Table of Contents: CHAPTER 1: Introduction

Transcription

1 Impact of PPP Management, Strategic & Innovative Practices on Government Initiatives: Focus on DMIC, The Game Changer for India s Production Ambitions Strategic & Innovative Practices Portfolio, Programs & Project (PPP) Management for Redefining India Keywords: Portfolio, Program, Project, DMIC. Abstract: Projects function as building blocks of strategy. A group of such inter-linked projects form part of a company s Program. Successful companies rely on continuous flows of innovative ideas for projects and programs. These multiple projects/programs, when integrated for analysis and decision-making become part of the firm s project Portfolio. In this case study we have concentrated on how the strategic vision of redefining India into a manufacturing hub, lead the Government of India to initiate the DMIC (Delhi-Mumbai Industrial Corridor) Program, which envelops a variety of inter-linked projects, like the dedicated freight corridor, ports, airports, road networks and development of Smart Cities. States in DMIC presently contribute to 45% of India s GDP and 58% of industrial output. They have 45% of India s factories and account for 57% of India s exports. On completion, DMIC is expected to increase the exports of these regions by 4 times, industrial output by 3 times and create 2.3 million jobs by 2016; thus allowing India to achieve a GDP growth rate of 8% by We have focused on how Project, Program and Portfolio Management can be used to complete the DMIC project within the projected time, budget and allotted resources. Our study also showed how standardization of PPP Management, using innovative practices like PMBOK and PRINCE-2 can benefit future Government initiatives. This will lead to a more professional/logical approach towards selection and development of ideas with the best strategic fit to our national goals and objectives and which can be completed with the available resources. 1

2 Table of Contents: Chapter No. Particulars Page No. Abstract 1 1 Introduction 2 2 Methodology 2 3 A Case-study on DMIC Project Brief PPP Management in DMIC Stage 1: Portfolio Management Stage 2: Program Management Stage 3: Project Management 11 4 Lessons learnt From DMIC 12 5 Suggestions/Areas Of improvement 13 6 Conclusion 13 CHAPTER 1: Introduction Indian economy has been growing at an average of 7.2% for the past 4 years [1]. Though the rate of growth is respectable compared to international standards, India has failed to carter to the needs of its own population. Unemployment is a serious concern. Standards of basic infrastructure are low. Industrial output growth is dismal.there is also a great disparity between import and export of goods. Keeping these in mind, the Government of India (GOI) in 2009 embarked upon the ambitious plan of creating industrial corridors. This would achieve the four fold goals of: increasing employment, increasing the standards of infrastructure, increasing industrial output and increasing the exports. Figure 1.1- India s Urbanization Prospects Forming strategies for long-term objectives, like nation building, needs a lot of foresight and forecasting. Selection, prioritization and execution of strategies can only be done if the vision is clear and the vision is integrated to the objectives of the program. Consisting of a varied range of projects, a program cannot succeed unless objectives of each project is aligned to the objective of the program. On the other hand, if a program s cash flow is not planned properly, it may hamper the completion of the individual projects. Thus an integrated approach of Portfolio, Project and Program Management is of utmost importance for the success of mega-projects like building of industrial corridors. 2

3 CHAPTER 2: Methodology The objective of this paper is to identify that how the implementation of Portfolio, Program and Project Management has led to the conceptualization, planning and management of the Delhi-Mumbai Industrial Corridor. A case-study based approach has been followed to find out the good practices of management employed, strategic and innovative methods used and how standardization of management principles can ensure a seamless project management. The data has been acquired through various articles, concept papers on the same subject and also through interviews of professionals connected with DMIC. As a mark of professional diligence, we have refrained from naming the professionals as well as the organizations involved in the project. We have also tried to refrain from financial aspects of the DMIC. CHAPTER 3: A Case Study on DMIC With the vision of making India into a manufacturing hub, the Government of India envisaged the creation of industrial corridors across the country. The Delhi-Mumbai Industrial Corridor is one such corridor identified for development. It can be considered as a sister project of the Dedicated Freight Corridor (DFC). Development of infrastructure (road networks), creation of ports and airports for connectivity and development of model smart cities in the influence area of the DFC are the various projects to be executed under the program. Figure 3.1- DMIC Influence Area 3.1 Project Brief [2] : Length of Corridor: 1483kms Project Influence Area: 436,486 sq.km End Terminals: Dadri (Delhi-NCR) to Jawaharlal Nehru Port (Mumbai) Project Cost: Rs3.6 lakh crores (estimated) spread over 3 phases. Expected Completion Date: 2019 (Phase-1 completion) Project Nodes: The project has been divided into 7 nodes for effective monitoring. Figure 3.2- DMIC Influence Area and total area(state-wise) 1. Dadri-NOIDA Gahziabad, Uttar Pradesh 2. Manesar-Bawal, Haryana 3. Neemrana-Khushkhera-Bhiwadi, Rajasthan 4. Pithampur-Dhar-Mhow, Madhya Pradesh 3

4 5. Ahmedabad-Dholera, Gujarat 6. Nashik-Sinnar-Igatpuri, Maharashtra 7. Dighi Port, Maharashtra Project Control Body: Delhi-Mumbai Industrial Corridor Development Corporation Ltd.(DMICDC) at national level and Special Purpose Vehicles (SPVs) comprising of State Governments and other stakeholders at nodal levels. 3.2 PPP Management in DMIC: DMIC is presently the largest project being undertaken by the GOI. From our case-study, we could establish that PPP management has been used for its governance. Keeping the basic concepts same, we have divided the DMIC into 5 stages: Portfolio, Sub-portfolio, Program, Sub-program and Project Stages. Such a classification is based on the relationship between portfolio, program and project established in the Project Management Book of Knowledge (PM-BOK). The portfolios have been divided into Highest Level portfolios, lower level portfolios etc. as shown in figure 3.3 [3]. Similarly programs have also been divided into Higher Level programs, Lower Level Programs etc. A classification of each stage into different levels not only helps in better understanding of functioning, segregation of responsibilities and identification of control points. The figure-3.4 shows our view of classification of DMIC into various stages. Figure 3.3-Portfolio, Program, and Project Management Interactions as per PMBOK. INDUSTRIAL CORRIDORS 4 PORTFOLIO STAGE

5 PORTFOLIO PROGRAM PROJECT SUB-PORTFOLIO STAGE DMIC INDIVIDUAL NODES OF DMIC PROGRAM STAGE INDUSTRIAL AREAS INVESTMENT REGION SUB-PROGRAM STAGE SMART CITIES INFRASTRUCTURE INFRASTRUCTURE MANUFACTURING UNITS PROJECT STAGE PROJECTS PROJECTS PROJECTS PROJECTS PROJECTS Figure -3.4: Classification of DMIC into PPP Stages We have considered the concept mentioned in PMBOK as the best standards of PPP Management. Keeping that in mind, we have defined the expectations from each stage in terms of various aspects defined by the PMBOK. Figure 3.5 shows the broad standards expected from each stages of PPP management. As we gone further into the case-study, we can see that DMIC has more or less achieved the standards expected in PPP Management [3]. 5

6 SCOPE CHANGE PLANNING MANAGEMENT SUCCESS Creation of industrial corridor between Delhi and Mumbai in the influence zone of Western DFC Change Management monitoring to be done at this stage. To plan resource allocation and development. Phase completion finish dates to be established. Management of stakeholders, Government policies related to DMICDC to be done at this stage. Success to be determined by timely completion of phases of DMIC. Monitoring of DMIC node MONITORING progress, investments by financial institutions and return on investments to be monitored 3.2.1Stage 1: Portfolio Management Creation of Investment Regions and Industrial Areas in the influence zone of DMIC. Sub programs to contain construction of smart cities and associated infrastructure. Change approval, reporting and impact study to be done at this stage. Milestone alignment of projects to be done with that of the program at this stage. Monitoring of progress of each project to be done. Management by stakeholders of State SPVs in land acquisition and risks of individual projects to be done at this stage. Success to be determined by timely completion of sub-program. Budgetary target achievements to also be considered as success factors. Monitoring of communication, budget allocation and critical path of individual projects. Construction of various projects like roads, utilities, convention centers etc. Actual change to be implemented at site to be identified, reported and executed upon approval Milestone alignment as well as planning and monitoring of critical paths of each project to be done in this stage. Management of individual project teams, project risks etc. to be done at this stage. Project deliverables, project quality and project cash flows to be considered as success factors. Monitoring of project quality, project schedule, project cashflow and KPIs to be done at this stage. As per PMI, portfolio is defined as a collection of programs/projects and operations managed as a group. Portfolio management is defined as the centralized management of one or more portfolios, which includes identifying, prioritizing, authorizing, managing, and controlling projects, programs and other related work to achieve specific strategic business objectives. [3] After successful completion of Golden Quadrilateral project, focus shifted from mobility to manufacturing. A backbone for connectivity had been established. The call of the hour was to utilize the connectivity to create vibrant economic zones which were again interconnected, self-sustainable and with world class infrastructure. The Dedicated Freight Corridor (DFC) was a direct product ofthe above mentioned concept. Plans for creating two DFCs were established: the Western (Delhi to Mumbai) and theeastern (Ludhiana to Khurja). To make the DFCs economically viable, it had to generate revenue. This brought about the concept of developing economic corridors in the influence area of the DFCs. The influence area was to be developed with modern infrastructure, smart cities and with zones allocated for manufacturing industries for private players. These private players would then use the DFC to transport goods and raw materials, thus generating revenue for the Government. The Eastern and Western industrial corridors were thusidentified. Prioritizationwas done through various socio-economic surveys. It was found that developing the influence area along the Western DFC was more profitable. Here the concept of Sub-Portfolio comes into picture. After establishing that the strategy for nation building would be development of Industrial Corridors (portfolio), the prioritization of DMIC and identification of DMIC Nodes can be considered as the next step (sub-portfolio).the Figure reasons -3.5: PMBOK established set standards for taking customized up the as per Western DMIC requirements corridor first were as follows [2] : 6

7 1. The region already contributed approximately 43% of the nation s GDP. 2. It contains more than 40% of India s industries. 3. Contributes to more than 50% of India s industrial output and exports. 4. Standard of basic infrastructure facilities already existing in and around the influence area was found to be better than the influence area of the Eastern DFC. Establishing goals and setting objectives are of utmost importance for any portfolio to succeed. The goals set for the DMIC were very realistic and based on Comptroller & Auditor general Reports (CAGR). DMIC, on its implementation, would achieve the following [2] : 1. Double employment potential in 5 years. (14.87% as per CAGR) 2. Triple Industrial output in 5 years (24.57% CAGR) 3. Quadruple exports from the region in 5 years (31.95% CAGR) Delhi Mumbai Industrial Corridor Development Corporation (DMICDC), an independent body, was created and given the authority to monitor, control and co-ordinate the entire DMIC program. The DMICDC is composed of the following stakeholders [2] : Sl.No Particulars % Shareholding 1. Government of India represented 49% through Department of Industrial Policy & Promotion, Ministry of Commerce & Industry. 2. Japan Bank for International 26% Cooperation (JBIC) 3. Housing and Urban Development Corporation Limited (HUDCO) 19.9% 4. India Infrastructure Finance Company Limited (IIFCL) 5. Life Insurance Corporation of India (LIC) 4.1% 1% The principles followed for managing and controlling the DMIC has been established in the Program and Project Management stage Stage 2: Program Management 7

8 Wiki-Answers defines program as something which delivers a massive piece of functionality. Within this program will be a large number of individual projects each of which will deliver a specific piece of the functionality. When all these projects have delivered, all their pieces will make the big deliverable. The Project Management Institute (PMI) defines program management as a group of related projects managed in a coordinated way to obtain benefits and control not available from managing them individually. Programs may include elements of related work outside scope of the discrete projects in the program. [3] For effective control, the nodes of DMIC have been subdivided into: InvestmentRegions (IR) and Industrial Areas (IA).This is the stage where the program management comes into picture. IRs and IAs are the points which would generate revenues in the future. Figure 3.6- DMIC Nodes and Influence Areas Investment Regions would be specifically delineated industrial region with a minimum area of 200sq.km. They would be comprised of industrial townships with world class infrastructure and integrated logistic hubs. Whereas, Industrial Areas would be developed with a minimum area of 100 sq.km for the establishment of manufacturing facilities along with associated services and infrastructure. [2] 11 IRs and 13 IAs have been identified in the 7 states of the DMIC [2]. These IRs and IAs are effectively the stage where program management comes into picture. Each investment region comprises of various individual projects like development of smart cities, infrastructure development, construction of air-ports etc. Similarly each Industrial Area again has various individual projects under it, like establishment of manufacturing facilities, development of roads, bridges and railway tracks etc. Hence the IRs and IAs can be considered as programs under the DMIC Portfolio. As shown in figure 3.4, the IRs and IAs have again been individulayy divided into Smart-Cities, infra-projects etc. Since the control would better rest at such a stage where similar projects come under one roof. We have established this stage as the Sub-Program stage. The DMICDC has appointed a Programme Managemers for New Cities Consultant (PMNC) for daily reporting, control and monitoring of the Dholera-SIR Sub-program. For a detailed understanding of good practices of program management follwed by DMICDC and the PMNC, We considered the development of Dholera-Special Investment Region, an IR proposed under the Ahmedabad-Dholera node of the DMIC. It is also the only phase of the entire DMIC where the actual ground execution of projects is about to start (a) DHOLERA-SIR(Special Investment Region) Project Brief [4] : Total Area: 920sq.km Town Planning (TP) Schemes: Total of 6 TP schemes have been finalized, with development spread over 30 years. Presently, TP-1 with an area of 22.5sq.km is being developed first. Future Goals & Objectives: Dholera s population is expected to be 2 Million by 2042, with total jobs directly generated being 827,000. 8

9 Manufacturing Industries Planned: Heavy engineering, pharmaceuticals, automobile, tourism etc. Figure 3.7 Major Milestones for Dholera-SIR Major milestones of the project have been shown in figure 3.7 [4]. Once the project is on the floors, following projects will fall under the Dholera-SIR program: Roads and Services, Flood Management, Desalination Plant,Raw Water Trnsmission+WTP, Waste Wate Treatmen Plant, Solid Waste Treatment, Power Plant & Transmission, ABCD Building and Anchor Tenats.Going further, we have highlighted the important aspects of program management and incuded what good practices are being followed by the PMNC appointed to monitor the Dholera- SIR program (b) Good Practices Followed in Program Management of Dholera-SIR: Program management can basically be said to comprise of aspects like planning, stakeholder management, performance management, change management and communication management. Some of these aspects have been dealt individually to highlight the good practices being followed by the designated PMNC. (i) Planning: A well-defined program charter was handed over to the PMNC after the award of the contract. The DMICDC had clearly defined the scope of work, objectives and the general way forward in the charter. This helped the PMNC understand their deliverable and Key Performance Indicators (KPI). The master schedule (Figure-3.8) [4] was drafted based on the feasibility study of the SIR conducted by the PMNC. The priority was given to develop basic infrastructure first. Hence roads and utilities projects are to be taken up first. The geographical survey also showed that Dholera is a marshy area with constant threat of floods from the Adhiya River. Hence flood management was considered as a critical project in itself. For effective flood management, basic facilities like Waste Water Treatment Plants, sewage lines and canal construction were needed to be completed first. Hence these projects were planned to be taken up after the start of road and utilities works.utilities needed for producing portable water, treatment of raw water required for manufacturing facilities, disposal of solid waste, setting up of power plants and power transmission were taken up next. Construction of ABCD building which is a project independent off other projects was planned to be taken up before execution of other project starts. 9

10 Figure 3.8- Project Timeline for Dholera-SIR (tentative) The planning done in the above mentioned procedure can be stated as milestone alignment method. This is again a good practice followed in program management. It states that the milestones of critical projects of the program should be aligned so as to be in sync with the milestones of the program as a whole. Hence, making the phase -1 ready for residential settlements can be considered as a mile-stone of the program, the completion of roads and water works as well as completion of power generation and transmission projects can be considered the milestones of individual projects aligned to the milestone of the program. (ii). Stakeholder Management: An important aspect of program management is the management of all stakeholders. As a good practice, the DMICDC had already established a well-defined control hierarchy and communication channels for the program (as shown in figure 3.9) [2]. It was decided that the overall control point will be the DMICDC, whereas the state Special Purpose Vehicles (SPVs) would be facilitators and coordinators at the nodal levels. This clear defining of scopes has helped each stakeholder understand its roles and responsibilities in the program. This has also led to less duplication of work and control on the information that needs to be supplied to each stakeholder. 10

11 Figure 3.9- DMIC Hierarchy (iii) Performance Management: Performance management can be defined as control, monitoring and mapping of Key Performance Indicators (KPIs) of a program. As discussed earlier, the milestone alignment in conjunction with the program charter has helped the PMNC develop its own KPIs as well as that of the various contractors of the projects under the Dholera program. The good practice followed in program management by the PMNC is that it uses the concept of 5-D while mapping the progress and performance of various projects. 5-D monitoring concept is an extension of the Building Information Modeling (BIM) concept, wherein in addition to the mapping of physical progress of the project, status of program in terms of time and cost is also monitored. This is achieved through application of a Program management 11

12 Software employed by the PMNC. It processes the real time data available and gives the detailed health of the program. (iv) Communication Management: For a program of the magnitude of DMIC, effective communication amongst all stakeholders is absolutely important. Daily communications, daily progress reports and change management should be available to the relevant entities and stakeholders at all points of time. The lines of communication had already been established by the DMICDC, as shown in figure no For the Dholera-SIR program, since the state SPV is not yet in place, daily communications are done directly between the PMNC and DMICDC. For handling this communication, the PMNC has created a brilliant portal called the Project Health Dashboard. All daily reporting is done through this dashboard. Though the dashboard contains all the information of the project in terms of planned status v/s actual progress, budget allocation for individual projects etc., it can be customized to only show desired information to the relevant entities. The dashboard is controlled and updated every day through the Central Server Collaboration Tool. The dashboard is also a very useful change management tool, since any change done in any aspect of the program or even in the individual projects is easily reflected in the dashboard. This keeps all the stakeholders aware about the changes being incorporated into the program/projects. Figure 3.10 shows the communication done through the Project Health Dashboard. Figure Communication via Dashboard Some other aspects of program management like risk management and conflict resolution protocols are also being looked. These aspects will become clearer once the actual execution of the projects starts. 12

13 Though a framework to deal with risks and issues is ready, it needs to be dynamic to incorporate the challenges that the program will face on a daily basis Stage 3: Project Management The final stage of PPP management is the project management. It is at this stage that the individual projects are planned, executed and monitored in a detailed manner. PMI defines project as a project is temporary in that it has a defined beginning and end in time, and therefore defined scope and resources. PMI also defines project management as the application of knowledge, skills, tools, and techniques to project activities to meet the project requirements. As stated earlier, the Dholera-SIR is at an initiation and planning stage and the ground execution of projects is yet to start. The contractors for almost all projects are yet to be finalized and hence the project management principles and good practices that will be followed for individual projects are yet to be clearly defined. Some basic guidelines have already been set by the PMNC to govern the individual projects at the micro-level. Some of the guidelines have been stated under the broad knowledge areas of project management. (i) Project Planning: As already mentioned, the alignment of milestones at program and project stage has given the individual projects with a clear idea of their critical success factors. Knowing these will help each contractor to decide its own project milestones, cash-flow, and procurement schedule and determine the critical path. (ii) (iii) (iv) Risk Management: A broad survey of all geographical, social and economic factors of the Dholera-SIR has already been conducted by the PMNC as well as various central and state agencies. The individual project contractors can use them to determine the prevalent risks associated to their projects. They can also conduct their own risk assessments to come up with project-level risks. Cost Monitoring: The decision to execute 22.5sq.km of the SIR (part of TP-1), was done through a study of budget and resource availability done by the PMNC. Hence all projects coming under the phase-1 can almost be certain of not falling prey to budget deficiencies. What needs to be done at the project level is that the contractor needs to align its cash flows to that of the program s cash flow. This will ensure that no project is held due to financial imbalances. Quality Management: Apart from the PMNC, there will also be independent agencies monitoring the quality aspect of each individual projects. This will bring about more focus on the quality of individual projects. Since achieving world class infrastructure is one of the aims of DMIC, the need for an independent agency on quality is of utmost importance. 13

14 CHAPTER 4: Lessons Learnt from DMIC DMIC is a project of enormous magnitude. The impact of PPP Management on such a project is huge. From our case study, we have been able to identify the following key learning that can be used in other similar projects: Portfolio management can help us setting our long terms goals and objectives. Strategies for national development can be done through identifying and prioritizing those programs/ projects that give maximum return on investments. Establishing basic infrastructure to facilitate building up of world class infrastructure and manufacturing facilities is absolutely essential. Program management can help us clearly define scopes and responsibilities of individual stakeholders, clearly define communication protocols and reporting mechanism. Using the program charter as a standard tool to establish procedures and protocols is a very good management practice Employment of Project Health Dashboards which is handled by a central server and is updated with real time data can lead to effective monitoring all the aspects of a program/project. Milestone alignment at program and project levels is absolutely essential to plan and monitor a project of such magnitude as the DMIC. Clearly defined communication channels always help in seamless functioning of programs and projects. CHAPTER 5: Suggestions/Areas Of improvement The basic concept of this paper is only to highlight the good impact of employing a PPP Management system in DMIC project. The project has duration of 40 years spread across in 3 phases. A lot of modifications and improvements in the practices will be done as the project moves forward. New practices will be implemented and innovative methods of management will be adopted. After a study of the entire can draw the following suggestions to improve the PPP management done for the DMIC: A detailed study of the required v/s available resources of DMIC should have been done. The resources needed for DMIC include cement, steel and other building material. No study is available to show the forecasted requirement of these resources for the next 40 years. This would also help to find out whether our existing facilities are sufficient to generate the required resources, is augmentation of such facilities needed etc. Also, whether the available human resources have the required skill set to execute the projects is another question that has been left unanswered. Though the DMIC and DFC are being looked upon as two independent projects, the interlinking of both these is absolutely essential. DFC can run optimally only when the manufacturing facilities are up and running and using it to transport goods and raw materials. Hence milestone alignment of DMIC and DFC needs to be done on a priority basis. 14

15 CHAPTER 6: Conclusion Industrial corridor projects have been developed in various countries around the world. Tokaido Corridor (Japan), BostWash Freight Corridor (USA), Leipzig Frankfurt (Rhein Main) corridor (Germany) and Southern Economic Corridor or Greater Mekong Sub-region (Vietnam, Cambodia, China, Lao PDR, Myanmar & Thailand) are some of the major corridor projects. All these projects have been managed in accordance with international management principles and methods. India also has the capability to manage and execute mega-projects needed for national development. Execution of the Golden Quadrilateral, Delhi Metro and Mumbai monorail bear testimony to India s capabilities. The DMIC is a project of magnitude that has never before been tried in India. Its successful completion would put India on the World map as a vibrant economy. The need of the hour is to use the lessons learnt from projects like the DMRC. Adopting the PPP Management approach towards DMIC shows that the Government can adopt set standards of management and view their projects just like corporates do. This will bring about the much needed professionalism in selection, prioritizing and management of projects which give best return on investments. Chapter 7: References [1] [2]Department of Industrial Policy & Promotion, Ministry of Commerce & Industry-GOI, Concept Paper on DMIC, August 2007, page [3] Project Management Institute, A Guide to the Project Management Body of Knowledge (PMBOK Guide)-Fourth Edition, page [4] DSIR, Gujarat-Dholera SIR Detailed presentation, Invest India, October16,