Partnering: Minimize Failure and Enhance the Chance of Success

Partnering
(Minimize Failure/Enhance Chance of Success)

© 2012 - 2013 SUKAD

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© 2012 - 2013 SUKAD Group (www.sukad.com) - Partnering

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Partnering Topics

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 Project failures and success
 CS 1: working across continents/organizations
 CS 2: innovative planning/execution techniques
 CS 3: project control/stakeholders involvement
 CS 4: from adversaries to integrated team

Project failures and success
There are four major categories of project
failures
There are dimensions for measuring project
success
Under each of these categories there
numerous reasons


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Project failures
Project fails because of one of four categories:
Lack of proper business case, feasibility study, objectives
setting
Failure in planning
Failure in execution
Environmental conditions significantly different than
anticipated due to abnormal situations
It could be a combination of the above
Understanding failure allows us to proactively seek success


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More on project failures
Failures due to each of the above categories can be due to:
Individuals’ competence, or lack of
 Training, professional development, other factors
 Lack of proper follow up
 Empowerment and accountability

The project management organizational system
 No proper methodology and processes in place
 No historical project records and lessons learned …

Low level of project management maturity

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Dimensions of project success
Topic of another workshop


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The four dimension of project success

D1: Success of the Product
D2: Success of Project Management

D3: Success of Project Delivery
D4: Success of The Idea – Business Objective

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Case studies: setting the scene
Three case studies are from same project
Mega project; two parts
 New facilities; revamp of existing refinery

Joint venture; 3 partner (50/40/10)
Main partners are North American, Project is Asia
On a small island; no space or local resources
Contractors mostly European
Labor from various Asian countries
Cost plus (reimbursable) contract + incentive

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CS 1: Working across continents & organizations
Project Management
Overall responsibility with the project owner
Delegated some PM activities to main contractor

Teams:
Owner team mostly North American with a few
European and Asian members
Contractor management team mostly European
with some Asian and other nationalities
Construction staff numerous nationalities

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Truly global project
Main owners executive management in USA
Main contractor management in UK
Construction contractor mostly German
Preliminary engineering in USA
Detailed engineering from UK
Procurement led from UK but global sourcing
Construction on four sites in SE Asia

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Procurement & sourcing


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Challenges and success factors (focus on
human aspects)
Dispersed teams and management
Frequent online and face to face communications
Island local and limited spacing
Modular construction on four sites
Enhance safety and productivity
Large number of organizations involved
Had to build bridges (cultural and otherwise)
Worked as integrated as possible

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More challenges and success factors
Incentive – cost plus contract
Initially a challenge and caused conflict
Later helped build trust and became an advantage
Language a challenge; especially construction
All signs and safety info in four languages
Every crew had a member that speaks one of the four
languages
Labors not used to strict safety standards
Using various techniques including “Models”

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CS 2: Innovative Planning and Execution
Techniques
Major challenges due to island limited space
New plant has to be on reclaimed land
Time constraints due to external factors
(government closing the shipping channel)
Lack of space did not allow to have all labors
on site
Plus not enough labor in nearby countries

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Location, location, location


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Possible solution


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Chosen solution
Use modular construction techniques,
Build the main process unit as modules
At fabrication yards
Ship them to the site on barges
Install them one after the other – like Legos
This was selected option
Resulted in close to 200 modules
Many the size of a four-story building

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Project pictures (the reclaimed site)
Tank Foundation

Crane Foundation


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Channel, Barge, Modules …
Closing the Channel
Vessels – Delivered Ready

Pipe Rack Modules


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Fired heaters modules


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The Giant
This is a relatively light module

One of the largest
cranes in the world
– 10 days to move

Various Stages of Assembly


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CS 3: Stakeholders Involvement
Focus is on project control
Contract: threats and opportunities
Stakeholders involvement


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Main contract
EPC Contract (Engineering, Procurement, and
Construction)
Construction was to be subcontracted to one
general contractor
Which ended up being a joint venture
(consortium)


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Contract’s commercials
Cost plus (reimbursable cost)
All costs will be reimbursed (owner risk)
Contractor profit is in the form of a fee
The fee was incentive fee with a cap
The fee was in three parts
 Safety fee: certain amount if project meets clients

safety requirement – on a scale

 Schedule fee: same thing – one a scale
 Cost component was also on a scale

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Capital Risk Continuum (Contract Types Versus Risk)

Our Project

Cost component of the fee
Cost component was largest; 75% of total fee
The fee could grow or shrink based on actual
performance
Budget was set by the owner, with input from
main contractor


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Project control
Owner team started as four people early in the
project
By the team we reached construction became 2 with
one doing most of the project control
Main contractor team had more resources
After the rough start early in the project learned to
trust each other
Un-officially formed an integrated team to work
together

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Dealing with the challenge
Team (project control) divided the project into
control accounts
Identified the owners for these accounts
Defined the budgets for these accounts
Analyzed the accounts for potential cost
savings opportunities
Simulated possible incentives if we achieved
these cost savings

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Stakeholders involvement
PC met with control accounts owners; oneon-one
Shared with them PC perspectives
Invited them to work with us in collaboration
Asked them to be cost conscious and identify
saving opportunities
Kept them up to date on weekly/monthly
basis (depend on account)

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Results
Some did not truly collaborate well
Most welcomed the initiatives
Did generate some cost savings, in construction,
which is not easy
Avoided potential costly variances
Built strong team and stakeholders relations
Did contribute to project success
Project wise: did not cap the cost incentive but came
close

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CS 4: Adversaries to Integrated Team
Project characteristics
Project owner and contractor
The contract
Project management
The challenges
The solutions


Alliance engagement: background
Petrochemical projects @ 5 sites (plants)
Multiple projects from $200 m to $50 mm
Total value at peak ~ $100 mm
Alliance contract
Engineering, Procurement, Construction
4 years term – renewable
True cost plus incentive based contract
Client provided estimate, agreed by contractor
Contractor profit only if we under run projects

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Organization
Client “PMO” housed
Project engineers
 Managing overall project with focus on engineering

Construction supervision
 Mostly about quality, safety, and coordination with

operation organization

Project control (cost & schedule) responsibility of
PE – but not main focus (initially was not on PMO)
Estimating is in home org not on PMO

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Organization, continued
Contractor PMO housed
Project engineers & construction supervision
 Like client organization but more direct to work

Project control: cost, schedule, & subcontracting
responsibility of Technical Support Team
Most construction labor by contractor and specialty
subcontractors
Both contractor and client housed together
Construction at each site
Engineering and Technical Support in common site near the
plants

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The situation
Most projects over running their budget
Contractor not earning any profit and blaming client for
deceptive estimating
Client blaming contractor for lack of management and
control
Definitions
> 110% of budget = over run (headache)
100 to 110% of budget = over expenditure
 Tolerated – but as long as we stay close to 105%


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Conflict
Both client and contractor losing credibility with the
“owner” / i.e. client operations
Trust was destroyed
Client PM – OK but not highly effective
Contractor PM – same way; replaced with a “top gun”
from contractor
Two years into a 4-year contract
Contractor no profit and facing losing renewal
Client suffering over runs

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Solution?
Client established a project support office
Initial team consisted of 3 team members
Later increased to 4

Main obstacles
Not enough power or authority
Walked into a confrontational situation
Not enough experience in team
Not directly responsible for control

Initial results
Contractor huge resistance
Large project control team consisted of close to
40 people at peak
Reduced workload led to drop to ~ 20
But not effective at all

Major confrontation
With every report and monthly status
Struggling with multi-projects environment

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The seesaw effect
Forecast Movement
140.0%
135.0%

Forecast / Planned Budget

130.0%
125.0%
120.0%
115.0%
110.0%
105.0%
100.0%
95.0%
90.0%
Month 1

Month 2

Month 3

Month 4

Month 5

Month 6

Month 7

Month 8

Month 9

Month 10

Month
Proj 1

Proj 2

Proj 3

Proj 4


Proj 5

Proj 6

Integration
Contractor new PM not fully aware of issues
Adversaries meeting of the minds
Convinced him to come to a monthly review
He was literally shocked – his pride was hurt
Another meeting – asking us for solution
Proposed concept of team integration
 Refused for all PMO
 Agreed for PSO – joining both teams
 Client organization accepted but with hesitation
 Contractor PM insisted – he was the champion

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Integrated, what now
Believe in the team
The issues are in the system
Resistance by contractor support manager
But lack of performance weakened his stand
Overcome through good relations and giving his team
confidence and support
Action – multiple meetings one-on-one
Understanding issues and frustrations
With their own organization and client

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Next steps
Team agreed to the various challenges facing the
organizations
Paired team members and assigned each pair a
challenge
to study, analyze, and develop solution … and
training of other team members
four weeks target completion
fear and lack of confidence – overcome with
coaching and mentoring

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Offsite team building
Three days – team building/offsite event
7 am to 11 pm together
Discussions and presentations about each challenge and
solution
Trained each others
Outcome
Major confidence building
Significantly increased trust
Understand that we are on the same side

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Specifics issues
Luck of trust in client estimates
Educated team about it and established feedback
process
Forecasting “by asking” around
Explained “client forecasting” and provided tips
on how to do it
Cost report issues
Developed standard form with easy use
Subcontracting issues – mostly scope related

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Alliance Engagement: Other Items
The were many other challenges that we did
address
Training sessions
For all control personnel
Also awareness about project control to
 All project engineers – both sides
 Construction supervisors – both sides


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Summary
Staged approach
First – fixed internal system
Next – evaluated contractor system
Worked on “low hanging fruits”
Then – made the case for integration
Integrated team
Tackled the issue of forecasting
Moved on to various accounts: issue by issue
Working toward enhanced control & forecasting
Effort helped renew the Alliance Contract

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Thank You
This presentation is per the
Creative Commons Guidelines
Refer to access information on PM Knowledge Portal

© 2012 - 2013 SUKAD

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