Executive education, rigorous definition and shared goals are the key to project predictability, says Arno Jansen.
The Concord® team recently sat down with Arno Jansen, an engineer and veteran capital project manager who currently leads a megaproject in the Gulf Coast of the United States. With more than three decades in the industry, he has an in-depth understanding of and experience in capital project development, project management and structuring, and engineering management.
In our recent interview, Jansen traces the origins of the project predictability movement, explores the current state of affairs and looks to the future, where he considers which organizations are set up to thrive, and why.
VELOCITY MAGAZINE: What does capital project predictability mean to you?
ARNO JANSEN: The traditional view of project predictability is that the project achieves performance in terms of cost and schedule that is relatively close to what was expected when the project team set out on the project journey. In my opinion, project predictability is far more than the traditional view articulated above.
The foundation of project predictability begins in the development of a very robust project premise that sets out the project’s predicted business performance in terms of Internal Rate of Return (IRR) and Net Present Value (NPV), its operational parameters, class of facility together with a well-defined high-level scope. This information then becomes the basis against which the project team develops and defines the scope, leading to the cost and schedule for the project.
To predictably deliver a project, the project must achieve its business performance quickly, which by definition means that it must deliver expected operability, Total Investment Cost (TIC) and be brought online within expectations. Project predictability is a journey where the project must be evaluated for completeness of definition, the robustness of the project estimate and schedule at crucial project stages throughout the project development. This means that the team must be fully formed and must contain — as part of the team — members of the business development group together with operations and maintenance representatives that ensure all elements of project input are covered.
Project predictability begins with the “end in mind”, meaning that the project is developed from how it will be turned over to operations, which in turn defines the construction sequencing or Path of Construction. Establishing this view of the project early, defines its path and its success and “casts in stone” a process that will lead to being able to predict project outcomes accurately. With these cardinal steps early in the process, project predictability becomes a mindset that is ingrained in process and project team culture.
VM: How does a capital project leader inspire his team to deliver predictable outcomes?
AJ: Project predictability is a mindset or culture. Project leaders and the project team want to do a good job, and this means having a project that is successful and meets the project premise set out in the beginning.
Armed with a very comprehensive and achievable Project Premise, the project leader uses this to align the team, articulate his vision of project success, and paint the path forward for the team. As part of this, the project leader must clearly set out the project deliverable expectations for each of the project stage gates, and the quality of the project definition at each stage. Project teams want to be involved in a successful project they can be proud of. By setting out a clear path to project predictability, the project leader establishes a culture around predictable outcomes at each project stage gate, and the team can see that that hard work along with a commitment to quality and completeness becomes a self-fulfilling prophecy.
VM: Where do you see the capital projects industry going in terms of its ability to deliver safe, on-time and on-budget projects?
AJ: This is a tough question, as the capital deployment industry continues to suffer from poor project execution performance. Significant strides have been made in defining the causes of poor project performance and the ability to achieve some consistency in project predictability by organizations such as IPA, CII, COAA, and many others. Tools, benchmarks, and processes have been developed and have been introduced by both Owners and Contractors alike, but project predictability and consistency still remain elusive.
Achieving consistency and predictability starts with the education of senior executives within Owner organizations who are shaping capital expansion projects because it is often at this level that project decisions are taken early on without an adequate understanding of what is required to make projects predictable and achieve the ultimate business performance. Contractors, on the whole, have been slightly more successful in being able to predict the performance of their projects as they have employed leading industry tools — or created their own — to achieve a more predictable margin in the case of lump-sum EPC contracts.
The organizations that have institutionalized the need for defining their project premises, adherence to rigorous and robust stage gate reviews and constant benchmarking of project definition and maturity, have demonstrated a more consistent ability to predictably meet the projects, cost, schedule, and operational performance.
There are current initiatives within the capital deployment industry that look to align the Owners and Contractors with a common set of goals that are grounded in the principles mentioned above, to drive better predictability and more consistent positive outcomes for project performance. This encourages early collaboration between all project stakeholders to set the project up early for success, defining the business performance and creating an environment of trust against which the project is implemented and its progress monitored and ultimately delivered.