Strategic Sales&Proposal Management Graffi

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Presentation given at the 2nd "Strategic Sales and Proposal Management for project-driven businesses" held in Berlin, 27th - 28th January 2011

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Strategic Sales&Proposal Management Graffi

  1. 1. Risk Management during Tendering:Proposal and Project Management IssuesCostanzo GRAFFIHead of Sales . Infrastructures and CivilTecnimont SpA (Maire Tecnimont Group)Strategic Sales & Proposal ManagementIn Project-Driven Business 2011Hotel Concorde Berlin,27 - 28 January 2011
  2. 2. ABSTRACT Risk Management during Tendering: Proposal and Project Management Issues • Approach to project risks during the tender stage • Organization for a fully comprehensive risk assessment • Interaction between proposal and project management with regards to risk • How can a proper risk management organization drive to winning business? Dr COSTANZO GRAFFI’s CAREER SUMMARY Head of Sales, Infrastructures and Civil - Tecnimont S.p.A Costanzo Graffi has developed an international Sales and Proposal management experience by working for business development and tenders for infrastructures engineering and EPC contracts with Tecnimont. Previously he worked in the technical consultancy for infrastructures asset management with Scott Wilson Ltd in the UK. He holds a PhD in Pavement Engineering (2002) and an MEng in Civil Engineering (1999). 2
  3. 3. CORPORATE PROFILE Maire Tecnimont is a leading Engineering and Construction Group operating worldwide in the Chemicals and Petrochemicals, Oil & Gas, Power, Infrastructure and Civil Engineering sectors. With a presence in four continents and 30 countries, the Group currently owns 50 operating subsidiaries, with main Italian offices in Rome, Milan and Turin. The Group’s success and reputation The Group combines high have been achieved due to its quality and planning standards strong technology orientation as with a focus on multicultural well as its advanced skills in and environmental issues. Project Management, Engineering, Procurement and With a workforce of about Construction services for the 5,100 employees, more than implementation of complex half of whom outside Italy, at projects worldwide. It has 30 September 2010 Maire developed and demonstrated Tecnimont reported revenues significant expertise in managing of 1,754 million Euro (2,164 large EPC projects on a turnkey million Euro at 31.12.2009) basis in different geographical and a backlog of 5,715 million locations. Euro. 3
  4. 4. INTERNATIONAL PRESENCE About 5,100 employees, half of whom are employed outside Italy Over 50 operating companies worldwide MANPOWER* ITALY 2,609 EUROPE 348 ASIA 1,965 SOUTH AMERICA 184 TOTAL 5,106 Presence of Maire Tecnimont Group* Figures as of September 2010 4
  5. 5. GROUP’S STRUCTURE Engineering and Process Engineering Licensing and IP Renewable Corporate Main Contracting Contractor group center energy Initiatives 5
  6. 6. TECNIMONT OVERVIEW The main operating company Tecnimont is an international E&C player Integrated system of services and installations in oil, gas & petrochemicals, power, and infrastructure and civil engineering Leading role in managing complex EPC project worldwide World-class patrimony of engineering and project management expertise with high competences in technological and process innovation 6
  7. 7. TECNIMONT BUSINESS UNITS Oil, Gas & Infrastructure & Petrochemicals Power Civil Engineering Revenues 45% 43% 12% 30.09.10 Backlog 76% 12% 12% 30.09.10 7
  8. 8. INFRASTRUCTURES - Milan Metro Line 1 Extension – ROADS & HIGHWAYS D&B for CW and TS RAILWAYS & HIGH - Rome Metro B1 – D&B for CW SPEED RAILWAYS and TS - Turin Metro Line 1 – D&B for all TS (Automated Metro) - Turin Metro Line 1 – DB for Marconi – Lingotto section – CW -Copenhagen Cityringen Metro – D&B for CW (awarded in Dec 2010) UNDERGROUNDS - Turin - Milan High Speed -Salerno – Reggio Calabria Railway – D&B for CW and TS Motorway Design - Bologna – Florence High -Local road interface with new Speed Railway – D&B for CW High Speed Railway lines – D&B and TS -Catania – Siracusa Motorway - Lamezia Terme – Catanzaro design Railway Line – D&B for CW and TS -Motorway in Lybia – D&B (awarded in Dec 2010) - Fiumetorto – Cefalù Railway Line – D&B for CW and TS 8
  9. 9. Risk Management during Tendering:Proposal and Project Management Issues 9
  10. 10. Risk Management during Tendering:Proposal and Project Management IssuesPresentation Scope: Provide a personal view of Risk Management issues related to strategicproposal activities Share outcome from experience with other professionals from other fields Invite discussionsContents: Approach to project risks during the tender stage Organization for a fully comprehensive risk assessment Interaction between proposal and project management with regards to risk How can a proper risk management organization drive to winning business? 10
  11. 11. Approach to project risks during the tender stage Perception of Risk : -Risk is normally associated with danger -Risk perception is in our own way of living -There are various levels of risk (risk is somehow measurable) -Higher risks are generally taken with higher levels of experience and/or protection -Risks can be managed 11
  12. 12. Approach to project risks during the tender stage Definition of Risk (examples): -ISO 31000:2009 : effect of uncertainty on objectives -deviation of one or more results of one or more future events from their expected value. Technically, the value of those results may be positive or negative. -Combination of the likelihood of an occurrence of a hazardous event or exposure(s) and the severity of injury or ill health that can be caused by the event or exposure(s) 12
  13. 13. Approach to project risks during the tender stage Components of Risk: 1- Uncertainty: the existence of more than one possibility 2- Value or Measure (A set of possibilities each with quantified probabilities and quantified losses) … therefore Risk can be defined as: “A state of uncertainty where some of the possibilities (hazards) involve a loss, catastrophe, or other undesirable outcome” …and Risk Management as: “identification, measurement and management of events which may adversely impact our organisational objectives” 13
  14. 14. Approach to project risks during the tender stage Risk Management at tender stage - Objectives: -Definition of a comprehensive list of hazards and risks -Assessment of project and company insurance coverages -Aid to choosing the most efficient project execution methodologies (decision making tool) -Provide a proper mitigation plan during the project execution 14
  15. 15. Approach to project risks during the tender stage In other terms: Get Ready for a successful project execution, in terms of: -Cash Flow -Completion time - Customer satisfaction 15
  16. 16. Approach to project risks during the tender stageHow Risks and Risk-related issues are considered at Tender Stage by theProposal Manager:- Something that should not happen but, better stay safe- Something that implies an extra Project cost that the Project manager alwayswants to be considered for hiding inefficiency- A fixed percentage that experience tells us is sensible for covering projectunknowns- Sometimes an extra document to be prepared by the tender deadline- A Proposal/Project Management item that allows a more realistic andcomprehensive assessment of the overall project for protecting Companies andClients- Any other? 16
  17. 17. Approach to project risks during the tender stage Risk Management Costs can be: - Fixed Costs, such as additional insurances, more expensive execution methodologies for reducing risks. - Assumed Costs, or Contingencies calculated by means of the Risk Analysis. Risks considered for the Risk Analysis: 1. Political risks 2. Technical risks 3. Suppliers risks 4. Financial Risks 5. … 17
  18. 18. Approach to project risks during the tender stage Risk Analysis: - It is a methodology to measure risks - It can be performed at different levels of accuracy - It shall take into account for the statistical combination of various risks. Murphy’s Law Risk Analysis Easy-go-lucky 18
  19. 19. Organization for a fully comprehensive risk assessment Risk Analysis - Main steps: 1. Technical analysis of the project a. critical items b. execution methodologies c. alternative solutions 2. Contract analysis 3. Local intelligence: a. Local legislation (registrations, taxes, import/export) b. Local suppliers c. Local lobbies d. Any reason for local clients to refuse our proposal? 4. Procurement issues 5. Cost estimates 19
  20. 20. Organization for a fully comprehensive risk assessment What is the best team to make the Risk Analysis a work winning tool and not only an extra proposal cost? (i.e. who shall be called at the table for the proposal risk analysis?) 1. The most acknowledged of the project a. Technical discipline leaders (design, execution …) b. Contract manager c. Procurement manager (local market) d. Estimator leader 2. Finance experts 3. Administrative experts 4. Partners Best if people from the company’s organization (so we take into account also for the internal weaknesses) 20
  21. 21. Organization for a fully comprehensive risk assessment What is the result seeked in a proper Risk Analysis: 1. To not forget any relevant risk 2. Give the most accurate and realistic assessment of hazards implications (cost for each risk scenario) 3. Identify where costs can be considered risks and treated differently (reduction in proposal costs) 4. Evaluate the global risk scenario (statistical analysis such as Monte Carlo for combination of risks) 5. Choose the most adequate target risk coverage for the project Similar project experience and local knowledge are a must! (risk analysis shall be carried out by grey-haired of the sector for making it a strategic tool) 21
  22. 22. Interaction between proposal and project managementwith regards to risk Risk Management is permeating every phase of the project execution Iterative process Tender Design Project Execution Tender Risk Analysis Risk Monitoring Risk Mitigations Detailed Risk Analysis Lesson Learnt Proposal Risk Management plan Submission Detailed design Contract Award 22
  23. 23. Interaction between proposal and project managementwith regards to risk Risk Management in Proposal and Project Management: 1. Design discipline leaders to be involved during the proposal stage 2. Contract Execution Managers to provide feedback from previous projects at proposal stage 3. Risk Register developed during tendering shall be implemented during the design stage for execution 4. Risk mitigations shall be defined at the proposal stage and implemented during the execution, if needed 23
  24. 24. Interaction between proposal and project managementwith regards to risk Risk Management in Proposal and Project Management (cont’d): 5. Risk mitigation activities shall be linked to the execution schedule for planning and cost control 6. Every contract executed shall be used as Lesson Learnt for the next proposal 7. Proposal risk analysis is a key tool for successful contract execution 8. Risk Administration Tools can be implemented 24
  25. 25. Interaction between proposal and project managementwith regards to risk Risk Administration Tool (RAT) : functional scheme Digital Platform Consequence 10-5 10-4 10-3 10-2 10-1 1 Likelihood 25
  26. 26. Interaction between proposal and project managementwith regards to risk 180 Risk contingency (tender) 160 Risk contingency (remaining) Calculated Total Risk Exposure 140 (at the time of each follow up) Estimated Total Risk Exposure 120 (prognosis at the last follow up) Accumulated actual risk cost 100 Money Spread due to uncertainty 80 60 40 20 0 Time for follow up 0 12 24 Time (months) 36 and calculation 26
  27. 27. How can a proper risk management organization driveto winning business? Winning Business is the result of: 1. Best Proposal (price and quality): WINNING THE JOB 2. Company’s profits: CASH FLOW 3. Client Satisfaction: QUALITY AND TIME 4. Lesson learnt: OPTIMIZATION OF NEXT PROPOSALS & CONTRACTS How is proper Proposal Risk Analysis leading to winning business? 27
  28. 28. How can a proper risk management organization driveto winning business? Proposal Price and Quality: 1. Risk Analysis can address execution methodologies (technical proposal) 2. It’s wortwhile highlighting Risk Management in proposal methodologies for conforting clients 3. Risk Analysis can provide a global assessment of the project costs in different categories 4. Project costs can be treated differently in order to reduce proposal price without affecting quality 5. Risk Analysis often provides a sensible compromise for sales (lower price) and execution (feasibility) needs 28
  29. 29. How can a proper risk management organization driveto winning business? Cash Flow: 1. Risk Management costs can be accurately spread over the project execution plan 2. Accurate cost forecast will help the project management in avoiding unforeseen expenditures and delays 3. Realistic cost forecast will help optimizing project profits Client Satisfaction: 1. Timely contract completion 2. Theoretically less claims and variations 3. In some cases less problems with the local environment 29
  30. 30. How can a proper risk management organization driveto winning business? Lesson Learnt: 1. It’s the most difficult task to perform because not urgent 2. It’s often what is asked for to experienced professionals for project planning and execution (and risk analysis) 3. It helps preventing the repetition of mistakes and foreseeing risks 4. It should result in a traceable path available for the following projects 5. It can be used at different stages of the project, from proposal to execution 30
  31. 31. Risk Management during Tendering:Proposal and Project Management Issues “ No construction project is risk free. Risk can be managed, minimised, shared, transferred or accepted. IT CANNOT BE IGNORED.” Sir Michael Latham, 1994 THANK YOU 31
  32. 32. Rome Via di Vannina, 88/94 00156 Rome P +39 06 4122 351 F +39 06 4122 35610 Milan Viale Monte Grappa, 3 20124 Milan P +39 02 6313.1 F +39 02 6313.9052 Turin Corso Ferrucci, 112/a 10138 Turin P +39 011 0056111 F+39 011 0056444info@mairetecnimont.it – www.mairetecnimont.it

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