Target) (Pre-Funding Assessment) (Pre-Qualification) (Award / Monitor) (Cost Collection / Analysis) (Post-Project Assessment) (Closeout) Cost Control/Forecasting (WBS) Performance Measurement (Establish Progress Payments) (Establish Cost Accounts & Budgets) (Earned Value) (Trend / Forecast) $ EST Progress reporting Finance/Audit (Capital versus Expense) (Asset Accounting) $ D PFD EST D P&ID D AFE D D Legend: AFE = Appropriation for Expenditure NPV = Net Present Value PFD = Process Flow Diagram D = Decision Point ROR = Rate of Return P&ID = Piping & Instrumentation Diagram EPC = Engineer, Procure & Construct CPM = Critical Path Method WBS = Work Breakdown Structure 26

27 Summary Structured Process, Management s active role, application of Value Improving / Best Practices and Total Cost Management can help achieve World-Class Project Performance: Better Cheaper Faster Safer PROJECTS 27