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Topics: Change Management, Construction, Risk Management
Agility in construction projects: how much variation is enough?
I am a lead planner in charge of a rather large project, i.e. a petrochemical plant with all utility plants. We are working with more than 12 main EPC contractors and 200+ suppliers/vendors and we have reached 70% overall progress.
The economic conditions in Iran led to a vast amount of risks in our project, leading to several changes in suppliers and technologies then naturally numerous budget increments. We had to accept such changes in an Agile way to ensure plant overall operation, and investors who had already spent more than 60%, now can not withdraw.
Our updated project budget inflated about 25% and the project overall planned IRR came down from 41% to 32%.
On the Risk management point of view, however, I am stuck with project risk management, and my question is "how much risk appetite is enough?"
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How much risk appetite are the stakeholders willing to assume?
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1 reply by Seyed Ali Vakilzadeh
Sep 29, 2020 6:18 AM
Seyed Ali Vakilzadeh
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They have accepted 96% total sum of the overbudget proposals.
Now we are going to incorporate new changes at least additional 10% budget increment.
Sep 29, 2020 3:04 AM
Replying to Marcus Udokang
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How much risk appetite are the stakeholders willing to assume?
They have accepted 96% total sum of the overbudget proposals.
Now we are going to incorporate new changes at least additional 10% budget increment.
First of all, is nothing to be with using Agile or not, while I agree that in that conditions being Agile is a must but if and only if is taking from the original definition of Agile, not thinking in software field (the Manifesto). Just to comment, I worked on critical projects in that conditions because I am living in South America. The first answer is what @Marcus did and you answered. No matter that, in that conditions, really it does not matter. Why? Because as far I understood the environmental instability will create conditions where the numbers will have no sense at least you update it in a regular way. How Agile can help you? The basement of Agile is knowledge and based on that knowledge you have to prevent instead of cure. That´s because some time ago the PMI published a short article I wrote about Agile where I explained that tennis is the perfect example to understand Agile: top players created the future based on their knowledge and anticipate the next mover by reading the position of their rival and hitting the ball with the pace and effect needed to receive the shot they want to receive. That´s Agile by definition. That´s what you have to do in this type the situations.
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1 reply by Seyed Ali Vakilzadeh
Sep 30, 2020 1:13 AM
Seyed Ali Vakilzadeh
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Thank you for your time and excellent reply.
I decided to think this project is going to be Agile because variations were not just simple changes in scope or cost, but primarily we took it in-depth and rethink each and every technology, scope definition, functionality, etc. in every subsystem of the plant.
In addition, we broke down the project goals into smaller, easier to catch, and shorter milestones to focus on. By such a decision, we prioritized the bunch of risks and problems. We even planned daily sprint meetings, purposefully out of the meeting room (usually in the corridor), and weekly / monthly success measurement sessions inside the meeting room.
Honestly, the investors are very easy on budged inflation proposals, because they think the project will be very profitable, but - as a project manager - I am worried about this inflation. This should stop somewhere before everything blows up!
Sep 29, 2020 7:24 AM
Replying to Sergio Luis Conte
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First of all, is nothing to be with using Agile or not, while I agree that in that conditions being Agile is a must but if and only if is taking from the original definition of Agile, not thinking in software field (the Manifesto). Just to comment, I worked on critical projects in that conditions because I am living in South America. The first answer is what @Marcus did and you answered. No matter that, in that conditions, really it does not matter. Why? Because as far I understood the environmental instability will create conditions where the numbers will have no sense at least you update it in a regular way. How Agile can help you? The basement of Agile is knowledge and based on that knowledge you have to prevent instead of cure. That´s because some time ago the PMI published a short article I wrote about Agile where I explained that tennis is the perfect example to understand Agile: top players created the future based on their knowledge and anticipate the next mover by reading the position of their rival and hitting the ball with the pace and effect needed to receive the shot they want to receive. That´s Agile by definition. That´s what you have to do in this type the situations.
Thank you for your time and excellent reply.
I decided to think this project is going to be Agile because variations were not just simple changes in scope or cost, but primarily we took it in-depth and rethink each and every technology, scope definition, functionality, etc. in every subsystem of the plant.
In addition, we broke down the project goals into smaller, easier to catch, and shorter milestones to focus on. By such a decision, we prioritized the bunch of risks and problems. We even planned daily sprint meetings, purposefully out of the meeting room (usually in the corridor), and weekly / monthly success measurement sessions inside the meeting room.
Honestly, the investors are very easy on budged inflation proposals, because they think the project will be very profitable, but - as a project manager - I am worried about this inflation. This should stop somewhere before everything blows up!
...
1 reply by Sergio Luis Conte
Sep 30, 2020 10:17 AM
Sergio Luis Conte
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You are welcome. What you describe can be made with waterfall based projects. The problem is people mix approach with life cycle. You can use Agile with waterfall life cycle projects. In fact, I did it lot of times including today and there is lot of examples and well known works outside there like Tom Gilb´s work for example. What you describe is the need to have iterative-incremental life cycle which is totally independent about using Agile or not. In fact, my recommendation in projects related to construction, is just in case it applies, to use iterative/incremental/iterative-incremental with Lean instead of Agile.
Sep 30, 2020 1:13 AM
Replying to Seyed Ali Vakilzadeh
...
Thank you for your time and excellent reply.
I decided to think this project is going to be Agile because variations were not just simple changes in scope or cost, but primarily we took it in-depth and rethink each and every technology, scope definition, functionality, etc. in every subsystem of the plant.
In addition, we broke down the project goals into smaller, easier to catch, and shorter milestones to focus on. By such a decision, we prioritized the bunch of risks and problems. We even planned daily sprint meetings, purposefully out of the meeting room (usually in the corridor), and weekly / monthly success measurement sessions inside the meeting room.
Honestly, the investors are very easy on budged inflation proposals, because they think the project will be very profitable, but - as a project manager - I am worried about this inflation. This should stop somewhere before everything blows up!
You are welcome. What you describe can be made with waterfall based projects. The problem is people mix approach with life cycle. You can use Agile with waterfall life cycle projects. In fact, I did it lot of times including today and there is lot of examples and well known works outside there like Tom Gilb´s work for example. What you describe is the need to have iterative-incremental life cycle which is totally independent about using Agile or not. In fact, my recommendation in projects related to construction, is just in case it applies, to use iterative/incremental/iterative-incremental with Lean instead of Agile.

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