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Business Success through Excellence in Project Management (Better, Cheaper, Faster and Safer Projects) Process and Tools that Enable Project Teams to Achieve World-Class Performance and thereby Improve Profitability of the Company Dr. Nick J. Lavingia, P.E. Project Management Consultant ([email protected]) 1

Project Management Course - cfroundtable.org · Project Management (Better, ... IPA = Independent Project Analysis, Inc. P&ID = Piping & Instrumentation Diagram P&ID $ EST DPFD

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Page 1: Project Management Course - cfroundtable.org · Project Management (Better, ... IPA = Independent Project Analysis, Inc. P&ID = Piping & Instrumentation Diagram P&ID $ EST DPFD

Business Success through Excellence in Project Management

(Better, Cheaper, Faster and Safer Projects)

Process and Tools that Enable Project Teams to Achieve World-Class Performance and thereby Improve Profitability of the Company

Dr. Nick J. Lavingia, P.E.Project Management Consultant

([email protected])

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Page 2: Project Management Course - cfroundtable.org · Project Management (Better, ... IPA = Independent Project Analysis, Inc. P&ID = Piping & Instrumentation Diagram P&ID $ EST DPFD

Dr. Nick J. Lavingia, P.E.Project Management ConsultantChevron

Nick has over 30 years of Global Project Engineering, Management, Consulting and Training experience in the Chemical, Petroleum and Air Pollution Control industry. As a Project Management Consultant at Chevron, he provides Consultation and Training to Project Professionals worldwide.

Nick has a B.S. and M.S. in Chemical & Petroleum-Refining Engineering and a Ph.D. in Engineering Economics & Management from the Colorado School of Mines. He is a registered Professional Chemical Engineer in the State of California. Nick has published and presented many papers at technical organizations and is a recipient of industry award from Pathfinder for outstanding Contribution to the advancement of Project Management Technology and Chevron Chairman’s award for implementing Value Engineering throughout the corporation.

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Page 3: Project Management Course - cfroundtable.org · Project Management (Better, ... IPA = Independent Project Analysis, Inc. P&ID = Piping & Instrumentation Diagram P&ID $ EST DPFD

AgendaI. Project Management’s Impact on the Bottom Line

Improve ROCE and TSR

II. Project Development & Execution ProcessEffective Communication Between Decision Makers, Multifunctional Project Team and Stakeholders

III. Value Improving and Best Practices Optimize Cost, Schedule, Performance and Safety aspects of any project

IV. Total Cost ManagementPlan, Schedule, Estimate, Monitor and Report

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Page 4: Project Management Course - cfroundtable.org · Project Management (Better, ... IPA = Independent Project Analysis, Inc. P&ID = Piping & Instrumentation Diagram P&ID $ EST DPFD

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Page 5: Project Management Course - cfroundtable.org · Project Management (Better, ... IPA = Independent Project Analysis, Inc. P&ID = Piping & Instrumentation Diagram P&ID $ EST DPFD

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Refinery.jpg

Page 6: Project Management Course - cfroundtable.org · Project Management (Better, ... IPA = Independent Project Analysis, Inc. P&ID = Piping & Instrumentation Diagram P&ID $ EST DPFD

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Page 7: Project Management Course - cfroundtable.org · Project Management (Better, ... IPA = Independent Project Analysis, Inc. P&ID = Piping & Instrumentation Diagram P&ID $ EST DPFD

Business Case for Improvement

Improved Capital Stewardship

Lower Costs

More Projects

Better Projects

Improved ROCE

Higher Earnings Growth

Higher P/E

Higher Market Confidence

Improved TSR

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Page 8: Project Management Course - cfroundtable.org · Project Management (Better, ... IPA = Independent Project Analysis, Inc. P&ID = Piping & Instrumentation Diagram P&ID $ EST DPFD

Project Management’s Impact on the Bottom Line

Project Management Improves ROCE byIncreasing Revenues, Decreasing Expenses,and Reducing Capital Employed

REVENUE MINUS EXPENSES

CAPITAL EMPLOYED= ROCE

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Page 9: Project Management Course - cfroundtable.org · Project Management (Better, ... IPA = Independent Project Analysis, Inc. P&ID = Piping & Instrumentation Diagram P&ID $ EST DPFD

Project Management Leads to Pacesetter Performance(Cheaper, Faster, and More Predictable)

1.25

1

0.750.75 1 1.25

Execution Schedule

Faci

lity

Cos

t

Industry Average

Indu

stry

Ave

rage

30%Improvement

30% Improvement

PacesetterPacesetterCompanyCompany

Company XCompany X

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Page 10: Project Management Course - cfroundtable.org · Project Management (Better, ... IPA = Independent Project Analysis, Inc. P&ID = Piping & Instrumentation Diagram P&ID $ EST DPFD

Project Development & Execution Process

A Process that Facilitates the OptimalUse of Resources (Dollars, People andTechnology) Over the Life of an Asset /Project to Maximize Value.

Desired Outcome• Select the Right Projects by Improving

Decision Making • Improve Project Outcomes through Excellence

in Execution of Decisions10

Page 11: Project Management Course - cfroundtable.org · Project Management (Better, ... IPA = Independent Project Analysis, Inc. P&ID = Piping & Instrumentation Diagram P&ID $ EST DPFD

Project Management Vision

High

HighLow Mid

Random Success• Good Projects• Average Execution

Consistent Success• Good Projects• Good Execution

Success Unlikely• Poor Projects• Poor Execution

Random Success• Poor Projects• Good Execution

DecisionQuality Mid

Execution Quality

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Page 12: Project Management Course - cfroundtable.org · Project Management (Better, ... IPA = Independent Project Analysis, Inc. P&ID = Piping & Instrumentation Diagram P&ID $ EST DPFD

PHASE 2SELECT fromAlternatives

Determine Project Feasibility andAlignment withBusiness Strategy

Project Development & Execution Process

PHASE 1IDENTIFY & Assess

Opportunities

Finalize Project Scope, Cost and Schedule and Get the Project Funded

Select thePreferred Project Development Option

Evaluate Asset to Ensure Performance to Specifications and Maximum Return to the Shareholders

PHASE 3DEVELOP Preferred

Alternative

PHASE 4EXECUTE

(Detail EPC)

PHASE 5OPERATE &

Evaluate

Produce an Operating Asset Consistent with Scope, Cost and Schedule

AFE

AFE = Appropriation For Expenditure12

Page 13: Project Management Course - cfroundtable.org · Project Management (Better, ... IPA = Independent Project Analysis, Inc. P&ID = Piping & Instrumentation Diagram P&ID $ EST DPFD

Project Management’s Impact on Creating Value

Phase 1Opportunity

Identified

Phase 2Generate &

Select Alternatives

Phase 4Execute

Phase 5Operate

Value Identification Value Realization

Phase 3Develop

Preferred Alternative

Poor Project Definition

Good Project

Definition

Poor Project

Execution

Good Project

ExecutionA

B

C

D

VALU

E

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Page 14: Project Management Course - cfroundtable.org · Project Management (Better, ... IPA = Independent Project Analysis, Inc. P&ID = Piping & Instrumentation Diagram P&ID $ EST DPFD

Influence vs. Expenditures

Major Influence Rapidly Decreasing Influence Low Influence

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INFL

UEN

CE

Front End Loading

Final Authorization

EXPEND

ITUR

ES

IDENTIFYDSP

Gate

DSP

GateSELECTDSP

GateDEVELOPDSP

GateEXECUTE OPERATEDSP

GateGateGateGate

Front End Loading DSP = Decision Support Package

Page 15: Project Management Course - cfroundtable.org · Project Management (Better, ... IPA = Independent Project Analysis, Inc. P&ID = Piping & Instrumentation Diagram P&ID $ EST DPFD

PHASE 2SELECT fromAlternatives

Clearly Frame Goal

Test for Strategic Fit

Preliminary Overall Plan

Preliminary Assessment

~1 % Engng.

Phase 1 Estimate

Project Development & Execution Process

PHASE 1IDENTIFY & Assess

OpportunitiesFully Define Scope

Develop Detailed Execution Plans

Refine Estimate

Submit Funding for Approval

~25 % Engng.

Phase 3 Est. (+/- 10 % Accuracy)

Generate Alternatives

Preliminary Development of Alternatives

Develop Expected Value

Identify Preferred Alternative

Phase 2 Est.

Operate Asset

Monitor & Evaluate Performance

Identify New Opportunities

PHASE 3DEVELOP Preferred

Alternative

PHASE 4EXECUTE

(Detail EPC)

PHASE 5OPERATE &

Evaluate

Implement Execution Plan

Min. Changes

Finalize Operating Plan

Business Plan for Phase 5

Project Review

AFE

AFE = Appropriation For Expenditure15

Page 16: Project Management Course - cfroundtable.org · Project Management (Better, ... IPA = Independent Project Analysis, Inc. P&ID = Piping & Instrumentation Diagram P&ID $ EST DPFD

Project Performance Drivers per IPA

1. Use of Multifunctional Integrated Teams

2. Best Practical Front End Loading (Phases 1, 2 and 3)

3. Use of Applicable Value Improving / Best Practices

4. Scope Management and Control

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Page 17: Project Management Course - cfroundtable.org · Project Management (Better, ... IPA = Independent Project Analysis, Inc. P&ID = Piping & Instrumentation Diagram P&ID $ EST DPFD

Management’s Role (1)

Accountability—Business evaluation should be conducted 1 to 2 years after project completion and Project Sponsor should be held accountable for the financial outcome.

Accessibility—Management should actively participate in gate keeping meetings at the end of each phase of the Process and communicate frequently with the project team.

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Page 18: Project Management Course - cfroundtable.org · Project Management (Better, ... IPA = Independent Project Analysis, Inc. P&ID = Piping & Instrumentation Diagram P&ID $ EST DPFD

Management’s Role (2)

Leadership—Management should establish clear expectations and objectives for the project team.

Resources—Provide resources of right people and funding to support the project team.

Behaviors—Demonstrate visible support and provide positive consequences for following Process, Best Practices and sharing Lessons Learned.

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Page 19: Project Management Course - cfroundtable.org · Project Management (Better, ... IPA = Independent Project Analysis, Inc. P&ID = Piping & Instrumentation Diagram P&ID $ EST DPFD

Key Players

• Decision Makers• Multifunctional Project Team

--Business, Technical, Operations and Maintenance

• Stakeholders• Contractors• Vendors / Suppliers

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Page 20: Project Management Course - cfroundtable.org · Project Management (Better, ... IPA = Independent Project Analysis, Inc. P&ID = Piping & Instrumentation Diagram P&ID $ EST DPFD

Value Improving / Best Practices

Value Improving / Best Practices are toolsto improve project planning and execution. In conjunction with a structured Processthey can optimize:

• Cost• Schedule• Performance• Safety

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Page 21: Project Management Course - cfroundtable.org · Project Management (Better, ... IPA = Independent Project Analysis, Inc. P&ID = Piping & Instrumentation Diagram P&ID $ EST DPFD

Impact of FEL & VIPs (from IPA)

1.0

1.1

1.2

0.9

Rel

ativ

e C

apita

l Cos

t

Best Practical Good Fair Poor

Industry Average Cost = 1.0

FEL Improvement plus VIPs

FEL Improvement Only

FEL Rating

RELATIVE CAPITAL COST AS A FUNCTION OF FEL

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Page 22: Project Management Course - cfroundtable.org · Project Management (Better, ... IPA = Independent Project Analysis, Inc. P&ID = Piping & Instrumentation Diagram P&ID $ EST DPFD

Value Improving / Best Practices

• Pre-Funding Assessment

• Value Improving Practices by IPA

• Peer Review

(Share)

• Decision & Risk Analysis

• Project Execution Planning

• Lessons Learned(Seek)

Legend: AFE = Appropriation for ExpenditureD = Decision Point PFD = Process Flow Diagram IPA = Independent Project Analysis, Inc. P&ID = Piping & Instrumentation Diagram

P&ID$

EST AFEPFDD D D DD$ EST

Phase 1IDENTIFY & Assess

Opportunities

Phase 2SELECT fromAlternatives

Phase 3 DEVELOP Preferred Alternative

Phase 4EXECUTE

(Detail EPC)

Phase 5OPERATE &

Evaluate

• Post Project Assessment

• Business Evaluation

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Page 23: Project Management Course - cfroundtable.org · Project Management (Better, ... IPA = Independent Project Analysis, Inc. P&ID = Piping & Instrumentation Diagram P&ID $ EST DPFD

Project Execution Planning--Part A(The Strategic Project Planner by Richard Westney)

Defining the business goals that will determine project success

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Page 24: Project Management Course - cfroundtable.org · Project Management (Better, ... IPA = Independent Project Analysis, Inc. P&ID = Piping & Instrumentation Diagram P&ID $ EST DPFD

Project Execution Planning--Part B(The Strategic Project Planner by Richard Westney)

Defining major phases, milestones, risks, organization, staffing and best practices to be used

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Page 25: Project Management Course - cfroundtable.org · Project Management (Better, ... IPA = Independent Project Analysis, Inc. P&ID = Piping & Instrumentation Diagram P&ID $ EST DPFD

Project Execution Planning--Part C(The Strategic Project Planner by Richard Westney)

How time, cost, quality and resources will be managed

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Page 26: Project Management Course - cfroundtable.org · Project Management (Better, ... IPA = Independent Project Analysis, Inc. P&ID = Piping & Instrumentation Diagram P&ID $ EST DPFD

Total Cost Management

•Contracting/Procurement(Strategy)

•Cost Control/Forecasting(WBS)

•Progress reporting

•Finance/Audit

Phase 1IDENTIFY & Assess

Opportunities

Phase 2SELECT fromAlternatives

Phase 3DEVELOP Preferred Alternative

Phase 4EXECUTE

(Detail EPC)

Phase 5OPERATE &

Evaluate

• Economic Analysis(NPV, ROR, Payout)

• Cost Estimating(Conceptual)

• Planning/Scheduling(Milestone)

• Benchmarking(Cost / Capacity)

Legend: AFE = Appropriation for Expenditure NPV = Net Present Value PFD = Process Flow DiagramD = Decision Point ROR = Rate of Return P&ID = Piping & Instrumentation DiagramEPC = Engineer, Procure & Construct CPM = Critical Path Method WBS = Work Breakdown Structure

P&ID$

EST AFEPFDD D D DD$ EST

(Funding +/- 10% Accuracy) (Definitive)

(CPM Bar Chart) (CPM Resource Loaded) (Monitor & Update)

(Pre-Funding Assessment) (Post-Project Assessment)

(Pre-Qualification) (Award / Monitor)

Performance Measurement(Establish Progress Payments) (Earned Value)

(Establish Cost Accounts & Budgets) (Trend / Forecast)

(Closeout)

(Cost Collection / Analysis)

(Set Pacesetter Target)

(Asset Accounting)(Capital versus Expense)

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Page 27: Project Management Course - cfroundtable.org · Project Management (Better, ... IPA = Independent Project Analysis, Inc. P&ID = Piping & Instrumentation Diagram P&ID $ EST DPFD

Summary

Structured Process, Management’s active role,application of Value Improving / Best Practicesand Total Cost Management can help achieveWorld-Class Project Performance:• Better• Cheaper• Faster• SaferPROJECTS

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