How to Create a World-Class Project Management Organization?

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How to Create a World-Class Project Management
Organization?

• Dr. Nick J. Lavingia, P.E.
• Chevron
• Project Management Consultant
• APEGGA Annual Conference, Calgary
• April 26-27, 2007

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Dr. Nick J. Lavingia, P.E.Project Management
ConsultantChevron
Nick has over 30 years of Global Project
Engineering, Management, Consulting and Training
experience in the Energy 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 is a member of
Project Management subcommittee for Athabasca Oil
Sands expansion project. He 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 Chairmans award for implementing Value
Engineering throughout the corporation.
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Agenda

• Business Case for Improvement
• Five Steps to Success
• Step 1 Common Language (PMIs PMBOK)
• Step 2 Common Project Development Execution
  Process
• Step 3 Application of Value Improving / Best
  Practices
• Step 4 Total Cost Management
• Step 5 Training Certification
• Summary
• QA

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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
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• Project Managements Impact on the Bottom Line
• Project Management Improves ROCE by
• Increasing Revenues, Decreasing Expenses,
• and Reducing Capital Employed

ROCE
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Project Management Leads to Pacesetter
Performance (Cheaper, Faster, and More
Predictable)
1.25
Company X
Industry Average
30 Improvement
Industry Average
1
Facility Cost
Pacesetter Company
0.75
1
0.75
1.25
30 Improvement
Execution Schedule
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Step 1. Common Language
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PMIs PMBOK

• Project Management Skills from PMBOK
• --Project Integration Management
• --Project Scope Management
• --Project Time Management
• --Project Cost Management
• --Project Quality Management
• --Project Human Resource Management
• --Project Communications Management
• --Project Risk Management
• --Project Procurement Management

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Step 2. Common Project Development Execution
Process
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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

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Project Management Vision
High

• Consistent Success
• Good Projects
• Good Execution

• Random Success
• Good Projects
• Average Execution

Decision Quality
Mid

• Success Unlikely
• Poor Projects
• Poor Execution

• Random Success
• Poor Projects
• Good Execution

High
Low
Mid
Execution Quality
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Project Development Execution Process
AFE
1
2
3
4
5
PHASE 2 SELECT from Alternatives
PHASE 3 DEVELOP Preferred Alternative
PHASE 4 EXECUTE (Detail EPC)
PHASE 1 IDENTIFY Assess Opportunities
PHASE 5 OPERATE Evaluate
Evaluate Asset to Ensure Performance to
Specifications and Maximum Return to the
Shareholders
Produce an Operating Asset Consistent with Scope,
Cost and Schedule
Determine Project Feasibility and Alignment
with Business Strategy
Finalize Project Scope, Cost and Schedule and
Get the Project Funded
Select the Preferred Project Development
Option
AFE Appropriation For Expenditure
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Project Managements Impact on Creating Value
Value Identification
Value Realization
Good Project Execution
Good Project Definition
A
B
VALUE
Poor Project Execution
C
Poor Project Definition
D
AFE
Phase 4 Execute
Phase 5 Operate
Phase 3 Develop Preferred Alternative
Phase 1 Opportunity Identified
Phase 2 Generate Select Alternatives
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Project Development Execution Process
AFE
1
2
3
4
5
PHASE 2 SELECT from Alternatives
PHASE 3 DEVELOP Preferred Alternative
PHASE 4 EXECUTE (Detail EPC)
PHASE 1 IDENTIFY Assess Opportunities
PHASE 5 OPERATE Evaluate
Operate Asset Monitor Evaluate
Performance Identify New Opportunities
Clearly Frame Goal Test for Strategic
Fit Preliminary Overall Plan Preliminary
Assessment 1 Engng. Phase 1 Estimate
Fully Define Scope Develop Detailed Execution
Plans Refine Estimate Submit Funding for
Approval 25 Engng. Phase 3 Est. (/- 10
Accuracy)
Generate Alternatives Preliminary Development of
Alternatives Develop Expected Value Identify
Preferred Alternative Phase 2 Est.
Implement Execution Plan Min. Changes Finalize
Operating Plan Business Plan for Phase
5 Project Review
AFE Appropriation For Expenditure
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Influence vs. Expenditures
Major Influence
Rapidly Decreasing Influence
Low Influence
Final Authorization
INFLUENCE
EXPENDITURES
Front End Loading
OPERATE
IDENTIFY
SELECT
DEVELOP
EXECUTE
Gate
Gate
Gate
Gate
Gate
Gate
Gate
Gate
DSP
DSP
DSP
DSP
DSP
Front End Loading
DSP Decision Support Package
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Key Players

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

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Managements Role (1)

• AccountabilityBusiness evaluation should be
  conducted 1 to 2 years after project completion
  and Project Sponsor should be held accountable
  for the financial outcome.
• AccessibilityManagement should actively
  participate in gate keeping meetings at the end
  of each phase of the Project Management Process
  and communicate frequently with the project team.

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Managements Role (2)

• LeadershipManagement should establish clear
  expectations and objectives for the project team.
• ResourcesProvide resources of right people and
  funding to support the project team.
• BehaviorsDemonstrate visible support and provide
  positive consequences for following Project
  Management Process, Best Practices and sharing
  Lessons Learned.

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Step 3. Application of Value Improving / Best
Practices
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Value Improving / Best Practices

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

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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

• Pre-Funding Assessment

(Share)

• Decision Risk Analysis
• Project Execution Planning
• Lessons Learned
• (Seek)

• Value Improving Practices by IPA
• Peer Review

• Post Project
• Assessment
• Business Evaluation

Legend AFE Appropriation for Expenditure
D Decision Point
PFD Process Flow Diagram
IPA Independent Project Analysis, Inc.
PID Piping
Instrumentation Diagram
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Step 4. Total Cost Management
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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)

(Definitive)
(Cost Collection / Analysis)
(Funding /- 10 Accuracy)

(CPM Bar Chart)
(CPM Resource Loaded)
(Monitor Update)
(Pre-Funding Assessment)
(Post-Project Assessment)
(Set Pacesetter Target)

• Contracting/Procurement
• (Strategy)
• Cost Control/Forecasting
• (WBS)
• Progress reporting
• Finance/Audit

(Pre-Qualification)
(Award / Monitor)
(Closeout)
Performance Measurement (Establish Progress
Payments)
(Earned Value)

(Establish Cost Accounts Budgets)
(Trend / Forecast)
(Capital versus Expense)
(Asset Accounting)
Legend AFE Appropriation for Expenditure
NPV Net Present Value PFD Process Flow
Diagram D Decision Point ROR Rate of
Return PID Piping Instrumentation
Diagram EPC Engineer, Procure Construct
CPM Critical Path Method WBS Work
Breakdown Structure

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Step 5. Training and Certification
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Training

• Project Management Skills from PMBOK
• --Project Integration Management
• --Project Scope Management
• --Project Time Management
• --Project Cost Management
• --Project Quality Management
• --Project Human Resource Management
• --Project Communications Management
• --Project Risk Management
• --Project Procurement Management
• Business Decision Risk Analysis
• Leadership Roles Behaviors

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Certification

• All Decision Makers should be certified in
• -- Overview of PMBOK Areas
• -- Business Decision Risk Analysis
• -- Leadership Roles Behaviors
• All Project Professionals should be certified in
• -- PMBOK Areas
• -- Business Decision Risk Analysis
• -- Leadership Roles Behaviors

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Summary

• Common Language, Common Project Development
  Execution Process, Application of Value Improving
  / Best Practices, Total Cost Management and
  Training / Certification can help create a
  World-Class Project Management Organization that
  Delivers
• Better
• Cheaper
• Faster
• Safer
• PROJECTS