Effective procurement of construction and major investment projects: give your citizens 25% more while spending the same - Ian Hepinstall @ PSE 2013 Vilnius

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Ian Hepinstall, MD of PMMS Middle East (UAE) @ TOCICO International Public Sector Effectiveness Conference 2013 Vilnius …

Ian Hepinstall, MD of PMMS Middle East (UAE) @ TOCICO International Public Sector Effectiveness Conference 2013 Vilnius

- In order to significantly reduce project duration and cost the procurement approach also needs changing.

- The proven approaches to selection and procurement that really work.

- How to deliver projects on-time in less time, to budget for lower cost, and without compromising on scope and quality?

- What habits will need to be changed, and what suppliers will need to be coached and developed?

- How to spend the same as you do today, but giving your citizens 25% more improved roads, parks and systems that enhance their daily lives?

More information - http://pse.lt

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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
  • 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%
  • Simon Brown Suncor example$300M traditional technologyThere is another way – $60M, but it is no one’s interest to propose it!!
  • 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

  • 1. 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
  • 2. Success Equation for Capital Projects Money Time + = Money Time CCPM + Collaborate = WOW! www.pmms.me www.pmms-group.com
  • 3. Project Value? 1. Cost Drivers on Projects 2. Managing projects 3. Commercial relationships www.pmms.me www.pmms-group.com
  • 4. 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
  • 5. Project Planning & Project Cost How costs breakdown Same Project On-time .. In less time On-budget .. At lower cost Margin Inherent Asset Cost BETTER = • Buy Smart • Use Team Inherent Asset Project BETTER = • Managed Project • Cost = Quantity x Rate www.pmms.me www.pmms-group.com
  • 6. Procuring Major Projects www.pmms.me www.pmms-group.com
  • 7. www.pmms.me www.pmms-group.com
  • 8. Why are large projects a problem? www.pmms.me www.pmms-group.com
  • 9. Why are large projects a problem? www.pmms.me www.pmms-group.com
  • 10. Capital 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 • 1995 www.pmms.me www.pmms-group.com
  • 11. www.pmms.me www.pmms-group.com
  • 12. CCPM Rule 1: No Bad Multitasking www.pmms.me www.pmms-group.com
  • 13. CCPM Rule 2: Shared Safety www.pmms.me www.pmms-group.com
  • 14. CCPM Rule 2: Shared Safety Typically 25% shorter Project Buffer FB www.pmms.me www.pmms-group.com
  • 15. CCPM Rule 2: Shared Safety Typically 25% shorter FB Project Buffer FB www.pmms.me www.pmms-group.com
  • 16. % 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
  • 17. New Product Introduction CCPM Users IT Systems Implementation Major ProductConstruction Public Works Engineering Engineered Systems “ Win-Win-Win” Project Workshop in Fukushima www.pmms.me www.pmms-group.com
  • 18. CCPM works Same Project On-time .. In less time On-budget .. At lower cost www.pmms.me www.pmms-group.com
  • 19. “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
  • 20. Major obstacles to exploiting CCPM Selection www.pmms.me www.pmms-group.com
  • 21. Collaboration www.pmms.me www.pmms-group.com
  • 22. Collaboration on Capital Projects • CCPM will not work on a traditionally-contracted project • Partnering – many tried, many failed • When done right collaborative sourcing can beat competitive sourcing • 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.” www.pmms.me www.pmms-group.com
  • 23. Compete or Collaborate? Price MARGIN COST www.pmms.me www.pmms-group.com
  • 24. The Potential Make Money Preferential Access to Innovation Reduced Risk www.pmms.me www.pmms-group.com
  • 25. Cases in Collaboration www.pmms.me www.pmms-group.com
  • 26. • • • • • • • IT Sourcing 1351 Companies 40% C-level Executives 35% >10,000 staff 18 industries 12 countries 70% from mature markets www.pmms.me www.pmms-group.com
  • 27. The Pay-off -10% Cost -20% Time -65% Changes +25% Profit -83% Claims +30% Satisfaction -99.8% LTA www.pmms.me www.pmms-group.com
  • 28. One size does not fit all MARKET COMPLEXITY AND RISK 3 2 4 1 VALUE www.pmms.me www.pmms-group.com
  • 29. 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
  • 30. Being Collaborative on Projects 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
  • 31. 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
  • 32. In Summary CCPM + Collaborative Procurement Money Time On-time .. in less time On-budget .. at lower cost www.pmms.me www.pmms-group.com
  • 33. Thank you Ian Heptinstall ian.heptinstall@pmms-group.com www.pmms.me www.pmms.me www.pmms-group.com