Download project initiation – making the right start

PRO J ECT I NI T I A T I O N –
MA KING T H E R I GH T S T A R T
Highlights from the Major Projects Association event
held on 25th Feb 2014
The early stages of a major project or programme are an
essential prelude to a successful outcome – for example
poor decisions made at the outset can lead to ‘baked in’
cost and risk and a potential decrease in benefit.
This full day Major Projects Association seminar
considered the importance of project initiation from a
conceptual and strategic point of view, discussed public
and private sector initiatives, and set out to establish
what best practice looks like.
It was agreed that the following points are important
criteria for success:
• There must be rigorous focus on the front end of
projects: value is determined during the initial phases
of a project, and is then preserved by executing
according to plan.
• Poor project initiation can lock in failure for all
subsequent phases. Mature project initiation means
accelerated later phases.
• Setting up for success requires high-quality business
framing, well-defined strategies and plans, and
thinking through the transition of key capability to
get the right skills at the right time.
• Cost increases are kept under control by getting
the estimating right and making sure the scope,
execution plan and contracting strategy are welldefined and tied down.
• Clarity at project initiation is achieved through early
engagement. Engagement for policy development
ensures you are doing the ‘right’ things well before
the strategic outline business case.
• When evaluating alternative options for a project, do
not forget the ‘do nothing’ option.
• People with the right capability and the right
information are needed in order to understand the
viability/level of challenge and make well-informed
judgements.
• Complex projects with multiple stakeholders and
a lack of clear definition require a competent and
credible sponsor, who will promote and own the
business case.
• Aim for transparency around decision making and
anchoring of the governance at the highest possible
level.
• Get real about managing the politics. A mechanism
for selecting and killing projects and a way of making
best value for money politically appealing is required.
• Free-market approaches have the potential to
provide commercial innovation. However, this
would require a change in political culture in the
UK, different public sector skills and an alternative
approach to benefits management, mitigating the
impact of short-termism, transactional costs and
monopolies.
• Be aware of market risk throughout the process, and
do not underestimate it.
• Methodologies such as the Infrastructure Routemap
support good practice at the project initiation stage
of major government projects.
The Infrastructure Routemap, first published in
January 2013, is a key tool to improving delivery
capability. Supported by analytics and diagnostics,
the Routemap is a guide for planning, procuring
and executing infrastructure projects, providing a
structured approach to assessing and improving
sponsor, client and supply chain capability.
‘The quality of project initiation is highly predictive
of project success.’
Initiating Successful Projects, National Audit Office 2011
‘Project sponsors create or destroy value. Their role
determines whether or not each project gets off to a
good start.’
The late Mike Nichols, The Nichols Group
Poor project initiation is of particular concern in
the public sector: in the UK, two thirds of pre-2010
major projects failed to deliver the predetermined
time and cost targets. Lord Browne of Madingley’s
March 2013 report to government, Getting a Grip
– How to Improve Major Projects Execution and
Control in Government, noted that, ‘There is still
insufficient attention given prior to the initiation of
projects to identifying options and risks; consistent
failure to put in place project leaders with the right
skills, experience and incentives; and inadequate
scrutiny of the most complex and expensive projects
at the centre of government.’
PROJECT GATEWAY REVIEWS
• No review process will ever replace the need for
informed judgement. People must be empowered to
make sensible judgements – in particular this means
good portfolio judgement in order to arrive at a
solution that fits a policy intent and is deliverable.
• Within government, gathering and applying
knowledge must improve to support the assurance
process and the judgements that have to be made.
Government should act as a catalyst to bring together
relevant knowledge from within academia and the
private sector; that learning can then be applied to
improving project initiation.
BP’s Stage Gate Process
Best alternative not implemented
• Major oil companies use a stage gate process, with
independent reviewers and external gatekeepers,
which holds people to account and ensures that the
appropriate studies have been completed.
Best alternative not selected
• Key portfolio decision points ensure projects are
viable and aligned with strategy, the appropriate
options are evaluated and clearly defined, and there
is the right amount of front-end loading.
In the UK, the Major Projects Authority have
introduced two-day reviews for all new major
projects and programmes. The Major Projects
Review Group, which includes representation
from government and the private sector, makes
decisions at key points in the approvals process on
deliverability, affordability and value for money.
It them makes recommendations to Treasury
Ministers about whether funding should be granted
– and can recommend that a project is stopped,
reset or de-scoped.
Best alternative not considered
• In Norway, the Government apply a gateway model
for major projects with a value of more than £75m.
Reviews concentrate on the initial project phases
– when a number of alternatives are viable and
amendments can be made at reasonable cost.
Solved the wrong questioin
• Gateway reviews help to strike a balance between
prolonged initiation, scope creep and setting the path
for affordability and value for money.
• Processes will not remove the need for a ‘controlling
mind’ that can take a holistic view across the portfolio
and understand the scale of the undertaking.
manage risk and uncertainty
• Some form of project initiation review/stage gate
process is imperative for a project model to be viable.
Cost/Schedule
competitive
not
Cost/Schedule
as expected
not
Front-end loading
Poor
operability
Prod targets
missed
gate
Seminar chairman:
more
Major Projects Association seminars
Speakers:
more
Major Projects Association reports
James Stewart: Chairman, KPMG’s Global Infrastructure Practice
Tim Banfield: Director, Major Projects Authority
Peder Berg: Deputy Director, General Ministry of Finance, Norway
Dr Colin McGill: Appraisal General Manager, BP Exploration Operating Company Ltd
Stephen Prendergast: Expert Panel, Hafren Power, Severn Estuary Barrage
Alan Stilwell: Vice President Regions, Institution of Civil Engineers
Keith Waller: Senior Advisor, Infrastructure UK, HM Treasury
Dr Richard Wellings: Director of Transport, Institute of Economic Affairs
Participating organisations:
AECOM
AMEC
Advance Consultancy Ltd
Bam Nuttall
BG Group
BP Exploration Operating Company Ltd
Balfour Beatty plc
CJ Associates
Cape
Capita Property and Infrastructure Ltd
Chiltern Railways
Copper Consultancy
Defence Infrastructure Organisation
Department for Business, Innovation & Skills
Department for Energy and Climate Change
Department for Transport
Freshfields Bruckhaus Deringer LLP
Hafren Power
HM Treasury
Institute of Economic Affairs
Institution of Civil Engineers
Jacobs Group
KPMG LLP
Major Projects Association
Major Projects Authority
Ministry of Finance, Norway
Moorhouse Consulting
Mott MacDonald
NATS
National Audit Office
National Centre for Project Management
Nuclear Decommissioning Authority
PA Consulting Group
Parsons Brinckerhoff
PricewaterhouseCoopers
Rhead Group
Risk Solutions
SKEMA Business School
School of Construction and Project Management, UCL
Sellafield Ltd
Temple Group Limited
The Nichols Group
Transport for London
Turner & Townsend
URS Infrastructure & Environment UK Limited
University of Cambridge
University of Leeds
WMG: University of Warwick
Wragge & Co LLP
For further information contact: Professor Denise Bower, Executive Director, Major Projects Association
t: 01865 338070 [email protected] www.majorprojects.org