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Quality at Entry


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Quality at Entry

  1. 1. Quality at Entry: The Norwegian State Project Model Making Projects Fly Conference Toulouse 23rd October 2014 Peder Berg Deputy Director General Ministry of Finance Norway
  2. 2. What is peculiar to the Norwegian case? • Concentration on the initial project phases, when alternatives still exist and amendments can be made at reasonable cost • Concentration on the bigger projects • Extensive, in-depth reviews lasting several months • Truly independent private sector reviewers • Governance based on systems responsibility with the Ministry of Finance and go/no go decisions elevated to Cabinet level
  3. 3. Risk and flexibility through the project Project life cycle Implementation Front-end Information, Amendment costs Risk, Flexibility
  4. 4. Five success criteria used to evaluate a project (OECD) Impact Efficiency Effectiveness Sustainability Inputs Tactical Operational Strategic objective objectives objective Relevance Needs/ priorities Project Process
  5. 5. QA regime: scope and procedure Needs Pre-project Project Effect QA 1: Review : documents Analyze: economic analysis uncertainty Assess: relevance feasibility sustainability timing Recomm: ranking management strategy QA 2: Review: documents Analyze: management strategy success factors and uncertainty Recomm.: budget, contract and management strategy •Needs analysis •Overall Strategy •Requirements •Opportunity space •Alternatives analysis • Key guidelines •Overall strategy document •Budget Decision documents produced by responsible ministry/agency Scope of external quality assurance Parliament decision Government decision
  6. 6. QA 2 Experience • 51 completed projects have been reviewed. This is the grand total of quality assured projects that are completed including the termination report. • 14 cost overruns and the remainders, more than 70%, with (considerable) cost savings. • 60% were over P50. • There are few projects that combine the properties ”many changes” and ”the contingency is spent”. The evidence thus does not support the allegation that risk analyses are cost driving. • Total net savings amount to about 3,5 per cent of the total investments. • These 51 projects were contracted throughout a complete business cycle. The data suggest there might be a correlation between cost performance and general market conditions. The data set is, however, too limited to draw conclusions of statistical significance.
  7. 7. 60% 40% 20% 0% -20% -40% -60% Cost deviation relative to budget (incl. contingencies)
  8. 8. 80% 60% 40% 20% 0% -20% -40% Cost deviation relative to P50
  9. 9. 60.0 % 40.0 % 20.0 % 0.0 % -20.0 % -40.0 % -60.0 % Cost deviation relative to budget (incl. contingencies), distributed in order of start-up of execution phase
  10. 10. 60.0 % 40.0 % 20.0 % 0.0 % 2002 2004 2006 2008 2010 2012 2014 -20.0 % -40.0 % -60.0 % Cost deviation relative to budget (incl. contingencies), distributed in order of date of completion
  11. 11. Are QA1 and QA2 really necessary? In 2005 the City of Oslo made a successful bid for the World Championships in skiing, Nordic Disciplines for 2011. There was no quality assurance until the summer of 2009, when the project was in the execution phase and obviously in trouble. Let us take a look at the budget development, as described by the quality assurer…..
  12. 12. Budget development Dec 2006 581 mill Sep 2008 1200 mill Mar 2005 Oslo applies For the 2011 WC in Ski Sep 2007 JDS Architects selected 2005 2006 2007 2008 2009 2010 2011 Aug 2010 1820 mill IPR Mar 2005 52,8 mill Dec 2007 900 mill
  13. 13. Key takeaways: - Some sort of Stage Gate Process is imperative for a Project Model to be viable. There need not necessarily be many gates, but the early stages must be covered. - Concentrating on the bigger projects will add more value to the portfolio. - It is recommendable to employ the best independent reviewers available in the market. - Governance anchored as high up as possible ensures political commitment. - Unbiased estimating according to Best Practice yields relatively robust results for a sufficiently large portfolio, at least when market conditions are fairly predictable.