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Risk Manage
faster
construction Collaboration better
BIM
Lean
Major Projects Partn
Alliance
Engineering cheape
Critical Ch...
These slides are based on a presentation made a the

European Public Sector Effectiveness Conference
held on 24 October 20...
Effective procurement
of major projects
Opportunities for major improvements in speed,
quality and value
Ian Heptinstall
M...
Synopsis
• The Situation Addressed

• Projects where the majority of the work is carried out by companies other than the
m...
The Idea:
Success Equation for Major Projects
Money

Time

+

=

Money

Time

CCPM

+

Collaborate

More, sooner, for
=
le...
Project Value?
1. Cost Drivers on Projects
2. Managing projects
3. Commercial relationships

www.pmms.me
www.pmms-group.co...
Project Planning & Project Cost
How costs breakdown

Margin
Inherent
Asset

BETTER =
• Buy Smart
• Use Team

Cost
Project
...
Project Planning & Project Cost
How costs breakdown
Same Project
On-time .. In less time
On-budget .. At lower cost

Margi...
Procuring Major Projects:
There are significant issues today

www.pmms.me
www.pmms-group.com
www.pmms.me
www.pmms-group.com

In 2007 the UK’s Chartered Institute of Building reported on a study into project delays i...
Why are large projects a problem?

www.pmms.me
www.pmms-group.com
Why are large projects a problem?

www.pmms.me
www.pmms-group.com

• Its never been done before – you cant
copy/learn as e...
Major Projects
• Known & Defined methodology
• But….
• Inconsistent delivery dates
• Inconsistent budget performance
• Bet...
Late 1990’s CCPM made public

www.pmms.me
www.pmms-group.com
CCPM
Critical Chain Project Management
• A methodology for managing project execution
• Delivers shorter, more reliable, h...
CCPM Rule 1:
No Bad Multitasking

www.pmms.me
www.pmms-group.com

• The colours represent 4 projects that need to be done....
CCPM Rule 2:
S
hared S
afety

Project Buffer

www.pmms.me
www.pmms-group.com

Traditional planning is based on task durati...
CCPM Rule 2:
S
hared S
afety

Typically 25% shorter

FB
Project Buffer

FB
www.pmms.me
www.pmms-group.com

However, the sa...
% of Buffer Used

CCPM Rule 3:
Management Focus - Buffer

% of Buffer Used

% of Project Complete
 Project D

 Project A...
Public Works Construction (Japan)

Major Product Engineering (Boeing)

New Product Introduction

A few CCPM users who have...
CCPM is proven to work
Same Project
On-time .. In less time
On-budget .. At lower cost

www.pmms.me
www.pmms-group.com
“Tell me how you measure me and I will
tell you how I will behave. If you measure
me in an illogical way... do not complai...
Major obstacles to exploiting CCPM

Selection

www.pmms.me
www.pmms-group.com
Collaboration

www.pmms.me
www.pmms-group.com
Collaboration on Capital Projects
• CCPM is very difficult on a traditionally-contracted project
• Partnering – many tried...
Compete or Collaborate?
Price

MARGIN
COST

www.pmms.me
www.pmms-group.com

Although it is a slight simplification, the ma...
The Potential
Make Money

Preferential Access to Innovation

Reduced Risk

www.pmms.me
www.pmms-group.com

This shows the ...
A few companies that have used and
benefited from Collaboration

www.pmms.me
www.pmms-group.com
Collaboration in IT
IBM 2013
•
•
•
•
•
•
•

IT Sourcing
1351 Companies
40% C-level Executives
35% >10,000 staff
18 industr...
The Pay-off: 300 construction
projects studied, those using
collaboration got…
-10% Cost
-20% Time
-65% Changes
+25% Profi...
Collaboration
Critical Success Factors
Aligning interests & sharing risk

Ensuring “doing the right thing” for the client ...
Being Collaborative on Projects.
Not a simple addition – complete change
Competition

Collaboration

• Late-as-possible se...
So why isn’t collaboration more
common?
It is unstable

It’s not how we were trained
Rare

Better the devil you know
We do...
Value-driven Procurement
• Competition is not the only way…. and often it’s not the
best way
• Collaboration is simple (in...
In Summary
CCPM

+

Collaborative
Procurement

Money

Time

On-time
.. in less time

On-budget
.. at lower cost
www.pmms.m...
Thank you
Ian Heptinstall
ian.heptinstall@pmms-group.com
www.pmms.me

www.pmms.me
www.pmms-group.com
Ian Heptinstall
• Ian helps organisations to improve the value added by their
supply base.
• He is involved in developing ...
PMMS Consulting Group
Global reach and local knowledge with offices across five continents
and the capability to deliver i...
A sample of our recent clients

www.pmms.me
www.pmms-group.com
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Major Projects - Faster Better Cheaper

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If your projects involve other companies doing most of the work, then this presentation can open the door to faster, better and less expensive projects. You don't have to spend more to get your project sooner. Critical Chain Project Management (CCPM) has worked wonders in many industries..but has not had much impact in sectors such as construction. We think we know why. Take a look ad let us know what you think www.profitableprojects.org

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  • Graph from Wall Street Journal July 2013 http://online.wsj.com/article/SB10001424127887324867904578593570111198546.htmlTable from report on SAP implementationshttp://www.zdnet.com/erp-implementation-benchmark-comparing-sap-oracle-and-microsoft-7000000971/FT: Sep 13 http://www.ft.com/intl/cms/s/2/794bbb56-1f8e-11e3-8861-00144feab7de.html#axzz2hg0uVYC8
  • Dr Reddy’s – 180 -> 53Motorway feeder traffic lights & speed limitsOmron
  • Collaboration in itself can work…but not consistentlyThe Construction Industry Institute (CII) researched nearly 300 projects that were completed using the partnering approach and found significant benefits:• Total project costs were reduced by 10%• Profitability increased by 25%• Overall project completion time was reduced by 20%• Schedule changes were reduced by 48%• The number of claims were reduced by 83%• Lost-time accidents were 1/3rd of industry standard• Change orders were reduced by 80%• Job satisfaction increased by 30%
  • The Construction Industry Institute (CII) researched nearly 300 projects that were completed using the partnering approach and found significant benefits:• Total project costs were reduced by 10%• Profitability increased by 25%• Overall project completion time was reduced by 20%• Schedule changes were reduced by 48%• The number of claims were reduced by 83%• Lost-time accidents were 1/83rd of industry standard• Change orders were reduced by 80%• Job satisfaction increased by 30%
  • Collaboration in itself can work…but not consistentlyThe Construction Industry Institute (CII) researched nearly 300 projects that were completed using the partnering approach and found significant benefits:• Total project costs were reduced by 10%• Profitability increased by 25%• Overall project completion time was reduced by 20%• Schedule changes were reduced by 48%• The number of claims were reduced by 83%• Lost-time accidents were 1/83rd of industry standard• Change orders were reduced by 80%• Job satisfaction increased by 30%
  • Transcript of "Major Projects - Faster Better Cheaper"

    1. 1. Risk Manage faster construction Collaboration better BIM Lean Major Projects Partn Alliance Engineering cheape Critical Chain Selection CCPM contracting Contract Earned Value Value Analysis forecast planning estimate
    2. 2. These slides are based on a presentation made a the European Public Sector Effectiveness Conference held on 24 October 2013 in Vilnius, Lithuania, a flagship event of the Lithuanian presidency of the European Union (July-December 2013) Additional words have been added to several slides to make them suitable for reading © Ian Heptinstall
    3. 3. Effective procurement of major projects Opportunities for major improvements in speed, quality and value Ian Heptinstall MD PMMS Middle East www.pmms.me www.pmms-group.com
    4. 4. Synopsis • The Situation Addressed • Projects where the majority of the work is carried out by companies other than the main client. • The Problem • Projects have inconsistent results, many being late, over budget or leaving needs unmet. • Traditional methodologies do not seem to guarantee high levels of success • Success is as much down to the experience of project manager as the methodology • The Prize • Projects delivered on time in less time, and on budget at lower cost, whilst maintaining or improving quality/scope. • Resulting in higher return on investment in the private sector, or more and faster projects in a budget-constrained public sector • Using methods that can be easily taught, transferred and managed • A project team which can implement and exploit other proven & evolving improvement techniques more easily and with higher success • The Direction of the Solution • Manage the project using the CCPM approach • Select your project team/supply chain using collaborative selection & contracting www.pmms.me www.pmms-group.com
    5. 5. The Idea: Success Equation for Major Projects Money Time + = Money Time CCPM + Collaborate More, sooner, for = less & better www.pmms.me www.pmms-group.com
    6. 6. Project Value? 1. Cost Drivers on Projects 2. Managing projects 3. Commercial relationships www.pmms.me www.pmms-group.com
    7. 7. Project Planning & Project Cost How costs breakdown Margin Inherent Asset BETTER = • Buy Smart • Use Team Cost Project BETTER = • Managed • Cost = Quantity x Rate www.pmms.me www.pmms-group.com A simple breakdown of a project’s cost. The inherent asset represents the goods bought that stay with the completed project. The project element of the costs are the one-off costs necessary to plan, manage and build the inherent asset. To reduce the cost of these elements requires different actions and capabilities. This presentation focuses on reducing the project cost element. There are some reductions in the inherent asset cost, but they are mostly incidental. I am not saying these are unimportant, just not the direct benefit of this proposed approach. One of the benefits of this approach is that it produces a project team environment more amenable to the implementing of other value-improving techniques
    8. 8. Project Planning & Project Cost How costs breakdown Same Project On-time .. In less time On-budget .. At lower cost Margin Inherent Asset Margin Inherent Asset Cost Project Project www.pmms.me www.pmms-group.com The right-hand column shows the impact on cost of this method. • A different management approach significantly reduces the project duration, and the quantity of all time-related resources such as design, management, construction, and hired items. • The integrated team can also have a contribution to improving the design and this cost of the inherent asset. Even if the supply chain make the same margin from their involvement, the project is significantly less expensive. Is this an example of the elusive “win-win”?
    9. 9. Procuring Major Projects: There are significant issues today www.pmms.me www.pmms-group.com
    10. 10. www.pmms.me www.pmms-group.com In 2007 the UK’s Chartered Institute of Building reported on a study into project delays in construction projects around the world. One standout feature was the lack of even basic planning in the industry. Under 5% of projects had a logically sequenced programme. 50% only had a high-level master plan, with short-term planning done inconsistently or on-the-fly. No one reported a single integrated project plan from initial conception through design to building , commissioning then handover. On the one hand worrying, on the other it shows the enormous potential to improve
    11. 11. Why are large projects a problem? www.pmms.me www.pmms-group.com
    12. 12. Why are large projects a problem? www.pmms.me www.pmms-group.com • Its never been done before – you cant copy/learn as easily • The team hasn’t worked together before • Low skill & awareness of key elements of major project management • Lack of trust amongst main players – or wrong types of trust Use of the inappropriate techniques • Design – Bid – Build • Arms-length competitive tendering • Soft-and-fluffy partnering • Certainty-based planning • Management by detail & control
    13. 13. Major Projects • Known & Defined methodology • But…. • Inconsistent delivery dates • Inconsistent budget performance • Better & Faster means more expense • Expensive Control • The new kid on the block • Critical Chain Project Management (CCPM) • 1995 www.pmms.me www.pmms-group.com
    14. 14. Late 1990’s CCPM made public www.pmms.me www.pmms-group.com
    15. 15. CCPM Critical Chain Project Management • A methodology for managing project execution • Delivers shorter, more reliable, higher quality projects • Used around the globe • • • • • New Product Development Capital Projects IT Maintenance, Repair & Overhauls Services & Administration • 3 Core “Rules” • Reduce bad multi-tasking and WIP • Plan for uncertainty at project-level not task-level • Control execution using buffer penetration/priorities www.pmms.me www.pmms-group.com
    16. 16. CCPM Rule 1: No Bad Multitasking www.pmms.me www.pmms-group.com • The colours represent 4 projects that need to be done. Doing them in sequence produces the best results – a steady stream of completed projects, with the shortest time between start & finish. • However, many factors in real life conspire to put significant pressure to start projects (multi-task). This is the 2nd line. Even if resources could switch without any waste, project completions are delayed & bunched – look when the projects finish & compare lines 1 and 2. • But in real life frequent switching is inefficient, and we get the 3rd line – everything is later • Major organisations have cut ongoing projects by 50-90% and seen a dramatic increase in completions!!
    17. 17. CCPM Rule 2: S hared S afety Project Buffer www.pmms.me www.pmms-group.com Traditional planning is based on task durations with a high degree of certainty – “Give me a date you can be sure to achieve”. In reality no one can predict the future, and the true answer would be “Probably somewhere between 4 weeks and 7 weeks depending”. Project planners don’t like this answer, so estimators tend to answer “7 weeks”. Tasks in the plan therefore have built-in safety to cover uncertainty, shown in the simple programme a the top. CCPM forms the basic schedule as shown below – with all this safety removed from the individual tasks. The task duration is based on the “50% chance” duration
    18. 18. CCPM Rule 2: S hared S afety Typically 25% shorter FB Project Buffer FB www.pmms.me www.pmms-group.com However, the safety is NOT removed from the project. It is placed in the programme where is can protect the whole project. This is key to CCPM: Protect the project from the variability that you know will happen, not the task. You can be sure that something will happen to delay a task, you just don’t know which task will have the delay! Statistics and vast experience shows that you need much less safety of it is in the right place – giving a duration around 75% of the traditional project. The main safety is the Project Buffer. Feeding Buffers protect the “critical chain” from delay on less critical tasks. The critical chain is slightly different to the more common critical path.
    19. 19. % of Buffer Used CCPM Rule 3: Management Focus - Buffer % of Buffer Used % of Project Complete  Project D  Project A  Project F  Project E  Project H  Project G  Project B  Project C % of Project Complete www.pmms.me www.pmms-group.com The project buffer becomes the main focus for project control and management. Compared to traditional measures is it simple and provides good early warning or issues, allowing them to be tackled when small. Tasks that are underway report frequently the date they expect to be finished. The amount of project buffer “used” is compared to the overall project progress in a simple graph – top left. Green = OK. Yellow = Watch/Prepare. Red = Act to Recover The bottom right shows an organisation-wide (or programme) overview. This allows managers to quickly identify projects that require support.
    20. 20. Public Works Construction (Japan) Major Product Engineering (Boeing) New Product Introduction A few CCPM users who have reported improvement of 25-95% Administrative Processes Engineered Systems IT Systems Implementation www.pmms.me www.pmms-group.com
    21. 21. CCPM is proven to work Same Project On-time .. In less time On-budget .. At lower cost www.pmms.me www.pmms-group.com
    22. 22. “Tell me how you measure me and I will tell you how I will behave. If you measure me in an illogical way... do not complain about illogical behaviour.” Eli Goldratt, Business Guru & Inventor of CCPM “Tell me how you pay me and I will tell you how I will behave. If you pay me in an illogical way... do not complain about my illogical behaviour.” Ian Heptinstall www.pmms.me www.pmms-group.com
    23. 23. Major obstacles to exploiting CCPM Selection www.pmms.me www.pmms-group.com
    24. 24. Collaboration www.pmms.me www.pmms-group.com
    25. 25. Collaboration on Capital Projects • CCPM is very difficult on a traditionally-contracted project • Partnering – many tried, many failed • When done right, and in the right circumstances, collaborative sourcing can beat competitive sourcing • Collaboration is customised – not one-size-fits all • • • • Together Everyone Achieves More “It is amazing what you can accomplish if you do not care who gets the credit.” Harry S Truman, 33rd president of the USA www.pmms.me www.pmms-group.com
    26. 26. Compete or Collaborate? Price MARGIN COST www.pmms.me www.pmms-group.com Although it is a slight simplification, the main difference between collaboration and competition is • Completion focuses on battling over the supplier’s margin • Collaboration focuses on working together to remove unnecessary cost
    27. 27. The Potential Make Money Preferential Access to Innovation Reduced Risk www.pmms.me www.pmms-group.com This shows the potential of the two approaches • Many really significant cost reduction achievements have been made by collaboration between buyer and supplier. Its collaborative supply network (keiretsu) helped Toyota to become the lowest cost car manufacturer • If you want to reduce risk you have to understand the risks in your supply chain. Collaboration requires increased honesty & openness – prerequisites to identifying supply-side risks • Competition is very unlikely to lead to preferential access to supplier-driven innovation
    28. 28. A few companies that have used and benefited from Collaboration www.pmms.me www.pmms-group.com
    29. 29. Collaboration in IT IBM 2013 • • • • • • • IT Sourcing 1351 Companies 40% C-level Executives 35% >10,000 staff 18 industries 12 countries 70% from mature markets Relative results from those (19%) of companies using true collaboration aimed at more than just cost reduction www.pmms.me www.pmms-group.com
    30. 30. The Pay-off: 300 construction projects studied, those using collaboration got… -10% Cost -20% Time -65% Changes +25% Profit -83% Claims +30% Satisfaction -99.8% LTA www.pmms.me www.pmms-group.com
    31. 31. Collaboration Critical Success Factors Aligning interests & sharing risk Ensuring “doing the right thing” for the client is also the “right thing” for the supplier Behaviours + Selection + Contract Contract is at the heart of the agreement – not in the back-office Collective responsibility for overall contract management Early selection of the team Requirement and freedom to innovate and change Negotiate the process/relationship www.pmms.me www.pmms-group.com
    32. 32. Being Collaborative on Projects. Not a simple addition – complete change Competition Collaboration • Late-as-possible selection • Detailed bids based on scheme (Design-BidBuild) • Select lowest/fastest bid • A Chain selected one at a time • Conflicting commercials • Early-as-possible selection • Outline bids based on capability (Bid-DesignBuild) • Select best available team • A team selected together • Aligned commercials www.pmms.me www.pmms-group.com
    33. 33. So why isn’t collaboration more common? It is unstable It’s not how we were trained Rare Better the devil you know We don’t know how to do it correctly “It’s the rules” www.pmms.me www.pmms-group.com
    34. 34. Value-driven Procurement • Competition is not the only way…. and often it’s not the best way • Collaboration is simple (in concept) but not easy (to do) • Apply Collaboration and CCPM on your major projects to give your business • • • • More projects for the same investment Higher returns Greater viability Greater profitability • Anyone can spend their way to better • Is that good enough for you?... “Life is boring without challenges” www.pmms.me www.pmms-group.com
    35. 35. In Summary CCPM + Collaborative Procurement Money Time On-time .. in less time On-budget .. at lower cost www.pmms.me www.pmms-group.com
    36. 36. Thank you Ian Heptinstall ian.heptinstall@pmms-group.com www.pmms.me www.pmms.me www.pmms-group.com
    37. 37. Ian Heptinstall • Ian helps organisations to improve the value added by their supply base. • He is involved in developing new and innovative approaches to major supply issues, and is currently working on opportunities to significantly improve major construction projects and retail supply chains. • His career has covered procurement and supply chain management, management consulting, engineering and capital project management. He has worked across many business sectors including construction, engineering, consulting, process and chemicals, pharmaceuticals, manufacturing and retail. • Before moving into consultancy, Ian was supply chain director for a leading construction company in the UK. He is a qualified engineer who started his career in the process and pharmaceuticals industries, and is now managing director of PMMS Consulting Group’s Middle East operation. www.pmms.me www.pmms-group.com
    38. 38. PMMS Consulting Group Global reach and local knowledge with offices across five continents and the capability to deliver in 10 different languages PMMS North America Toronto PMMS Europe UK, France, Germany, Switzerland, Turkey PMMS Asia Pacific PMMS Middle East Dubai Australia, New Zealand, Hong Kong, Japan PMMS Southern Africa Pretoria www.pmms.me www.pmms-group.com
    39. 39. A sample of our recent clients www.pmms.me www.pmms-group.com
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