Project Management Assignment IPE-MBA KSivabala Naidu

Assignment Record Form

Student Name : K. Sivabala Naidu

IC / Passport Number : 861101-56-5057

Nationality : Malaysian

IPE Index Number : MYS-0100588

Teamie Index Number : [email protected]

Learning Centre : KL

Course : MBA

Term : 1

Module Title : Project Management

Centre Facilitator Name : Dr. Dasaratha Rao

Assignment Submission Due Date : 1st June 2014

Status : Active

I declare that this is an original piece of work undertaken by me.

I confirm that I have read and understood the IPE regulations with regard to referencing and

plagiarism.

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IPE MBA Project Management Assignment Page 2 of 17

Executive summary

The purpose of this report was to undertake a thorough investigation about as to the various

causative factors which may have contributed to the failure of KLIA 2 by Malaysia Airports

Holdings Berhad (MAHB) wherein the cost overrun was from RM 1.9 Billion to RM 4.0 Billion

and with more than 2 years of delay in its completion.

One of the major factors which may have contributed to the cost overrun and delayed completion

is the inability to manage change. As we know, managing the changes in a project is a part of

project management life cycle. Based on the report, given by CEO & Managing Director of

Malaysia Airports Holdings Berhad (MAHB) Tan Sri Bashir Ahmad, the new terminal was

delayed three times from its original completion date of September 2011, is because of the new

requirements. If only the additional or new requirements was managed with a scope which is a

major factor in having a balanced project management these cost overrun and delay would not

had occurred.

After taking all the project success and failure factors into consideration, I would like to

recommend to the Chairperson of the MAHB Board of Directors to use Statement of Work

(SOW). Plan the purpose of the project by taking into consideration, the risk management and

scope in this case is to finish the KLIA 2 as per the initial project planning without running away

from the schedule and cost and to clearly outline the possible risks, and management of the risk

so that when a change or new requirements arises we could manage it without interrupting the

iron triangle, where the main components are quality, scope, cost and schedule. Which is the key

being the co-ordination between all the sectors working in building KLIA 2.


Table of contents

Introduction

1.1 Purpose 4

1.2 Overview. 4

Main Body

2.1 The cost overrun & delays.......... 6

2.2 The lack of change management team in Project KLIA 2 .... 8

2.3 The purpose of project management life cycle in a project 11

2.4 Statement of Work (SOW). 13

2.5 The common pitfalls in a project.... 15

Conclusion & Recommendations. 16

References. 17

Word count: 4.013


Introduction

1.1) Purpose

The purpose of this report was to undertake a thorough investigation about as to the various

causative factors which may have contributed to the failure of KLIA 2, by Malaysia Airports

Holdings Berhad (MAHB) wherein the cost overrun was from RM1.9 Billion to RM 4.0 Billion

and with more than 2 years of delay in its completion. Based on the report provided by Tan Sri

Bashir Ahmad, CEO & Managing Director of Malaysia Airports Holdings Berhad (MAHB), the

cost of KLIA 2 has been doubled due to revision to increase 71% of its original capacity. The

revised plan is based from Air Asias growth projection, this is simply because Air Asia being

the main stake holder in KLIA 2. In 2013, Air Asia has flown more than 21.85 million

passengers in LCCT. With 3% growth annually, the initially planned KLIA 2 will be crowded in

10 years time. To build such airport at that time will cost us double or triple. Therefore the

revision took place to avoid building another airport in the next 10 15 years time.

1.2) Overview

The KLIA 2 is built to be Malaysia's Next Generation Hub the airport hub that will allow

seamless connectivity between low-cost and full service carriers. The new KLIA 2 terminal is

measured to be at least 257,000 m2, with 60 gates, 8 remote stands, 80 aerobridges, plus a retail

space of 32,000 m2 to accommodate 225 retail outlets. It is designed to cater 30 million

passengers a year with the provision to expand to 45 million. Built at a cost around 4.0 billion

ringgit which was noticeably a cost overrun, the KLIA 2 was scheduled to open on April 2013

but delayed. Below is a table comparing the cost and other criteria of KLIA, LCCT and KLIA 2.

Adding to that, KLIA 2 was built to replace the current LCCT. Firstly, Air Asia the fastest

growing and largest low cost airline in Asia needs a bigger home to accommodate a larger

number of passengers. Secondly, is to accommodate KLIAs growth and vision. How does

KLIA2 fit into KLIAs vision? The terminal has an integrated international concourse that will

enable seamless transfer to domestic flights and vice versa. In other words, it will provide more

traffic to KLIA. Not only that, due to limited runway capacity faced by Changi Airport,

Soekarno Jakarta Airport and Bangkok Suvarnabhurmi Airport, ours KLIA is set to be a regional


hub in Southeast Asia. The completion of KLIA2 will bring the airports total capacity to 85

million. But more importantly, the additional runway from KLIA2 will reduce congestion. In

addition, KLIA 2 is also designed to be a retail airport. The large terminal is due to the large

space for retail. Airport operator now comprehend that more revenue must come from this

source. The reason is many middle income people from Southeast Asia choose to fly with Low

Cost Carrier and they expect much more amenities once they land. When you consider there are

550 million people in ASEAN and only around 4% are currently flying, you can see the potential

in retail.

The major key player being; Developer Malaysia Airports Holdings Berhad (MAHB),

Contractor UEM Construction Bina Puri JV, Design Architect LKMD Architecture Sdn.

Bhd., Architects - A.Hanapiah Architect and Arkitek ICB Sdn. Bhd. As in any branch or division

of a business unit one needs to have a clear notion on the accountability and responsibility within

the project management domain too. The project managers must be well aware of their

responsibilities and the accountability towards the project whether it is a success or a failure. The

airport operator, which took over as project manager from KLIA consult in November 2011, has

been blamed for the delay and higher cost of completing KLIA 2, a terminal dedicated to low


cost carriers. Project manager should be coordinating all the sectors and failure in

communication which will result in failure of delivering the project as per cost and schedule.

Main Body

2.1) The cost overrun and delays

The delay and cost overrun has been mainly due to changes of the design of the airport

and its size it was initially meant to handle a passenger volume of 30 million but this was scaled

up to 45 million passengers per year based on the recent Air Asias growth projection. Thus,

there were a 71% of its original capacity been changed. What started as a 150,000 m2 terminal

with 50 semi contact gates and 2.5km runway, to a 257,000 m2 terminal with 68 gates fully

aerobridges and 3.9km runway. Rather than anticipating and managing the changes, the parties

involved in KLIA 2 began to point finger at each other. There is clearly a shortage of

coordination between the major key players. For example, MAHB which has come under fire

from all sides for the delay in the completion of KLIA 2 is pointing finger at Air Asia Berhad,

government agencies and the main contractor. The baggage handling system was relocated on

the advice of the Department of Civil Aviation. This clearly shows that there were no prior

discussion with related agencies and department before the project execution period. There was

no prior anticipation. There was an increase in the scope of work. Below I have attached a table

of the specifications of the upgrades. Changes, upgrades and new addition are not a stranger in

the event of a project management, thus the problem or the reason for the project failure in terms

of cost overrun and inability to deliver on time is due to poor management skill. Thus, the parties

involved should be able to see clearly that the problem was not the change; it was the inability to

adapt and deliver to the change. The final design is supposed to be frozen says the main

contractor The Star online June 28. This statement itself shows the lack of anticipation. The

planning part is one of the key in project management life cycle. Under the planning vice comes

risk plan and acceptance plan which will be elaborated in the later part.


Major upgrades in specifications


2.2) The Lack of Change Management Team in Project KLIA 2

Project management is an approach to managing work within the constraints of time, cost

and business objectives. Whether you are using Six Sigma, DMAIC or Lean, there are

techniques and tools project teams can apply to plan, control and monitor results. Change

management can and should follow a similar structured process. Prosci, whose change

management methodology is one of the most widely used and recognized approaches for

managing the people side of change, includes a set of assessments to help you identify risk and

address assumptions you may have made in planning for the project. At each gate or phase of

your project, Prosci defines specific plans to help execute and manage the change to ensure you

not only meet your business objectives, but new processes are adopted and sustained. While

project management handles the technical side of the project, change management facilitates the

acceptance of the initiative taking place. Project management life cycle focuses on the technical

aspect of moving from current state to future state while change management focuses on people

aspect. Change management and project management are complementary disciplines with a

common objective. When applied using proven steps and tools, you greatly increase your

probability of success. How dependent are your project outcomes on people changing the way

they do their work? No matter how well we follow the project plan, if people do not change the

way they do their job, we will not achieve the desired business results.

The failure of KLIA 2 is due to the absence in change management. The number one rule

in change management is preparing for the change and preparing change management team. We

can clearly see that in KLIA 2 they were not at all open to the idea of a future change thus the

change has been viewed as a glitch in the project. And when there is a change in the project, the

people need to cope with the change. Here the partys involved in KLIA 2 does not manage to

change their mindset and work phase accordingly. If there is an increase in job scope thus there

is a need to increase the velocity of the work of the people and maybe a need to increase the

number of workforce. They should have anticipated such changes in the beginning of the project

itself and have an allocation of cost if such changes would have occurred. In KLIA 2 they did

blame the cost overrun due to the increase of number of workers needed. This shows that such

changes were not anticipated by the team. Projects are naturally subjected to change and it is up

to the project management team to deal with it. If only there was a change management team in


Project KLIA 2, the changes or any upgrades nor additional ideas would have been managed

with structure and delays or cost overrun could been monitored and controlled. People have a

natural tendency to resist change. No matter how flawlessly executed, the project will not meet

its objectives if no one follows the new process, uses the new technology or changes the way

they work. The more effective your change management plan, the more likely your project is to

finish on or under budget. Effective change management ensures faster speed of adoption,

increased proficiency and higher utilization.


2.3) The Purpose of Project Management Life Cycle in a Project

Despite the fact that no two projects are exactly alike, but all projects must go through

these four phases of project management life cycle. Initiation involves starting up the project by

documenting a business case, conducting a feasibility study, coming up with the terms of

reference, appointing the team and setting up a project office. Planning involves setting out the

roadmap for the project by creating the following plans: project plan, resource plan, financial

plan, quality plan, acceptance plan and communications plan. Execution involves building the

deliverables and controlling the project delivery, scope, costs, quality, risks and issues. Closure

involves winding down the project by releasing staff, handing over deliverables to the

customer and completing a post implementation review.

In the initiation part of the project, these are the steps to be done; develop a business case,

undertake a feasibility study, establish the project charter, appoint the project team, set up the

project office and perform phase review. In the planning phase we need to create a project plan,

resource plan, financial plan, quality plan, risk plan, an acceptance plan, communications plan,

procurement plan, contract the suppliers, define the tender process, issue a statement of work,

request for information, request for proposal, and create a supplier contract and perform another

phase review. In the project execution phase, we build deliverables and perform monitor and

control, perform time, cost, quality, risk and issue management and perform procurement

management acceptance and communications management. In the closure phase, we perform

project closure and review project completion.

At the beginning of project initiation, a project manager is assigned. The project manager

works with the project sponsor to identify the necessary resources and team members needed to

further develop the key project parameters Cost, Scope, Schedule, and Quality (CSSQ). The

project team documents its charge in the form of a project charter, which is based on the project

proposal, which includes the initial business case. Approval of the Project Charter by the Project

Sponsor authorizes the designated team to begin the initial planning effort. The initial Project

Plan resulting from Project Initiation differs in the level of detail and the validity of its estimates

from Project Origination, and must be at a level sufficient to acquire any additional resources

needed to progress to the next phase. The Project Plan also includes plans for involving and


communicating with all the parties that are affected by the project, as well as identification of an

initial set of foreseeable risks that can threaten the project. At the conclusion of Project Initiation,

based on the initial planning documents, the Business Case is revised and re-evaluated and a

decision is made to halt or proceed with the project.

Project Planning builds on the work done in Project Initiation, refining and augmenting

CSSQ and Project Plan deliverables. Usually, additional members join the Project Team, and

they assist the Project Manager in further elaborating the details of the Cost, Scope, Schedule

and Quality. A number of key elements are added to the Project Plan, including project-specific

items such as change control, acceptance management and issue management, as well as

externally-focused items such as organizational change management and project transition. The

initial list of project risks is augmented, and detailed mitigation plans are developed. At the

conclusion of Project Planning, the Business Case is revised and re-evaluated based on the

completed planning documents and a decision is again made to either halt the project, or to

commit the resources necessary for Project Execution and Control.

Project Execution and Control is where most of the resources are applied / expended on

the project. A significant number of team members will join the project at the beginning of this

phase. The primary task of the Project Manager during Project Execution and Control is to

enable the Project Team to execute the tasks on the defined Project Schedule and develop the

product or service the project is expected to deliver. The Project Manager uses the processes and

plans prepared during Project Initiation and Project Planning to manage the project, while

preparing the organization for the implementation of the product / service and for transitioning

the product / service responsibility from the Project Team to the Performing Organization.

In Project Closeout, the Project Team assesses the outcome of the project, as well as the

performance of the Project Team and the Performing Organization. This is accomplished

primarily through soliciting and evaluating feedback from Customers, Project Team members,

Consumers and other stakeholders. The primary purpose of this assessment is to document best

practices and lessons learned for use on future projects.


2.4) Statement of Work (SOW)

It is important to create a statement of work (SOW) for the case study where we identify

the purpose, scope, project deliverables, goals and objectives and cost and schedule estimates. In

risk management we need to identify, analyze and have a risk plan. In risk management we need

to identify the sources of risk, determine the available funding, time constraint, staffing,

customer relations, project size and / or complexity, overall structure and organizational

resistance. Risk analysis is broadly defined to include risk assessment, risk characterization, risk

communication, risk management, and policy relating to risk. Risk analysis is a technique used

to identify and assess factors that may jeopardize the success of a project or achieving a goal.

This technique also helps to define preventive measures to reduce the probability of these factors

from occurring and identify counter measures to successfully deal with these constraints when

they develop to avert possible negative effects on the competitiveness of the company. One of

the more popular methods to perform a risk analysis in the computer field is called facilitated

risk analysis process (FRAP). FRAP analyzes one system, application or segment of business

processes at time. FRAP assumes that additional efforts to develop precisely quantified risks are

not cost effective because; such estimates are time consuming, risk documentation becomes too

voluminous for practical use, specific loss estimates are generally not needed to determine if

controls are needed and without assumptions there is little risk analysis. After identifying and

categorizing risks, a team identifies the controls that could mitigate the risk. The decision for

what controls are needed lies with the business manager. The team's conclusion as to what risks

exists and what controls needed are documented along with a related action plan for control

implementation.

The Risk Impact / Probability Chart are based on the principle that a risk has two primary

dimensions; Probability A risk is an event that "may" occur. The probability of it occurring can

range anywhere from just above 0% to just below 100%. *Note: It can't be exactly 100%,

because at that juncture it would be a certainty, not a risk. And it can't be exactly 0%, or it would

not be a risk. Impact A risk, by its very nature, always has a negative impact. However, the size

of the impact varies in terms of cost and impact on health, human life, or some other critical

factor. The chart allows you to rate potential risks on these two dimensions. The probability that

a risk will occur is represented on one axis of the chart and the impact of the risk, if it occurs,


on the other. It is advisable to use these two measures to plot the risk on the chart. This gives a

very quick and a clearer view of the priority that needed to be given to each. You can then decide

what resources needed to be allocated to managing that particular risk.

I believe there is a drooping in the risk management of the KLIA 2 project. Based on the

report by The Edge, the Senior General Manager of Malaysia Airports Holdings Berhad

(MAHB) Datuk Azmi Murad stated that the reason for the delay is the contractor could not

deliver maybe due to under estimation of the difficulties. MAHB has issued 212 non -

compliances report progressively to UEM Bina Puri JV since it started construction in the main

building. UEM Bina Puri JV, the main contractor of KLIA 2, is appealing against the

liquidated and ascertained damages (LAD) fine slapped on it by Malaysia Airports Holdings

Berhad (MAHB). Bina Puri Construction Sdn. Bhd. Director Henry Tee Hock Hin said the joint

venture (JV) would appeal based on the terms and conditions of the contract that stated that the

contractor could appeal for an extension of time (EOT) to finish up the work, as there had been

many last minute requests and additional changes made by stakeholders. These were the

extensions of time (EOT) granted by Malaysia Airports Holdings Berhad (MAHB) to the

contractor as reported by The Edge April 2012 ; Contractor was given EOT by MAHB,

October / November 2012 ; Contractors commit to opening of the airport on May 2013, January

2013 ; Contractor asks for 6 more weeks and commits to airport opening on June 28, May 7 ;

MAHB makes announcement to Bursa Malaysia that the contractor may have difficulty in

meeting the project deadline, May 16 : The contractor as for an EOT until Jan 2014 without any

justification, May 29 : Malaysia Airports Holdings Berhad makes an announcement to the Bursa


that the contractor has notified that it cannot meet its contractual obligation to deliver KLIA 2 by

June 28 and on June 18 contractor confirms April 30th

2014 as the new completion date. As per

seen in this case there was a lot of risks in this project. Malaysia Airports Holdings Berhad and

UEM Bina Puri JV had recently been embroiled in a spat blaming each other for the works that

could not be completed in time for the opening of KLIA 2. When all the major stakeholders and

key players start blaming each other it brings upon the risk of project delivery failure. This is

where the project manager should have used his skills of project management and risk

management.

2.5) The Common Pitfalls in a Project

There are several pitfalls in a project contributing to its failure such as unclear objectives,

lack of senior management support and lack of effective project integration, inadequate funding,

change in business priorities, original assumptions being invalid, an ineffective team, and lack of

effective communication processes. In order to ensure a project success there are a few factors to

be kept in mind and put to work such as coordination and relations, adequacy of structure and

control, the project uniqueness, importance, and public exposure, success criteria salience and

consensus, a competitive and budgetary pressure, initial over - optimism, conceptual difficulty

and internal capabilities build up. In KLIA 2 there were a few changes made after the retail

optimization plan (ROP). Optimization means finding an alternative with the most cost effective

or highest achievable performance under the given constraints, by maximizing desired factors

and minimizing undesired ones. But its uncertain the ROP was coordinated with all the

participating parties, for example the contractor was not briefed prior hand about the possibilities

of changes in the final design. These have been one the major factor for the downfall of this

KLIA 2 project. There was absence in effective communication and privation in co-ordination

and relations.


Conclusion & Recommendations

We have discussed the various relevant factors which may have contributed to the failure

of KLIA 2 by Malaysia Airports Holdings Berhad (MAHB). The key factors being lack of

anticipation to the project plan changes and a poor risk management.

Thus, I would recommend to the chairperson of MAHB in the future projects have a

change management team where they help execute and manage change to ensure, you not only

meet your business objectives but new processes are adopted and sustained.

Other than that its crucial to follow the four phases of project management life cycle and

not skipping any of these phases will ensure the success of the project. It is also important to

create statement of work (SOW) for the business case to identify the purpose, scope, project

deliverables, goals and objectives and cost and schedule estimates. These ensure we do not run

out of the planning we initially made thus preventing mishaps such as cost overrun or delays.

Adding to that the risk management team should calculate the possible risks with the help

of risk impact / probability chart. This gives a quick and clear view of the priority we need to

give each, and help us to decide what resource to allocate in managing the particular risk.

Therefore as conclusion project management skills should be incorporated with the

theories and models I have presented in my study above should be followed to attain project

success, as these are the models proven by researches and trials. I hope these recommendations

will help to elevate the project success in future business cases.


References

1. Company's Background. 2013, KLIA 2, viewed 16 May 2014

2. KLIA 2 Proposal. 2013, Proposal, viewed 16 May 2014

3. Info KLIA 2. 2014, Comparison between klia2,klia and lcct, viewed 18 May 2014

4. Project Management. 2012, Accountability in Project Management, viewed 20 May 2014

5. The Edge Malaysia. 2014, highlight: klia2 delay, MAHB reveals all, viewed 19 May

2014

6. Project Management. 2012, project management life cycle, viewed 2 May 2014

7. Russell D. Archibald,Project Life Cycle Model .2013, The Six-Phase Comprehensive

Project Life Cycle Model Including the Project Incubation/Feasibility Phase and the

PostProject Evaluation Phase, viewed 18 May 2014

8. Change Management. 2014, the change management process , viewed 19 May 2014

9. PMMP. 2011, The project management life cycle, viewed 19 May 2014

10. PM HUT. 2012, an introduction to project management life cycle, viewed 20 May 2014

11. SRA. 2014, risk analysis, viewed 21 May 2014

12. Project Smarts. 2013, risk analysis matrix, viewed 21 May 2014

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Project Management Assignment IPE-MBA KSivabala Naidu