Prepared by Alastair LairdProject Time and CostDelivering NothingEfficientlyan EVMS journeyDecommissioning ChallengesIndustrial Reality, APM Edinburgh
AGENDA• Overview of UK Nuclear Decommissioning• Problem Solving (Tables) - Issues- Value for Money Challenge• EVMS Journey
Overview3Nuclear Decommissioning Authority (NDA)• Non-Departmental Public Body established in2005• Remit to clean up the civil public sectornuclear legacy• Sites and facilities built from 1940’s onwards• Annual funding of ~£2.8Bn• Head Office based in West Cumbria• Total M&O staffing circa 16,000• Has responsibility for all civil nucleardecommissioning & Waste Management formost of the older civil power and R&Dsupport sites – former BNFL & UKAEA sites.
M&O Nuclear Contracting Model41 Ownership of SLC shares2 Nuclear Decommissioning Authority (NDA) Maintenance & Operations Contract3 Parent Company Agreement4 Payment of dividends generated by SLC5 Statutory Consultation6 Regulatory Oversight of SLC / Licensing / Authorisation
Decommissioning OverviewTypical Nuclear Site Cycle5BUILD NEWSITEPROJECT7 YEARSGENERATIONOPERATIONAL40 YEARSDEFUELINGOPERATIONALPROJECT3 YEARSBUILD ILW(WASTE)FACILITIES& STORE6 YEARSWASTERETRIEVAL,PASSIVATION &STORAGEOPERATION6 YEARSINITIALDEPLANTINGANDDEMOLITIONPROJECT6 YEARSCARE &MAINTENANCE50 YEARSFINAL SITECLEARANCEPROJECT10 YEARS
Strategy7• Who wants to fly first?• What to do when food is scarce?• Planning scenarios?• Integrated programmes options?
Magnox (Power Station) Example8Magnox Optimised Decommissioning Programme (2011)MODP is a single integrated BaselineStrategic Programmes of Work (10 Sites, 22 Reactors)• PONDS Decommissioning• FED (Fuel Element Debris) Treatment• ILW Management• Plant & Structures• Graphite Disposal• Restructuring and Hotel Cost ChallengeOperating Plan• Operational life extension• Defueling OptimisationQuiescent State (Care and Maintenance)• Each site can be different• End states - funding & ‘hotel cost’ burden and need for phasing• Transition Planning• Lead and lag concepts – site pairings and technology selection options10 (2005)2 (2008)M&O (Site)Contracts1 (2011)
ScopeTheory• Framework for EVMS• WBS, Organizational Structure, and Responsibility Assignment Matrix• Schedule Baseline and Cost Estimate Development• WBS reporting levels & Control Accounts• Performance Measurement Baseline• Forecasting of EAC• Performance ManagementPractice• UK Nuclear Decommissioning• Multiple site scenario• Funding Constraints• Stakeholders10
EVMS - Intro• EEarned• VValue• MManagement• SSystemEarnedWork Completed / Cost SpentValue …for MoneyExpected PerformanceDelivery against Targets/EstimatesManagement Metrics / TargetsSchedule Performance ManagementCost Performance ManagementSystems of control and calculationBasis of SchedulingBasis of Cost EstimatingWBS / Control AccountsTrending/ReportingChange Control11
EVMS - Intro12• What is Earned Value Management?– It is a methodology for driving performance from an integrated set of policies,procedures, and practices to support program and complex project management as adecision enhancing tool.– It is a critical component of risk management.– Works mainly with complex programs - cost reimbursable type– An EVMS helps integrate the project work-scope, cost, and schedule into a singleperformance measurement baseline (PMB).• EVMS reliably tracks:– Planned Value, or budgeted cost for work scheduled (BCWS),– Earned Value , or budgeted cost for work performed (BCWP), and– Actual cost of work performed (ACWP).• EVMS provides performance measures - against the PMB.• EVMS provides trend analysis and forecast capability of estimated cost atcompletion (EAC).• EVMS provides a sound basis for variance analysis and corrective action planning.
EVMS – Do we need it?13• By comparison, Earned Value Management has three data sources:– the budget (or planned) value of work scheduled– the actual value of work completed– the “earned value” of the physical work completed• Why Use EVMS? It permits management to determine:– Where have we been?– Where are we now?– Where are we going?
EVMS Framework14• The Inputs to the EVMS consist of:– Work Breakdown Structure (WBS)– Organisational Breakdown Structure (OBS)– Performance Measurement Baseline (PMB)– Baseline Cost Estimate– Baseline Schedule– Cost/Resource Control Plan– Change Control
EVMS Framework15Earned Value Formulas:• Planned value = BCWS = budgeted cost for work scheduled= what was planned to be done• Earned value = BCWP = budgeted cost of work performed= what was done at budget rates• Actual cost = ACWP = actual cost of work performed= what was paid for the work• BAC = BCWScum. = budget at completion= original budget plus changes
EVMS FrameworkThe Variance Formulas:• CV = EV-AC = BCWP-ACWP = cost variance• SV = EV-PV = BCWP-BCWS = schedule variance• CV% = (EV-AC)/EV= (BCWP-ACWP)/BCWP= cost variance, %• SV% = (EV-PV)/PV = (BCWP-BCWS)/BCWS= schedule variance, %• VAC = BAC-EAC = variance at completion16Cost Variance (CV)If the result is POSITIVE “Under run”If the result is NEGATIVE “Over run”Schedule Variance (SV)If the result is POSITIVE “On Schedule”If the result is NEGATIVE “Behind Schedule”Cost Variance (CV%)Shows what percentage cost varies from what has beenearned to dateSchedule Variance (SV%)Shows what percentage schedule varies from what hasbeen planned to dateCost Performance Index (CPI) = BCWP/ACWPIf result is less than 1.0, cost is GREATER than budgetedIf the result greater than 1.0, cost is LESS than budgetedSchedule Performance Index (SPI) = BCWP/BCWSIf result is less than 1.0, project is “BEHIND” scheduleIf the result greater than 1.0, project is “AHEAD of schedule
WBSWBS – Work Breakdown Structure• A WBS is a way of organising a project into groups of activities or tasksthat are inter-related to achieve a specified scope of work and objective.• The WBS is used to develop the project baseline cost estimate andschedule, and to establish controls aligned to the objective.• The WBS, like cost estimates and schedules are living, changing tools toreflect project scope changes as they occur.• Pictorially, a WBS is drawn to look like a company organization chart butfunction in an entirely different way.• The WBS Dictionaries (scope statements) are written descriptions of whatis being delivered at WBS control account levels• WBS supports BENCHMARKING & Consistency18
Cost Control21• The RAM shows theintegration of theWBS and OBSagainst each task.• This is the pointwhere the ProjectManager assignsControl Accountsfor the WorkPackagesOBS – Organisational Breakdown Structure• A similar hierarchal breakdown structure for the organisations responsiblefor delivering the WBSRAM – Responsibility Assignment MatrixWBSOBS
Baseline Cost & Schedule22• The process of developing a Schedule and Cost Baseline is interactive.• The schedule affects the costs, and the costs affect the schedule.• Risk and uncertainty also needs factored into both cost and schedule.• Numerous cost estimating methodologies and applications.• One integrated example is the International Structure forDecommissioning Costs (ISDC). ISDC uses a standard WBS format andcontent which ensures all aspects of a decommissioning project will beincluded. Same with PCWBS in UK.• Accuracy/estimating uncertainty is very important in determiningcontingency/management reserve.– The AACEI has established cost estimate classifications of accuracy based on thelevel of information available to the estimator, and the estimating methodologyused (AACEI, “Cost Estimate Classification System,” Recommended Practice 18 R-97)
PMB23• The PMB is the level where earned value is determined from the sum ofDistributed (defined scope) and Undistributed (known but undefinedscope) Budgets• The Distributed Budget is the sum of all Control Accounts.PMB – Performance Measurement Baseline• Control accounts are key asthey are used to establish thelevel at which to report theperformance of the WorkPackages
Forecasting24EAC – ESTIMATE AT COMPLETION• The EAC is the actual cost to date plus an objective estimate of costs forremaining authorised work.• There are multiple ways and varying degrees of detail to calculate EAC.• The following are the typical EAC formulas used, which will be describedin the following slide:– EAC = AC + ETC– EAC = (AC/EV) x (BAC)– EAC = BAC/CPI– EAC = AC + [(BAC-EV)/CPI]BAC – BUDGET AT COMPLETION• The Budget at Completion (BAC) is the sum of all budgets allocated to aproject scope• The Project BAC must always equal the Project Total PV.
Change Control25• Triggers include:– Excessive Contingency Drawdown– Significant Variances– Adjustments - which are equitable across client and contractor– Scope or agreed strategy change– Technology decision points– Sanction/approval gates– Funding change• The Project Manager, working with the Control AccountManager(s) and the Contractor would determine what changeswere necessary to bring the project back under control.• All Change Control of the major elements (WBS, OBS, RAM,Control Accounts, Work packages, etc need to be documentedand approved.• Poor performance is not a basis for change control.
Performance Reporting26• Management of an EVMS program must include:– Integrated Baseline Reviews– Change Control– Transparent Contingency/Management Reserve drawdown– Monthly/Quarterly Reporting• Integrated Baseline Reviews conducted within c. 6 months ofcontract signing, and repeated annually at a minimum• The Owner and Contractor need to agree on control account levelsand acceptable reporting formats (NEA - ISDC, UK - PSWBS etc)• Other things to remember with EVMS:– EVMS should be senior management mandated - highest echelons of theorganisation need to understand and drive client behaviours– Contractor EVMS systems should be certified– Control account Managers and PMs should be suitably trained
Uncertainty & Risk27• Baselines are Characterised by ‘base data’ with addition of threepoint estimating methodologies to determine more likely outcomesfrom impact of EU and discrete risk.• Low probability high impact events need to be carefully considered.• Part science / part art.• Risk/Issues are sometimes included as scope (as base BCWS).• Opportunities are sometimes included as scope (as base BCWS).• Uncertainty related costs can be allowed to creep into the costestimates (as base BCWS).• Overall ‘P50’ planning concept is however sound – eg NDA ProjectControls Procedure PCP09.
Uncertainty & Risk - Waste28Decommissioning Waste Quantities&Waste Retrieval & DisposalOperational Waste QuantitiesPMB Programme Drivers:• Need for more Cost Planning Certainty• (High) Legacy Hazard reduction (UK, US & France)• Local Stakeholder & Regulatory led• Need to maximise use of national assets – eg LLWR Drigg / L’Aube• FundingInventoryUncertaintiesPacking Density UncertaintyWaste Acceptance UncertaintiesWaste Treatment OptionsWaste Container OptionsInterim Storage Options and UncertaintyFinal Disposal Options and UncertaintyOrphan Waste Streams?Legacy Waste Characterisation Generates a set of Risks and Assumptions
BDP/FDP/PMB (Baseline)29• Essential to have a plan, a baseline, a position of understanding– Scope– Schedule– Cost• Uncertainty & Risk• Several benefits of having ‘decent’ cost estimates– Liability Number– Financial Planning– Affordability– Work off curve– Measure delivery & efficiency (VfM)• Operational throughputs c.f. Targets• Capital programme delivery through EVM– Supports new investment• FDP planning• Benchmarking• And then ….Let the market decide.
UK National Liability30How did we get here? What happens next?EscalationInflation versusWork Done versusIndependent Challenge ona) Cost estimatingb) Contingencyc) Staffing/hotel costsd) ScopeversusImpact of Competitions Graph reproducedFrom NDA AnnualReport and Accounts(Moneyoftheday)Add c. £10Bn for GDFlife-cycle costs2012 NAO reportsuggests Sellafieldsite alone is £67.5Bn.