How to Create World Class Project Management Organization? By: Dr. - - PowerPoint PPT Presentation

February 27 - March 1, 2020 | Renaissance Indian Wells Resort & Spa

How to Create World Class Project Management Organization?

By: Dr. Nick Lavingia, P.E.

• Dr. Nick Lavingia, P.E.

Chevron-Retired Project Management Consultant, Advisor & Trainer

• Education: BS & MS in Chemical & Petroleum Refining Engineering

and PhD in Mineral Economics from Colorado School of Mines, USA.

• Experience: Over 40 years of Project Engineering, Management,

Consulting and Training in the Energy Industry. Supported more than 100 major capital projects worth well over $ 100 billion in more than 20 countries.

• Awards: Chevron Chairman’s award for implementing Value

Engineering throughout the corporation and Pathfinder’s award for Outstanding Contribution to the Advancement of Project Management

• Technology. Published and presented numerous papers at

conferences.

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Agenda

1. Project Management’s Impact on the Bottom Line Improve ROCE and TSR 2. Project Development & Execution Process Effective Communication Between Decision Makers, Multifunctional Project Team and Stakeholders 3. Project Management Best Practices Optimize Safety, Cost, Schedule, and Operability of any project 4. Total Cost Management Plan, Schedule, Estimate, Monitor and Report 5. Training and Certification For Executives, Managers and Project Professionals

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Offshore Platform

Floating, Production, Storage & Offloading

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Oil Sands -Truck

• 400 tons empty
• 400 tons load
• 800 tons total weight

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Oil Sands - Shovel & Truck

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Liquefied Natural Gas Tanker

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Refinery & Petrochemical Complex

• 1. Project Management’s Impact on the

Bottom Line Improve ROCE and TSR

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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

ROCE = Return On Capital Employed, P/E = Price to Earnings , TSR = Total Shareholder Return

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Project Management Leads to Pacesetter Performance

(Cost Efficient, Faster, and More Predictable)

1.25 1 0.75 0.75 1 1.25

Execution Schedule Facility Cost

Industry Average Industry Average

30% Improvement 30% Improvement

Pacesetter Company Company X

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High High Low 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

Decision Quality Execution Quality

Mid

Project Management Vision

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• 2. Project Development & Execution Process

Effective Communication Between Decision Makers, Multifunctional Project Team and Stakeholders

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PHASE 2

SELECT from Alternatives

Determine Project Feasibility and Alignment with Business Strategy

Project Development & Execution Process

PHASE 1

IDENTIFY & Assess Opportunities

Finalize Project Scope, Cost and Schedule and Get the Project Funded Select the Preferred Project Development Option Evaluate Asset to Ensure Performance to Specifications and Maximum Return to the Shareholders PHASE 3

DEVELOP Preferred Alternative

PHASE 4

EXECUTE (Detail EPC)

PHASE 5

OPERATE & Evaluate

Produce an Operating Asset Consistent with Scope, Cost and Schedule

1 2 3 4 5

FID FID = Final Investment Decision

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VALUE

Project Management’s Impact on Creating Value

Phase 1 Opportunity Identified Phase 2 Generate & Select Alternatives Phase 4 Execute Phase 5 Operate

Value Identification Value Realization

Phase 3 Develop Preferred Alternative

Poor Project Definition Good Project Definition Poor Project Execution Good Project Execution

A B C D

FID

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INFLUENCE Front End Planning Major Influence Rapidly Decreasing Influence Low Influence EXPENDITURES Final Authorization

IDENTIFY & ASSESS

DSP Gate DSP Gate

SELECT

DSP Gate

DEVELOP

DSP Gate

EXECUTE OPERATE

DSP Gate Gate Gate Gate

Influence vs. Expenditures

Front End Loading

DSP = Decision Support Package

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PHASE 2

SELECT from Alternatives

Clearly Frame Goal Test for Strategic Fit Preliminary Overall Plan Preliminary Assessment ~1 % Engng. Phase 1 Estimate

Project Development & Execution Process

(Effective Communication between Decision Makers, Multi Functional Project Team and Stakeholders)

PHASE 1

IDENTIFY & Assess Opportunities

Fully Define Scope Develop Detailed Execution Plans Refine Estimate Submit Funding for Approval ~25 % Engng. Phase 3 Est. (+/- 10 % Accuracy)

Generate Alternatives Preliminary Development

• f Alternatives

Develop Expected Value Identify Preferred Alternative Phase 2 Est.

Operate Asset Monitor & Evaluate Performance Identify New Opportunities PHASE 3

DEVELOP Preferred Alternative

PHASE 4

EXECUTE (Detail EPC)

PHASE 5

OPERATE & Evaluate

Implement Execution Plan

• Min. Changes

Finalize Operating Plan Business Plan for Phase 5 Project Review

1 2 3 4 5

FID FID = Final Investment Decision

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• 3. Project Management Best Practices

Optimize Safety, Cost, Schedule, and Operability of any project

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• Pre-Funding Assessment
• Construction

Industry Institute Best Practices

• Peer Review

(Share)

EPC Reviews

• Decision & Risk Analysis
• Project Execution Planning
• Lessons Learned

(Seek)

Legend: D = Decision Point, CII = Construction Industry Institute , FID = Final Investment Decision P&ID = Piping & Instrumentation Diagram, PFD = Process Flow Diagram

P&ID $ EST FID PFD D D D D D $ EST

Phase 1

IDENTIFY & Assess Opportunities

Phase 2

SELECT from Alternatives

Phase 3

DEVELOP Preferred Alternative

Phase 4

EXECUTE (Detail EPC)

Phase 5

OPERATE & Evaluate

Project Management Best Practices

(Optimize Cost, Schedule and Performance of any project)

• Post Project

Assessment

• Business

Evaluation

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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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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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Project Execution Planning - Part C

(The Strategic Project Planner by Richard Westney)

How time, cost, quality and resources will be managed

Construction Industry Institute (CII) Best Practices

• Advanced Work Packaging
• Alignment
• Benchmarking & Metrics
• Change Management
• Constructability
• Dispute Prevention &

Resolution

• Front End Planning
• Implementation of CII

Research

• Lessons Learned
• Materials Management
• Partnering
• Planning for Modularization
• Planning for Startup
• Project Risk Assessment
• Quality Management
• Team Building
• Zero Accidents Techniques

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• 4. Total Cost Management

Plan, Schedule, Estimate, Monitor and Report

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• Contracting/Procurement

(Strategy)

• Cost Control/Forecasting

(WBS)

• Progress reporting
• Finance/Audit

Total Cost Management (Plan, Schedule, Estimate, Monitor and Report)

Phase 1 IDENTIFY & Assess Opportunities Phase 2 SELECT from Alternatives Phase 3 DEVELOP Preferred Alternative Phase 4 EXECUTE (Detail EPC) Phase 5 OPERATE & Evaluate

• Economic Analysis

(NPV, ROR, Payout)

• Cost Estimating

(Conceptual)

• Planning/Scheduling

(Milestone)

• Benchmarking

(Cost / Capacity) Legend: FID = Final Investment Decision NPV = Net Present Value PFD = Process Flow Diagram D = Decision Point ROR = Rate of Return P&ID = Piping & Instrumentation Diagram EPC = Engineer, Procure & Construct CPM = Critical Path Method WBS = Work Breakdown Structure P&ID $ EST FID PFD D D D D D $ 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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• 5. Training and Certification

For Executives, Managers and Project Professionals

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Training & Certification

• Leadership Roles and Behaviors
• Project Management Skills from PMBOK
• -Project Integration Management
• -Project Scope Management
• -Project Time Management
• -Project Cost Management
• -Project Quality Management
• -Project Human Resource Management
• -Project Communications Management
• -Project Risk Management
• -Project Procurement Management
• PMP/AACE Certification

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Management’s Role

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. Leadership—Management should establish clear expectations and

• bjectives for the project team.

Resources—Provide resources of right people at right time 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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Key Functions of Project Sponsor

• Selects Project Manager/Director
• Makes sure project economics and assumptions are

consistent with Business Unit plans and strategies

• Agrees on key milestones for review
• Responsible for assessing the level of risk analysis to

be done

• Approves major scope/budget changes and estimates

for the project

• Assures that the Project definition and cost estimate

for FID are consistent with the Process

• Responsible for ensuring project meets FID objectives

including safety, cost, schedule and economic projection

• Reports to a high level in Business Unit or Corporate

Management

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Summary

Structured Project Development & Execution Process, Application of Project Management Best Practices and Total Cost Management Tools with Trained Workforce can help achieve World Class Project Performance:

• Safer
• Better
• Faster
• Cost Efficient

PROJECTS

Thank you.