Effective procurement
of major projects
Opportunities for major improvements in
speed, quality and value
Ian Heptinstall
M...
Success Equation for Capital Projects

Money

Time

+

=
Money

Time

CCPM

+

Collaborate

=

WOW!
www.pmms.me
www.pmms-g...
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

www.pmms.me
www.pmms-group.com
www.pmms.me
www.pmms-group.com
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
Capital Projects
• Known & Defined methodology
• But….
• Inconsistent delivery dates
• Inconsistent budget performance
• B...
www.pmms.me
www.pmms-group.com
CCPM Rule 1:
No Bad Multitasking

www.pmms.me
www.pmms-group.com
CCPM Rule 2:
Shared Safety

www.pmms.me
www.pmms-group.com
CCPM Rule 2:
Shared Safety

Typically 25% shorter

Project Buffer

FB
www.pmms.me
www.pmms-group.com
CCPM Rule 2:
Shared Safety

Typically 25% shorter

FB
Project Buffer

FB
www.pmms.me
www.pmms-group.com
% of Buffer Used

CCPM Rule 3:
Management Focus - Buffer

% of Buffer Used

% of Project Complete
 Project D

 Project A...
New Product Introduction

CCPM Users

IT Systems
Implementation

Major ProductConstruction
Public Works Engineering

Engin...
CCPM works
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 will not work on a traditionally-contracted project
• Partnering – many tried, ma...
Compete or Collaborate?
Price

MARGIN
COST

www.pmms.me
www.pmms-group.com
The Potential
Make Money

Preferential Access to Innovation

Reduced Risk

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

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

IT Sourcing
1351 Companies
40% C-level Executives
35% >10,000 staff
18 industries
12 countries
70% from mat...
The Pay-off
-10% Cost
-20% Time
-65% Changes
+25% Profit

-83% Claims

+30%
Satisfaction

-99.8% LTA

www.pmms.me
www.pmms...
One size does not fit all
MARKET COMPLEXITY
AND RISK

3

2

4

1
VALUE
www.pmms.me
www.pmms-group.com
Collaboration
Critical Success Factors
Aligning interests & sharing risk

Ensuring “doing the right thing” for the client ...
Being Collaborative on Projects

Competition

Collaboration

• Late-as-possible selection
• Detailed bids based on
scheme ...
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...
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
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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

- 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

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

    1. 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. 2. Success Equation for Capital Projects Money Time + = Money Time CCPM + Collaborate = WOW! www.pmms.me www.pmms-group.com
    3. 3. Project Value? 1. Cost Drivers on Projects 2. Managing projects 3. Commercial relationships www.pmms.me www.pmms-group.com
    4. 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. 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. 6. Procuring Major Projects www.pmms.me www.pmms-group.com
    7. 7. www.pmms.me www.pmms-group.com
    8. 8. Why are large projects a problem? www.pmms.me www.pmms-group.com
    9. 9. Why are large projects a problem? www.pmms.me www.pmms-group.com
    10. 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. 11. www.pmms.me www.pmms-group.com
    12. 12. CCPM Rule 1: No Bad Multitasking www.pmms.me www.pmms-group.com
    13. 13. CCPM Rule 2: Shared Safety www.pmms.me www.pmms-group.com
    14. 14. CCPM Rule 2: Shared Safety Typically 25% shorter Project Buffer FB www.pmms.me www.pmms-group.com
    15. 15. CCPM Rule 2: Shared Safety Typically 25% shorter FB Project Buffer FB www.pmms.me www.pmms-group.com
    16. 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. 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. 18. CCPM works Same Project On-time .. In less time On-budget .. At lower cost www.pmms.me www.pmms-group.com
    19. 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. 20. Major obstacles to exploiting CCPM Selection www.pmms.me www.pmms-group.com
    21. 21. Collaboration www.pmms.me www.pmms-group.com
    22. 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. 23. Compete or Collaborate? Price MARGIN COST www.pmms.me www.pmms-group.com
    24. 24. The Potential Make Money Preferential Access to Innovation Reduced Risk www.pmms.me www.pmms-group.com
    25. 25. Cases in Collaboration www.pmms.me www.pmms-group.com
    26. 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. 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. 28. One size does not fit all MARKET COMPLEXITY AND RISK 3 2 4 1 VALUE www.pmms.me www.pmms-group.com
    29. 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. 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. 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. 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. 33. Thank you Ian Heptinstall ian.heptinstall@pmms-group.com www.pmms.me www.pmms.me www.pmms-group.com

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