PROJECT GOVERNANCE
SURAJ ARVAPALLY
Student ID: 117062
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ContentsObjectives.
Conclusions / Recommendations
Introduction.
Literature review
Case study.
Analysis of case study
References
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Objective of the study
• To understand the concept of project governance.
• To understand the implementation of the principles of project governance
in construction organizations.
• To analyze the principles by implementing them on case study.
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INTRODUCTION
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What is project governance ?
• Project governance is the management framework within which
decisions of the project are made.
Project
governance
Policies
Regulations
FunctionsProcedure
Portfolios
Confident and
transparent
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INTRODUCTION
CORPORATE GOVERNANCE
PROJECT MANAGEMENT
PROJECT
GOVERNANCE
RELATION
• Provides the structure through
which the objectives of the
company are set.
• It is the system by which
companies are directed and
controlled.
company’s
management
Its board
Its
shareholders
Other
stakeholders
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Why project governance?
Set out lines of responsibility and accountability within the Authority for the delivery of the
project;
Give the stakeholders the ability to manage their interest in the project;
Provide a forum for issue resolution;
Communicate information by reporting to stakeholders so that they can effectively fulfil
their roles
Provide a framework for project disclosures.
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Literature review
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INVESTMENT DECISION GROUP
PROJECT TEAM
STRATEGIC
ADVISORS
PROJECT
MANAGER SHAREHOLDER
WORKING
GROUP
SENIOR SUPPLIERPROJECT OWNER
PROJECT
DIRECTOR
SENIOR USER
PROJECT GOVERNANCE FRAMEWORK
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Project owner/sponsor
• The project sponsor usually chairs the project steering committee and is the link
between the organization's senior executive body and the project.
• Owner is ultimately accountable for
the success of the project.
Senior
executive
body
Owner Project
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Project
sponsor
Project leadership
The sponsor provides:
timely decisions, clarifies decision
making framework, clarifies business
priorities and strategy, communicates
business issues, provides resources,
engenders trust, manages
relationships.
Project management
• The project sponsor engages
stakeholders.
• governs stakeholder
communications,
• Manages client relationships and
governance of users and suppliers.
• arbitrates between stakeholders.
Stakeholder management
The sponsor provides leadership on culture and
values, owns the business case, working with the
steering committee keeps the project aligned with
the organization's strategy, governs project risk,
focuses on benefits.
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The responsibilities of the project sponsor are:
• Securing budgets and ensuring appropriate financial controls are in place
• Supporting the project manager to successfully deliver the project.
• Prescribing the project both internally and externally.
• Ensuring a project is undertaken according to the Project Management Framework.
• Appointing the project management team including other members of the Project
Board
• Signing off project deliverables
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Project Board
• It provides direction and management for the project.
• Final decision is made by the project owner.
• Project board meeting is often organized for project board members for
decision making on reports of the project director and project manager
SENIOR SUPPLIERPROJECT OWNER
PROJECT
DIRECTOR
SENIOR USER
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Project Director
• The project director acts as a representative of project owner and
responsible for empowering project manager.
• The project director is a core member of the project steering committee or
project board.
Skills
project
management
.
Risk
management
Relation
management
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Project manager
• He ensures that the project outcomes are of required quality.
• Develops and updates the project management plan.
• Have to manage day-to-day aspects of project on behalf of project owner.
• Project management also resolves planning, implementation issues and
manage progress and budget of the project.
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Responsibilities of project manager:
Directing the project team
Maintaining the risk register, issue.
Managing the project plan.
Reporting on progress to the project sponsor and other stakeholders
Ensuring the project is managed in accordance with agreed processes and tolerances
approving minor variations to budget, schedule or scope, within agreed tolerances
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Investment Decision Group
• This group provides platform to stakeholders to give any kind of input to
the project.
• No validity for life span of the group. (Entire life of the project)
• Internal or external of organization.
• Stakeholders may be invited to participate but often they will not report to
the organization and cannot be forced to participate.
• Called to support project board (Rarely)
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5 Questions for Governance team
• (Includes both on and off project activities.)
Are we on track – to plan/schedule?
• (Includes required business decisions and escalation issues.)
What decisions need to be made?
• (Includes required inter-dependency issues, resource issues, proposed scope
changes.)
What issues are there – inside or outside the
project?
• (Includes expenditure, financial commitments, AND benefit value driver
changes and benefits realized to date.)
Are we on track – to budget and benefits plans?
• (Includes project, benefits delivery and business impact risks and critical success
factors status.)
Has the objectives of the project changed?
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2.2 PRINCIPLES OF EFFECTIVE PROJECT GOVERNANCE:
1: Ensure a single point of accountability.
2: Service delivery ownership determines project ownership
3: Ensure separation of stakeholder management and project
decision-making
4: Ensure separation of project governance and organizational
governance structures
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1: Ensure a single point of accountability
• Ensures clarity of decision making and empowers the accountable person
within the organization.
• Consistency of accountability throughout the project’s life ensures proper
decision-making – the focus of the project, its objectives and the benefits it
seeks remain consistent throughout its life, or at least are not changed
without due process.
• The project governance framework is a document prepared for each project
outlining who has responsibility and authority to make decisions which
ensures there is clearly defined accountability for all aspects of the project.
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Effective accountability requires everyone within the project to know:
Note: Care should be taken to ensure individuals who join the project
receive sufficient introduction to this framework.
What they are responsible for.
The limits of their authority and tolerance levels.
When tasks have to be achieved.
Communication, reporting and monitoring lines.
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2: Service delivery ownership determines project ownership
• Organizations have to be more competitive by continuously increasing their
quality of service
• Services can be delivered directly or indirectly by products.
• For example, construction material producers provide services to a housing
developer through construction materials they produce, and the way that
they serve is considered on quality, schedule, cost, etc,
• Changes on technology may support the service or the project which delivers
the service. For example, precast concrete panel can shorten construction
schedule of the project;
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The project as a transition mechanism
Equal importance to project ownership and (service and Asset delivery)
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3: Ensure separation of stakeholder management and project
decision-making
Increase in size of the committee.
The detailed understanding of each attendee of the critical project issues
reduces
Many members within the assembly raise more opinions, Questions
because they consider that being members of the assembly they are entitled
to do so.
They just use the meeting to get updated about the project issues
stakeholder Management (Project board - decision making)
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4: Ensure separation of project governance and organizational
governance structures
• The project governance is ineffective if there are many layers in the project
decision making process.
• Organization structures generally do not provide the necessary framework to
deliver a project.
• Adoption of this principle will minimize multi layered decision making and
the time delays.
• Empower Project decision making body to make decisions in a timely
manner.
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What happens if governance is not good?
Failure to communicate fully and appropriately on a timely basis.
Failure to specify or accept decision making authority and responsibilities.
Confusing contract management and decision making.
Over emphasis on reporting that reduces meetings to status updates rather than interactive decision making.
Non-alignment of key stakeholders.
Confusion between the project and organizational decision-making structures.
lack of project direction and control.
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“STAR SERVICE CENTER”
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Introduction
• In 2009, the board of directors decided to invest in the project SSC. It is a five
storey office building located on plot A-01, star road, in Star Commercial Complex
(SCC), Dilshuknagar, Hyderabad city, Telangana, India with its main objective of
initiating the master project SCC and of providing office services to tenants as well
as for STAR itself. Total land area of the building is 6,634.03m2.
• Total construction schedule of the project is 638 days starting from December 17,
2009 and completed on September 16, 2011, delayed 286 days as per the project
plan.
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SSC
STRUCTURAL
Main building
ARCHITECTURAL
ParkingInfrastructure
M/E
Fire prevention and fighting
system
Electrical
works
Plumbing/ Water supply
Land Scaping
WORK BREAK DOWN STRUCTURE
• 2,787.5 m2
• Five floors
• RCC
• Internal
traffic
• RCC road
• 280 bikes
• 50 cars
• RCC
• Sump
• Over head
tank
• Supply
560KVA
• Generator
• Installation of smoke
detectors, sprinklers
etc.,
• 20%
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Project cost
Total project cost is classified into eight packages:
Original Cost:- 43615USD
Liquidated Cost:- 53544USD
Original Cost:- 113464USD
Liquidated Cost:- 136157USD
Original Cost:- 1076514USD
Liquidated Cost:- 1076514USD
Original Cost:- 44180USD
Liquidated Cost:- 46899USD
4:Perfect construction work package
3. Package of transformer and underground water
tank:
2. Construction supervision and construction
management package:
1. Design package:
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Original Cost:- 1123183USD
Liquidated Cost:- 1104384USD
4:Perfect construction work package
Original Cost:- 136969USD
Liquidated Cost:- 151713USD
4:Perfect construction work package
Original Cost:- 31490USD
Liquidated Cost:- 22190USD
Original Cost:- 3147USD
Liquidated Cost:- 3219USD
5. M&E work:
6. Infrastructure and parking shed package:
8. Landscaping work:
7. Retaining wall package:
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THE PROJECT GOVERNANCE FRAMEWORK
The Project Director
(Engineering Manager)
The Project Owner
(President)
The Senior User
(Department Managers)
The senior Supplier (Designer and Interior Contractors) Project Board
Investment Decision Group (Board of Directors)
Project Manager appointed by Senior Supplier
Project team (architect, civil engineer, M&E engineer and interior engineer)
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PROJECT SPONSOR
• The sponsor of SSC is STAR
• The management assigned the president of organization as sponsor of the
project.
• He is the head of the project board responsible for project success.
• He assigned project director and other staff of project board.
• He involved in the project board and solved many issues within project
board.
• He reported the information directly to the investment decision group.
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SENIOR USER
• The first defined user of SSC is STAR itself using 900 m2 of building area.
• The sponsor assigned manager of the site management department to act as
the Senior user of the building after completion of construction.
• Operation and maintenance.
• Other users are customers having office demand. They are undefined users.
• As this manager is not the member of project board.
• There is no manual of users requirement from early stage of the project.
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SENIOR SUPPLIER
• The project sponsor decided to choose the senior suppliers from outside of the
organization.
• Company A was assigned as the designer of the project.
• Company B was selected for main construction packages through bidding process.
• Company C was nominated by owner for sub-construction works like transformer,
underground water tank and retaining walls.
• Company D was nominated for infrastructure and parking sheds by sponsor.
• Company E was nominated by sponsor for landscaping.
It is reminded that all of the senior suppliers nominated by owner are professional in the allotted works
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PROJECT DIRECTOR
• The project owner appointed the manger of the engineering department as
the project director.
• He is the member of the project board and reports the information directly
to the project owner and also the project manager.
• The project director nominated two engineers in the engineering department
to act as project engineers for the SSC.
• The project director presented daily in the project to keep the project
supported.
• The project director is expertise in construction management, so he could
assist the project owner to drive the project successfully.
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PROJECT BOARD
• The project board was established as per the decision of the project owner.
• Members of the project board are the project owner, the project director, and the
senior supplier.
• The project board was lack of senior user as discussed in the above article senior
user.
• The main objective of the project board is decision making.
• Weekly meeting are held. (Project budget, project quality, project work scope,
material changes, budget changes.)
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PROJECT MANAGER
• Project manager was assigned by senior supplier and approved by sponsor.
• Position of project manager has changed based on the stages of the project.
• The project manager is responsible to deliver the project within the time, cost and
money mentioned in contract.
• The project manager worked closely with the project director to make sure that the
project delivery meets the project’s owner’s needs.
• There was 5 main project managers represented by companies A,B,C,D and E.
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INVESTMENT DECISION GROUP
• The project owner with support from the project board submitted budget
plan to the investment decision group (the board of directors) for approval.
• In case of budget change, the project board was responsible to consider and
give instruction whether it approves for the change. The investment
• decision group in this case study includes a chairman, a vice chairman and six
directors.
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PROJECT TEAM
• The project team comprised engineers assigned by senior suppliers
• Members of the project team worked and reported directly with the project
manager.
Project
team
architects
civil
engg,
M&E
engg Responsible for
Detail activities
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ANALYSIS OF CASE STUDY
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PRINCIPLES OF EFFECTIVE PROJECT
GOVERNANCE:
1: Ensure a single point of accountability for the success of the
project.
2: Service delivery ownership determines project ownership
3: Ensure separation of stakeholder management and project
decision-making
4: Ensure separation of project governance and organizational
governance structures
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CONSIDERATION ON THE PRINCIPLE 1 OF EFFECTIVE PROJECT
GOVERNANCE
“Ensure a single point of accountability”
The management assigned the president of organization as
sponsor of the project.
He is the head of the project board responsible for project
success.
He assigned project director and other staff of project board.
He involved in the project board and solved many issues within
project board.
He signed the liquidated damages.
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CONSIDERATION OF THE PRINCIPLE 2 OF EFFECTIVE PROJECT
GOVERNANCE
“Service Delivery Ownership Determines Project Ownership”
No senior user from the beginning of the project.
User needs are not defined. No proper project targets
was prepared by owner from early stage of the project.
Problems in project investment related to
ineffectiveness of parking and space for advertising
demands was aroused.
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CONSIDERATION OF THE PRINCIPLE 3 OF EFFECTIVE
PROJECT GOVERNANCE
“Ensure Separation Of Stakeholder Management And Project Decision
Making Activities”
• Project governance framework of this project met the requirement of the
principle 3.
Project
board
Project
owner
Project
director
Senior
supplier
Therefore, all of the project
board meetings were aimed to
project decision making.
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CONSIDERATION OF THE PRINCIPLE 4 OF EFFECTIVE
PROJECT GOVERNANCE
Ensure separation of project governance and organizational governance
structures
Slow
decision
making
Sponsor
President/
Sponsor
External
issues
Director
Manager of
engg dept/
Director
Lot of
work load
DELAY
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Conclusions/ Recommendations
Every organization must follow the project governance framework
independent of its size.
All the projects should have the project governance framework and also
satisfy all the 4 principles of the project governance.
Ensure that the person who is selected for the sponsor of the project
should have enough ability to manage the framework and project issues.
Try to avoid playing multi roles at the same time. Due to which this project
have been delayed.
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REFERENCES
• Alessia D’Amato and Nigel Roome (2009), Leadership of organizational change toward an integrated model of
leadership for corporate responsibility and sustainable development: a process model of corporate responsibility
beyond management innovation, Corporate Governance, Vol.9 No 4, pp. 421-434
• Karim S. Rebeiz and Zeina Salameh (2006), Relationship between Governance Structure andFinancial Performance in
Construction, Journal of Management in Engineering, Vol. 22, No.1, pp. 20-26.
• Charles Y.J. Cheah and Micharl J. Garvin (2004). An open framework for corporate strategy in construction,
Engineering, Construction and Architectural Management Vol. 11 No. 3, pp.176-188
• Pearce, J. A., and Zaha, S. A. (1991). “The relative power of CEOs and boards of directors: Association with
corporate performance.: Strategic Manage. J., 12, pp. 135-153 Pfeffer, J. (1972). “Size and composition of corporate
boards of directors.” Adm. Sci. Q., 17, 218-228
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“THANK YOU”
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