Strategies for Managing Major Projects from POME By Gautam KOppala
Strategies for Managing Major Projects
Strategies for Managing Major Projects
The initiation of a project largely determines how successful it will be. The crucial point about the model presented below is that all the items must be considered from the outset if the chances of success are to be optimized. The project must be seen as a whole, and it must further be managed as a whole. While our focus here is on large, broad, community-based projects, the same principles apply, on a lesser scale, to other projects.
The strategic model for managing projects discussed in this chapter is shown ibelow. Its logic is essentially as follows:
The project is in danger of encountering serious problems if itsobjectives, general strategy, andtechnology are inadequately considered or poorly developed, or if itsdesign is not firmly managed in line with its strategic plans.
The project'sdefinition both affects and is affected by changes inexternal factors (such as politics, community views, and economic and geophysical conditions), the availability offinancing, and theproject duration; therefore, this interaction must be managed actively. (Many of these interactions operate through the forecasted performance of the product that the project delivers once completed.)
The project's definition; its interaction with these external, financial, and other matters; and its implementation are harder to manage and possibly damagingly prejudiced if the attitudes of the parties essential to its success are not positive and supportive.
Realization of the project as it is defined, developed, built, and tested involves:
Deciding the appropriate project-matrix-functional orientation and balancing the involvement of the owner, as operator, and the project implementation specialists.
Having contracts that reflect the owner's aims and that appropriately reflect the risks involved and the ability of the parties to bear these risks.
Establishing checks and balances between the enthusiasm and drive of the project staff and the proper conservatism of its sponsors.
Developing team attitudes, with emphasis put on active communication and productive conflict.
Having the right tools for project planning, control, and reporting.
Let us examine these points in more detail.
The project should be defined comprehensively from its earliest days in terms of its purpose, ownership, technology, cost, duration and phasing, financing, marketing and sales, organization, energy and raw materials supply, and transportation. If it is not defined properly "in the round" like this from the outset, key issues essential to its viability could be missed or given inadequate attention, resulting in a poor or even disastrous project later. The extent to which the project's objectives are not clear, are complex, do not mesh with longer-term strategies, are not communicated clearly, or are not agreed upon compromises the chances of its success. The Apollo program, which placed the first man on the moon, was technically extremely difficult, but its chances of success were helped by the clarity of its objective.
It is interesting to compare the Apollo program with a later US plan for a permanent, manned space station orbiting the earth. The space station objective was superficially clearin former President Ronald Reagan's words, "to develop a permanently manned space station and to do it within a decade." But the objective is in fact far from clear. What, for example, doesdevelop really mean? Just design and construct? Surely not. And what is the station's real missionand hence, what is the project's proper development strategy? Earth observation? A way station to planetary observation? Experimental purposes? A combination of these? The space station example illustrates that project, or program, objectives should match with viable long-term strategies, otherwise there will be confusion, uncertainty, changes, cost increases, and delaysas there indeed have been.
Strategies for the attainment of the project objectives should similarly be developed in as comprehensive a manner as possible, right from the outset. This means that at the prefeasibility and feasibility stages, for example, industrial relations, contracting, communications, organization, and systems issues should all be considered, even if not elaborated upon, as well as the technical, financial, schedule, and planning issues.
Some of the most valuable work on the need for comprehensive planning has come from the areas of R&D and new product development. Valuable work has also been done with regard to development aid projects. The insights of Cassens, Moris, and Paul encapsulate almost everything anyone of good sense would expect regarding what it takes to produce successful development projects.
2 The writings of Cooper, Manfield, and others on new product development similarly relate product implementation performance to environmental and market success.
The development of the design criteria and the technical elements of the project should be handled with the utmost care. The design standards selected affect both the difficulty of construction and the operating characteristics of the plant. Maintainability and reliability should be critical factors in determining the project's operating characteristics. Many studies have shown that technical problems have a huge impact on the likelihood of project overrun: Thorough risk analysis is therefore essential. The rate of technological change in all relevant systems and subsystems should be examined; technology must be tested before being designed into production (as opposed to prototype) projects; and design changes should be kept to a minimum.
No design is ever complete; technology is always progressing. A central challenge in the effective management of projects is thus the conflict between meeting the schedule against the desire to get the technical base that fits better. The orderly progressing of the project's sequence of review stagesthe level of detail becoming progressively tighter, with strict control of technical interfaces and of proposed changes (through configuration management)is now a core element of modern project management.
Projects as different as weapons systems, process plants, and information systems now generally employ project development methodologies that emphasize careful, discrete upgradings of technology; thorough review of cost, schedule, and performance implications; and rigorous control of subsequent proposed changes.
A major issue in project specification is how great a technological reach should beaimed for without incurring undue risks of cost overruns, schedule slippages, or inadequate technical performance. This was once the most difficult issue to get right on projects. More recently, practice has improved (though there have still been some spectacular disasters), partly because our basic technologies are not progressing into new domains at the rate they were before, but also partly because of the greater caution, care over risk assessment, use of prototypes, etc., which are now more common project practices. It is barely conceivable that we should embark on a brand new nuclear power reactor (AGR) or aerospace project (Concorde) today with the bravura that we did twenty to thirty years ago.
In setting up projects, then, care should be taken to appraise technological risk, prove new technologies, and validate the project design before freezing the design and moving into implementation.
Many external factors affect a project's chances of success. Particularly important are the project's political context, its relationship with the local community, the general economic environment, its location, and the geophysical conditions in which it is set.
Project personnel have often had difficulty recognizing and dealing with the project's impact on the physical and community environment and, in consequence, managing the political processes that regulate the conditions under which projects are executed. Most projects raise political issues of some sort and hence require political support: moral, regulatory, and sometimes even financial. National transportation projects, R&D programs, and many energy projects, for example, operate only under the dictate of the politician. The civil nuclear power business, Third World development projects, and even build-own-operate projects require political guidance, guarantees, and encouragement.
Do non-major projects also need to be conscious of the political dimension? Absolutely. Even small projects live under regulatory and economic conditions directly influenced by politicians; within the organization, too, project managers must secure political support for their projects.
Therefore, these political issues must be considered at the outset of the project. The people and procedures that are to work on the project must be attuned to the political issues and ready to manage them. To be successful, project managers must manage upward and outward, as well as downward and inward. The project manager should court the politicians, helping allies by providing them with the information they need to champion his or her program. Adversaries should be co-opted, not ignored.
Although environmentalism has been seriously impacting project implementation since the 1960s, most project personnel ignored it as a serious force at least until 19871988, when a number of world leaders, the World Bank, and others began to acknowledge its validity. Now, at last, most project staff members realize that they must find a way of involving the community positively in the development of their project. Ignoring the community and leaving everything to planning hearings is often to leave it too late. A "consent strategy" should be devised and implemented.Dialogue must begin early in the project's development.
In a different sense, getting the support of the local community is particularly important in those projects where the community is, so to speak, the useras, for example, in development projects and information technology. The local community may also be the potential consumer or purchaser for the project. Doing a market survey to see how viable the project economics are is thus an essential part of the project's management.
Changes in economic circumstances affect both the cost of the project's inputs and the economic viability of its outputs. The big difference today compared to thirty years ago is that then we assumed conditions would not vary too much in the future. Now we are much more cautious. As with technology, then, so with economics, we should be more cautious in appraising and managing our projects today.
In the area of cost-benefit discounting and other appraisal techniques, practice has moved forward considerably over the last few years. Externalities and longer-term social factors are now recognized as important variables that can dramatically affect the attractiveness of a project. Old project appraisal techniques have been replaced with a broader set of economic and financial tools in the community context with the use of environmental impact assessment procedures.
Initially resisted by many in the project community, the great value of environmental impact assessment (EIA) is that it
(1) allows consultation and dialogue between developers, the community, regulators, and others; and
(2) forces time to be spent at the front end in examining options and ensuring that the project appears viable.
Through these two benefits, the likelihood of community opposition and of unforeseen external shocks arising is diminished. Further, in forcing project developers to spend time planning at the front end, the EIA process emphasizes precisely the project stage that traditionally has been rushed, despite the obvious dangers. We all know that time spent in the project's early stages is time well spentand furthermore, that it is cost-effective time well spentyet all too frequently this stage is rushed.
During the 1980s there was a decisive shift from public sector funding to the private sector, under the belief that projects built under private sector funding inevitably demonstrate better financial discipline. This is true where projects are built and financed by a well-managed private sector company. But private financing alone does not necessarily lead to better projects (as the record of Third World lending shows: weak project appraisals, loan pushing, cost and schedule overruns, white elephants, etc.). What is required is funding realism. The best way to get this is by getting all parties to accept some risk and to undertake a thorough risk assessment. Full risk analysis of the type done for limited recourse project financing, for example, invariably leads to better setup projects and should therefore be built into the project specification process. The use of this form of funding in methods such as build-own-operate projects has had the healthy consequence of making all parties concentrate on the continuing economic health of the project by tying their actions together more tightly to that goal.
The raising of the finance required for the English Channel Tunnel is a classic illustration of how all the elements shown belowinteract, in this case around the question of finance. To raise the necessary billions of pounds required that certain technical work be done, planning approvals be obtained, contracts be signed, political uncertainties be removed, etc. Since the project was raising most of its funding externally, there was a significant amount of bootstrapping required: The tasks could be accomplished only if some money was already raised, and so on. Actions had to be taken by a certain time or themoney would run out. Furthermore, a key parameter of the project's viability was the likelihood of its slippage during construction. A slippage of three to six months meant not just increased financing charges, but the lost revenue of a summer season of tourist traffic. The English Channel Tunnel thus demonstrates also the significance of managing a project's schedule and of how its timing interrelates with its other dimensions.
Determining the overall timing of the enterprise is crucial to calculating its risks and the dynamics of its implementation and management. How much time one has available for each of the basic stages of the project, together with the amount and difficulty of the work to be accomplished in those phases, influences the nature of the task to be managed.
Gautam Koppala,
POME Author
Strategies for Managing Major Projects from POME By Gautam KOppala
By: GAUTAM KOPPALA
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