How to Adapt Supply Chain IT Systems to the Specifics of Project Execution

Standard ERP systems and procurement systems are not well adapted to the specifics of project execution in particular for Large, Complex Projects. Substantial changes and improvements are required. Based on our experience and observations, our new White Paper 2017-18 ‘How to Adapt Supply Chain IT Systems to the Specifics of Project Execution’ explains the reasons for this issue and what can be done to overcome it in an effective and timely manner.

Adaptation of standard Supply Chain Management and ERP IT systems for the specifics of project execution is necessary. At the same time, this adaptation needs to be done with a particular focus on those aspects for which an IT system provides substantial benefits. It is a must to keep control of Large, Complex projects and an investment that cannot be avoided. The investment will provide substantial returns in terms of enhanced control and minimization of procurement costs.

Specific system adaptations are required, in particular in terms of Material-Take-Off import in the system, the detailed receipt on site, the need of a specific purchase-to-pay process based on milestones, and several other post-award management features.

Read our  new White Paper 2017-18 ‘How to Adapt Supply Chain IT Systems to the Specifics of Project Execution’ to understand the details of what need to be adapted for Large Complex Projects.

If you can’t access the link to the white paper, copy and paste the following link in your browser: http://www.projectvaluedelivery.com/_library/2017-18_Project_SCM_systems_v0.pdf

How to Maintain Sufficient Control of EPC Contractors on Projects

One of the most frequent failure modes we observe is insufficient, or poorly structured oversight of EPC Contractors. It is not because the contract is a turn-key EPC contract given to a reputed and professional contractor that the Project should not devote sufficient attention and oversight. In reality, EPC contracts are as susceptible to failure and commercial issues as other setups, and both direct and indirect consequences can be massive. Our new White Paper 2017-10 ‘How to Maintain Sufficient Control of EPC Contractors on Projects’ focuses on how to properly organize Project Control of an EPC Contractor.

One of the most common issues we encounter when it comes to EPC contractors that have to deliver a sizable part of the Project is a relative weakness of the supervisory organization. Projects or Owners too often underestimate the amount of control required to obtain a smooth delivery. In addition, they fail to understand that the relatively limited supervisory investment required is key to avoiding later major issues that may have consequences several orders of magnitude larger.

We are not favoring here the excessive addition of technical experts as part of this oversight, which sometimes have the opposite effect of affecting significantly the progress of the contractor and its ability to propose alternate solutions. We are focusing mainly on contract and control personnel.

Delegation is not incompatible with control, and even with lump-sum EPC contracts, it is essential to maintain substantial control in the interest of the Project. The issue of proper supervision by the Project is applicable in particular to lump-sum contracts. Contrary to common belief, in reality lump-sum EPC contracts often prove to be more risky for the Project due to the lack of detailed visibility on the actual progress, and because any change or interface issue from the side of the Project will be translated immediately into a Change Order. In a number of circumstances, it is more appropriate to use other contractual approaches. In any case, sufficient supervision remains required on the Project side even in the case of lump-sum EPC contracts..

Our new White Paper 2017-10 ‘How to Maintain Sufficient Control of EPC Contractors on Projects’ gives some pointers as to the required setup and areas of focus. Professional supervision of EPC contractors is a must.

If you can’t access the link to the white paper, copy and paste the following link in your browser: http://www.projectvaluedelivery.com/_library/2017-10_Project_Control_EPC_Contractors_v0.pdf

How to Develop Information Systems in an Effective Manner for Project-Driven Businesses

In a series of White Papers, based on our extensive experience in this area, we cover challenges of Information Systems in project-driven organisations: from the overall architecture to systems implementation, development and ongoing management. In this third White Paper 2018-05 ‘How to Develop Information Systems in an Effective Manner for Project-Driven Businesses’ we cover the specific challenges of developing bespoke Information Systems (refer to White Paper 2018-04 ‘How to Implement Information Systems in an Effective Manner in Project-Driven Organisations’ for the case of implementing a commercially available software). After a first discussion on the choice between customising a commercial software and developing one’s own, the key success factors of successful developments are investigated.

While developing systems in-house may be an adequate solution in some cases, it is generally not recommended except in specific cases.

If this solution is chosen, the consequences in terms of additional cost for maintenance and upgrades must be understood. It is also essential to ensure that there is an ongoing and viable relationship with the developer to make sure that continuous improvements can be implemented as required by the business and to keep the underlying technological up to as technology evolves.

Key best practices include:

• Have the project driven by the business
• Choose a local provider to enhance communication
• Ensure the developer has a robust development framework
• Be aware that the productivity of a developer can vary by orders of magnitude
• Ensure that non-regression checks are properly performed for upgrades.

Find more about those best practices and more in our new White Paper 2018-05 ‘How to Develop Information Systems in an Effective Manner for Project-Driven Businesses’ .

If you can’t access the link to the white paper, copy and paste the following link in your browser: http://www.projectvaluedelivery.com/_library/2018-05_Systems_Development_v0b.pdf

Why Custom Indicators and Visual Dashboards Are So Important for the Success of Large Complex Projects

In a Large and Complex Project it is essential to make sense of the large amount of information that flows back to the Project Manager. Devising proper indicators and developing Visual Management Tools (to the extreme of setting up a Project War-Room) is an essential skill of the Project Control Manager. In our new White Paper 2017-09 ‘Why Custom Indicators and Visual Dashboards Are So Important for the Success of Large Complex Projects’ we describe the different steps that need to be taken in that respect.

At the end of the day, all the work done by the Project Control Manager aims at allowing the Project Manager and its management team take the right decisions at the right moment.

In a Project, the role of the Project Control Manager is quite similar to a cockpit’s engineer. The challenge of dealing with very large number of information sensors is also a reality for large Projects. Beyond the ‘usual’ Project indicators, the Project Control Manager must make sense of all the incoming information. What needs to be displayed will change with the Project phase and condition. During the Project course the Project Control Manager must also be ready to develop specific temporary, custom indicators to help the Project Manager take the right decisions.

At any given time, these custom indicators must be in limited number and aligned with the priorities of the Project Manager. They thus need to be carefully chosen and possibly renewed regularly. Some will be used for a large part of the Project duration, while some might be devised and used only for a few weeks during a critical phase.

Experience also shows that communicating with the Project team through visual indicators is a great way to foster continuous alignment. This has been recognized also by the early practitioners of Total Quality Management such as Toyota, to enhance teamwork: Kanban boards or Heijunka boxes are in fact visual dashboards on the workplace, to which the workers are to refer regularly.

A relatively new trend in the Project industry is to systematically implement ‘war-rooms’ where lots of indicators are displayed graphically on the walls. This room normally serves also as the main meeting room for the Project Management Team. This is not a new concept – again, the Toyota Way promotes the concept of ‘Obeya’, the “great room” of Lean Management where the management gathers to undertake a higher level of effectiveness in communication and decision-making.

Leveraging on new technology, modern war-rooms not only have static displays of visual dashboards. They should also provide data-mining tools and interface to allow for further data analysis.

Read our new White Paper 2017-09 ‘Why Custom Indicators and Visual Dashboards Are So Important for the Success of Large Complex Projects’ to understand better the power of custom indicators and dashboards for Large Complex Projects.

If you can’t access the link to the white paper, copy and paste the following link in your browser: http://www.projectvaluedelivery.com/_library/2017-09_Visual_Dashboards_Warrooms_v0.pdf

How to Implement Information Systems in an Effective Manner in Project-Driven Organisations

In a series of White Papers, based on our extensive experience in this area, we cover challenges of Information Systems in project-driven organisations: from the overall architecture to systems implementation, development and ongoing management. In this second White Paper 2018-04 ‘How to Implement Information Systems in an Effective Manner in Project-Driven Organisations’ we cover the specific challenges of implementing commercial Information Systems. Implementation projects can be disruptive and even sometimes fail to bring value to the business. Key success factors of those implementation projects are described in the paper.

High level best practices include:

• Implement first the most standard version of the software
• Design an implementation team driven by the business
• Do not force functionalities upon a software that is not initially designed for. Prefer niche software
• Avoid too much customisation that will impede version update
• Be careful with automated interfaces – and specifically if they are bi-directional

Proper leadership of such projects is required, insisting on minimum customisation, selection of proper solutions that fit the business needs and the overall Systems Architecture. This is the role of strong Information Systems management resources, which are too often lacking in organisations.

Implementing new software systems is a major cost for organizations. It often carries substantial risk and requires substantial involvement of the business. Our new White Paper 2018-04 ‘How to Implement Information Systems in an Effective Manner in Project-Driven Organisations’ describes best practices which we believe carry substantial opportunities for organisations.

If you can’t access the link to the white paper, copy and paste the following link in your browser: http://www.projectvaluedelivery.com/_library/2018-04_Systems_Implementation_v0b.pdf

How to use Blended Rates appropriately in Project Contracts

Engineering and Construction contracts have been using ‘blended rates’ for a very long time. The recent trend of the usage of this term is disruptive in terms of terminology: new acronyms or new words are used to change the old concept.

The new concept of an all-encompassing blended rate appears to be simplifying contract management, but this new approach requires strict estimating protocols to make sure that they reflect the actual costs. In our new Expert paper 2018-01 “How to use Blended Rates appropriately in Project Contracts” by Saty Satyamurti we describe the content of Blended Rates and in which contact their usage should be restricted.

Recently Consulting Engineers and Construction Contractors have opted to use one single rate, which is called the “Blended Rate” for all the work performed under a single project. This approach is also favored by government as a simplifying approach. In other words the billing is easy, just compute the number of hours spent by all personnel working on the design, drawing, checking, approving and releasing the final product for construction and multiply by ‘one single rate’ to forward to the Client for payment.

The “Blended Rate” application is a worthwhile simplifying move on small short-term project like Software Developments, initial Viability and Feasibility Study, Computer Modeling, Visualization of a large project and low cost short term projects.

However, on large and long multimillion and billion dollars contracts, Consulting Engineers and Construction Contractors should sign contract in the old-fashioned way where talented people have each an adapted applicable rate. Every project needs a careful evaluation as to the benefit of using blended rate and the advantages.

Read more about Blended Rates in our new Expert paper 2018-01 “How to use Blended Rates appropriately in Project Contracts”

If you can’t access the link to the white paper, copy and paste the following link in your browser: http://www.projectvaluedelivery.com/expert/PVD_Expert_2018-01_Blended_Rates_v0b.pdf

How The Threshold for Capex Projects To Report to the CEO Should be Lower

In our interventions, we encounter too often Owner organizations that do not grasp the economic importance of some Capital Expenditure (Capex) projects that they execute, and the risks associated for the business. In this new White Paper ‘How most Owner organizations underestimate the importance of Capital (Capex) Projects: PVD rule of thumb of Capex project criticality’ we share in particular some orders of magnitude of the thresholds for Capex projects that should get the attention of CXO level executive teams.

Capex projects that create the means of production of the company might be rare and far in-between, in most industries they will decide the economics of production for years, be there factories, mining plants, power plants, oil or gas production facilities. Therefore, their success in terms of cost and delay is of utmost importance for the sustainability of the organization – and probably more so than most executive realize.
The failure of a single large Capex project may jeopardize the survival of the organization or make it so weak financially it cannot resist being taken over. Often one failed project will require substantial re-financing. This is valid for Contractors and Owners alike, with the emphasis being on either side depending on the split of risk agreed contractually. There are many examples of this effect in many industries and it is sometimes amazing that Board do not learn sufficiently from these failures.

It is our opinion in terms of rule of thumb that:

• any total Capex higher than 5% of the annual organization revenue should report at the CXO level
• those Capex projects higher than 15-20% of the annual revenue should have a direct line to the CEO, because issues in these projects might jeopardize the business

Read our new White Paper ‘How most Owner organizations underestimate the importance of Capital (Capex) Projects: PVD rule of thumb of Capex project criticality’ to understand our rationale behind this rule of thumb and why it is so important.

If you can’t access the link to the white paper, copy and paste the following link in your browser: http://www.projectvaluedelivery.com/_library/2018-02_Capex_project_criticality_v0.pdf