Newpapers, industry magazines, corporate press releases and televisions sound-bites have introduced “transformation” and “transformational” into the lexicon of content in reporting on projects and describing corporate reorganizations.
From behind podiums and microphones, executives and public officials are touting the benefits of transformational projects. The content typically emphasizes how the projects will transform the company, the region, the community and the products/services to customers. Some of the projects in the media include:
In the rail transit domain, the context may contain dramatic changes in the organization to improve operating performance or to re-energize the completion of major projects that change the existing products and services to customers. This may include system expansions with new terminals that advertise high-end property features and stores, and a new fleet with never before seen amenities, such as charging stations, video advertizing, new seating features, and CCTV monitoring operator and passenger compartments.
On projects, the organization provides the input and the tools and techniques to accomplish the plan and realize the deliverables and benefits. Not surprising, transformational projects usually contain detailed analysis of the financial investment and forecast returns for the execution, start-up, operation and maintenance phases. Each of these phases may also require adjusting the organization’s operating model for staffing, training, facilities and furnishing, tools and equipment, and materials.
Transforming an organization is different than the results from the output of the projects involving capital improvements, and it may require changes in culture, reporting structure, and processes and procedures. For these transformations, there needs to be a strategic framework for changing the current performance trends and to better aligning organizational assets with longer term goals and expectations for both short term and continued improvement in the quality of management and business operations. Some organizational changes in the media include:
Any change is an organization can be disruptive and create challenges to existing operations while improvements are defined and implemented systematically. The decided upon change should be the outcome of a thorough review of the existing organizational conditions, work flow problems and execution risks. Determining the transformation plan and proofing the end results will focus on:
Validating the reported performance metrics and trends are correct and accurate
Verifying and concurring changes are required to better align all activities and deliverables with the organization’s business plan and the organization’s assets including personnel, processes, procedures, tools, and techniques.
The transformation should be undertaken as a project or a series of projects that when completed can mitigate conditions or solve the stated problem(s), and achieve the envisioned end results. The solutions should demonstrate improvements in the organization ability and confidence in achieving the short term and long term goals. Ideally, the plan will follow proven project management and quality management processes and methods and adhere to a defined lifecycle. However before finalizing a plan roll-out, the organization’s executives should perform a rigorous vetting of the plan to prove out assumptions, approve the approach and hold the project team accountable for the expected results.
The transformation initiative must be carefully planned and executed with transparency throughout the organization’s reporting structure. The lessons for updating tools and techniques and adopting best practices learned from executing capital projects will be applied for transformation, including a proven communications plan and a strong scope management plan.
An operating transformation in an organization will require a well defined communications plan covering:
The transformation plan will be complemented by strong project governance and highly skilled and experienced project staff. Since the transformation will likely require changes in existing practices, processes and procedures, it will be necessary to continue the existing operations while the transformation proceeds. As milestones and deliverables are achieved, changes will be systematically and deliberately implemented. The plan will identify the required training for personnel and the new equipment, tools, software and software licenses that will be installed, tested and ready for use.
The scope of the transformation will focus on re-engineering management work flows, which are the root cause of poor performance metrics. The work flow reviews should include attributes and objectives such as:
Like project plans, the transformation milestones and dates should be realistic, measurable and achievable. In some cases, public sector transformations are the product of executive goals and government influencers. This often creates lofty promises and aggressive performance metrics that challenge an organization’s operating processes, its long established working culture, and the quality of personnel. These challenges and risks will need to be addressed as part of the transformation plans. Ideally, the format and content of the plans will resemble the Project Charter and Project Management Plan requirements from Project Management Institutes – Project Management Body of Knowledge (www.pmi.org) and Federal Transit Administration (www.FTA.dot.gov).
In short, stop voluntarily creating the potential for risk events on projects that may not have adequate management resources to ensure opportunities are realized and threats are mitigated!
Projects are exposed to risks throughout the project lifecycle and they present threats and opportunities for altering the original project plan for scope, schedule, budget and quality expectations as well as for adjusting the project business case for purpose, deliverable requirements and functionality, and the cost benefit analysis for project completion.
Guides for project management and practice standards for project risk management are available from government funding agencies and from industry advocates and professional development organizations such as the Federal Transit Administration (www.transit.dot.gov) and the Project Management Institute (www.pmi.org). Managing risks also requires experienced project professionals with demonstrated expertise in the industry domain of the project and with adequate allocation of hours and budget to perform risk management activities.
Hard risks can be addressed with engineering solutions and added funds to retain schedule goals. But soft risks require managerial solutions that must be addressed with funds, changes in project management processes and other innovations that mitigate impacts to extending schedule duration and forecasting new milestone dates.
Organizational processes and internal struggles between managerial silos create risks on projects. Many of the risks in this category can be managed and controlled by diligently monitoring events and consequences to assure operational initiatives do not place new burdens on established project objectives, management processes, performance metrics and progress to goals.
Here are some examples soft risks:
In the rail transit domain, the value and duration of projects, including planning and defining requirements, can span 5 years to 10 years. For megaprojects in this domain, the operating organizations are usually highly bureaucratic. As a result, the project durations can be longer due to factors that add time and complexity for processes associated with government contracting requirements, securing bonds and insurance carrier support, managing available manpower and labor agreements, coordinating a large quantity of contracts and project participants, monitoring vast interdependencies and interfaces, directing the logistics for work within fixed boundaries, and for managing materials provided by the project to contractors.
TIP: Conduct a time study of recurring risk management activities and deliverables to estimate the manhours required from supporting staff.
TIP: Ensure Agendas for monthly project meetings, monthly contract progress meetings and periodic management oversight meetings include risk topics.
TIP: Project program budgets should identify separate budget line items and schedule duration reserves that can be drawn down for mitigating and responding to risks.
Basic Management Fundamentals
Owners’ upper management and project governance, and Project Management Offices’ (PMO) leadership are always looking for the single biggest issues that can be resolved to remove impediments to project progress and performance, and to get a stagnate project back on track. But sometimes it is the smallest most basic activities that create the largest issues for maintaining proactive management on a project.
Recently, a new management team was introduced on a mega project to convert the contract management centric approach to a PMO centric management approach. This change was understandable and foreseen as beneficial to improving the overall management on the project. While this was aligned with the standards and practices defined by the global professional organization Project Management Institute (PMI), there was Owner oversight, construction management, contract management, project controls, quality management and risk management – but no defined project management roles in the organization’s management structure.
As expected, the new PMO team focused on analytics and decentralized management into specific physical asset project boundaries that will be managed independently to meet goals within a segmented territory of the project. The basis of this approach was adopted from a predecessor review by an industry management consultant that assured the Owner that the approach, which worked in 2001 on a major European project, would do the same for a 2018 project in North America.
While understandable in its presentation to the Owner’s Board, it did not resolve the root cause of the performance attributes affecting overall project progress. Hidden in plain site were common management interactions between project participants that deteriorated the work environment required for effective project management. Some of the typical factors negatively affecting project performance, included:
Roll-out of the new PMO centric approach was implemented with Owner’s Board acceptance and project governance support. Expectations were high for turn-around of performance to critical dates leading to project realization. Monitoring of performance metrics produced charts, dash boards, and heat maps that required constant attention to variances and management inquiries.
Some of the missed opportunities included:
Owner’s hire consultants for expertise that does not exist in-house or that is used to supplement staffing levels and to validate expertise and conclusions of in-house personnel accountable for the same services. In organizations where institutional expertise has been drastically depleted, Owners also hire consultants to oversee other consultants. Some organizations have demonstrated that hiring a consultant allows them to disrespect and bully other consultants. As a result, Owner’s management of consultants must monitor the interactions with the organization to assure consultant staff is provided respect and professional courtesy that comes with professional ethics, contract requirements, and laws and statutory requirements. If not, the consultants will expend scarce project funds on non-value added activities that displace funds allocated for the creation of project assets.
The PMO, organization and consultants hired by the organization must insist on a code of respect that transcends contractual responsibilities. Just as in-house staff are accountable for interactions between employees, it is equally important the organization’s consultants insist on respect in interaction between in-house staff and consultants, and between consultants.
Analytics at the Expenses of PM Overhead
Project Management Offices (PMO) establish and uniformly apply Key Performance Indicators (KPIs) for program and project managers to monitor performance on projects and programs of projects (Mega projects). Typical KPIs on projects are Schedule Performance Index (SPI), Cost Performance Index (CPI) and Planned EVM verse Actual EVM. Other KPIs for monitoring project cost and schedule goals can include forecasts of future efforts expressed in ratios including remaining duration, remaining EVM, Estimate To Complete, and pending project/contract changes.
For projects that are not performing as expected, PMOs may need to conduct management reviews and implement additional monitoring measures to mitigate poor performance to cost and schedule. As a result, more granular KPIs (Sub-KPIs) are created for work directly related to the performance of individual contributors with significant roles and responsibilities where the service quality was identified as a root cause affecting project performance.
The purpose of the Sub-KPIs is to monitor, measure, assess and act on performance attributes and make decisions on critical activities in order to assure progress to meet project schedule milestones. The goal is to improve processes and procedures, and to reduce schedule activity durations, which are identified as risk threats to critical project dates. Each of the Sub-KPIs will capture historical data that will be used for identifying and resolving problems and for increasing confidence in future project decisions.
This new level of monitoring will focus on analytics that PMO executives should establish through a defined breakdown structure of KPIs, which include metrics for activities that are driving durations of processes and procedures essential to quality performance to goals.
Examples of Sub-KPIs include:
In the example, the Sub-KPIs are all related to schedule progress as prioritized by the PMO. A high percentage are outside the project teams control, and under the direct responsibility of the PMO’s management and the contracting office, which is usually an existing organizational asset within the Owner’s business structure. As a result, monitoring of the related Sub-KPIs should have executive level buy-in and commitment that provides the PMO with the authority to improve processes and procedures.
Creating new Sub-KPIs will require enhancement to existing reporting to incorporate color coded graphics such as dashboards, heat maps, histograms, and bar graphs, which provide conspicuous visual recognition of critical metrics for managing efforts across the project. The color coding may indicate Red – Outside Tolerances - Action Required, Yellow – Near Tolerance Thresholds - Action Under Review, and Green – Within Tolerances - No Action Required.
Depending on the project domain, other Sub-KPIs may be created for monitoring and improving performance to intermediate milestones and EVM targets. For rail-transit projects, there may be significant access restraints, production time limits, and promised on-site services by Owner to contractor. In this case, Sub-KPIs might include ratios for: 1) Actual access days to site and planned access days. 2) Actual contact hours and planned production hours. 3) Actual crew days for work and planned crew days to support contractor. 4) Accrued liquidated damages and contract amount. 5) Accrued incentive payments verse contract budget.
In theory, KPIs and Sub-KPIs increase management quality and improves project performance at the expense of added management overhead cost and staff levels. However, each PMO needs to assess the benefits from the added managerial effort for implementing and monitoring the KPIs and Sub-KPIs.
The number of KPIs will proportionally increase costs for Project Controls, management overhead and for added project analysts that are required for the collecting data, reporting data, explaining metric variances and implementing corrective actions.
At the expenses of other progress/performance report attributes and content, readers may overly focus on the red metrics while ignoring non-red items. This may cause missed opportunities on schedule risk events that may actually be more significant to schedule performance and be more easily resolved to mitigate or avoid the events.
Performance monitoring of Sub-KPIs without an improvement in schedule durations may indicate processes are not aligned with project expectations despite recognition of the impact to progress. Executive management needs to ensure that the metrics identified as contributing to schedule risks can be mitigated. Otherwise, the risks are just be accepted threats that need to be built into the schedule.
Critical Components in Special Conditions/Supplemental Terms and Conditions - Part B
In most contracts, the Contract Terms and Conditions may be amplified using sections for Special Conditions (SC) or Supplemental Terms and Conditions (STC).
This is the 12th in a series of discussions that is intended to prompt Project Teams to be aware of the entire contract document, including Information For Bidders (IFB), General Conditions/Terms and Conditions (GCs) and the Technical Requirements [Specifications and Drawings.]
In the rail transit domain, there may be unique requirements that are created by work conditions, from implementation of alternative delivery methods, for multiple milestones with liquidated damages and for incentives to beat performance milestones. By exception, these requirements are expressed in SC and STC.
INSURANCE : Typically, insurance requirements cover General Liability, Workmen’s Compensation, automotive, and professional liability. The scope and insured amounts are established by the Buyer’s legal and risk management groups. In a railroad environment, the requirements are supplemented to include:
Railroad Protective: This coverage applies to a contract work zone that requires the contractor to work under hazards such as moving passenger trains and on-track vehicles, high voltage third rail and overhead catenary systems.
Environmental: This coverage applies to a contract work zone where there is known materials and risks of hazardous materials, such as contaminated soil, asbestos containing materials and cables, lead in paint and cable insulation, and hazardous materials in soils such as PCBs and mercury.
WARRANTY: Generally, the standard contract form specifies the requirements for warranty of the products, including the period based on a defined date typically a contract milestones, such as Substantial Completion. However depending on the complexity of systems, first time applications of technology or unique execution means and methods in an operations environment, trade standard warranty requirements may not be adequate. In these cases, Buyer’s will supplement requirements with processes and metrics.
The SC and STC Warranty requirements such as:
TIP: Warranty commercial requirements in the SC/STC should be coordinated with requirements that are identified in technical specifications.
MATERIALS PROVIDED BY BUYER: Division of work on contract uniformly specify the contractor responsibilities for labor, materials, equipment and supervisory services to complete the work. In unusual circumstances, the contract requirements stipulate the Buyer provides the Seller with materials for installation as part of the contract scope. As a result, the contract will incorporate technical information in the Div 1 specifications, and commercial conditions for transfer of materials between Buyer and Seller and the responsibilities for accepting and storing materials for installation when required. This may include warehousing requirements, bonding, insurance and processes for accepting materials.
TIP: Ensure the project risk management plan and the contract management plan includes the required resources and processes for executing and managing the work under this project requirement.
TIP: Ensure a cost benefit justification is documented to support the decision for the division of work on the contract.