Project Disaster? Just Add Politics

H2S-project-politics-are-the-death-of-projects
Not Stopping at Your Station Anytime Soon

In England there is great debate about building a high-speed railway link between 2 cities. Birmingham to London. The distance is about 200 kilometres, give or take how far a horse could spit. It’s called the HS2 Project. And it’s beset by politics.

If I was inclined to write a book called ‘How to Totally Banjax a Project’ I could describe this one and put it between 2 hardcovers with no comments added.

And it’s not started yet.

As a primer – have a butcher’s hook at this.  That’s the 2014 numbers at £50.1 billion ($65.8 billion in real money) and incredibly is a P95 estimate. That means there should only be a 5% probability of exceeding the total. It’s the first time I’ve seen a P95 used in my entire working life. It’s a worthless measure.

In 2018 the estimate is now £65 billion with a Cabinet and Treasury Department claiming it should be £80 billion. So far so normal for politically motivated projects. But it’s what the agency also said about the project that caught my eye.

Quote 1 “The report (classified as “official-sensitive” and “not for publication”) attacks HS2 management for “lack of cohesion and common vision” and says the executive team has “no credible plan by which to gauge or manage progress”. It notes “destabilising” turnover of senior staff despite paying some of the “highest public-sector salaries in the UK”.

Quote 2 “highly likely to significantly overspend by circa 20-60% with the likely cost increasing . . . to more than £80bn”.

I wont go into the schedule except to say whoever produced it should have their crayons confiscated immediately!

Remember that the contractor who wins this project will be the one with the lowest price and the shortest schedule, and a great curse will fall over them.

Politics – the biggest killer of projects known to man.

 

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NATO – I hope these guys don’t intend to fight a war any time soon

images-2The NATO Headquarters will be in the news this week. For all the wrong reasons.

 

 

Most of the project tools we use originate from the military. Critical Path Networking (Nuclear Submarines), Supply Chain Management, Cost Controls, etc.

But it seems that when it comes to using these tools to build a new headquarters the tools weren’t applied.

BUT – any project launched by an organisation of 29 countries to be run by the Belgian Authorities has one foot in the grave and the other on a skateboard.

The project was sanctioned in 1999. The project got underway in 2010.

The original budget was Euro 457.6 Million. A UK company called BAM UK won the contract at Euro 650 million but the Belgian Authority squeezed that down to Euro 240 million.

BAM UK ‘s motto is ‘we deliver what we promised on time and on budget. The final price will be in excess of Euro 1.4 Billion and it’s 4 years late.

The original project duration was 4 years. BAM UK managed to have that increased to 6 years. So, completion in 2016. It’s being opened this week mid-2018.

The NATO Secretary General Jens Stoltenberg said last week ‘that the building met it’s original budget and is only a year late’.

I suspect that the building is far from complete and that all cranes have been taken off site until President Trump goes to hit the white ball. But before he leaves that Euro 1.4 billion is going on Twitter.

A thought. Would your company have taken that project on?

My view?  I’d have grabbed that baby with both hands and dived in head first from a very great height.

Because. 1) NATO pay their bills 2) growth couldn’t be anything else but exceptionally high 3) the project would never be cancelled (too political) 4) it’s managed by the Belgian Authorities (Yahooooooo!!!!)

As I said in a previous blog What if a Risk Was An Opportunity in Disguise? This is a good example.

All it would remain to do is to mobilise a Claims Director as the first person on the project.

Ends.

 

Digging A Grave for Your Company

graveyard burial companySome company activities may look innocuous and many seem like a good idea. But there is one thing you can do to kill your company and bury it in a very deep hole. One action that is as good as buying a burial plot and signing the deeds.

 

 

When a Client establishes a Project it will have been approved against a Budget. A budget for Engineering, Procurement, Construction or a Total Budget for a Main Contractor.

Knowledge of that budget for anyone other than a select group of Client personnel is a very dangerous thing indeed.

But to many Contractors it might seem like something they could put to good use.

You may be able to obtain such a budget through various means but a better idea would be to buy an elephant gun and shoot your bid in the back of the neck with it.

Because

Clients. They prepare a budget with the information they have available using their best cost practices. The relationship of that budget to reality may be tenuous.

The relationship of that budget to how much it will cost a Contractor to execute the job could not even be described as tenuous. It’s a guesstimate.

Because? They’re not the Contractor. They have no insight into how much it will cost a Contractor to do the work. No idea of how comfortable or desperate a Contractor is to get the work.

Plus. The project may have been priced to ensure a thumbs-up by the Client’s review committee.

Main Contractors. Knowledge of a Client’s Budget will deep-six their company in a variety of ways.

They can shave $10 off the budget price and ensure their bid is ‘under budget’. Or they can take all of the money out of their bank account and distribute it on the street to passers-by to achieve the same end result.

Because 1. The budget minus $10 bears no relation to what it will actually cost that particular company to do the job + overheads + profit + taxes +++

Because 2. What is the budget you’re looking at? Does it contain contingency? Was it produced at FEL 1 stage or FEL 3? The content and context of a budget is as important as the price. It is unlikely that you know the details.

Because 3. The provenance of the information is uncertain. Who exactly stole that information? I could have used a different description there but theft is the right terminology. Did a clerk find it on the wrong photocopier? Who knows?

Because 4. If the Client finds out? You’re off their bid-list, maybe forever.

Because 5. If the law finds out you could end up in a situation where all your statements end with the words ‘your honour’.

 

The Solution?

Bid the contract the best you can.

Know your costs, your overheads, your risk.

Understand the scope of work.

Price in location, the job market, the contract details.

Ignore what your competitors are doing.

 

Or buy a shovel.

 

 

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The Holy Grail of Projects – A Meaningful Risk Register

Holy-Grail-Projects-Risk
A Holy Grail May Be An Illusion

A Meaningful Risk Register – the Holy Grail. But more difficult to find

The main problem is, as can be expected, where to start?

Here’s an overview of how to go about it.

Avoid a ‘Risk Brainstorming Session’ like the plague. You’ll end up with a long list of risky events that happened to people on their last projects. The past is no predictor of the future when it comes to risk.

A look at a close-out review and lessons learned of a similar project is always worth while but few projects do them and even fewer file them where they can be found.

But anyway….

 

 

Gather Your Sources

Gather the 4 documents that contain the Genesis of All Risks

  1. The Contract
  2. The Project Plan (if you don’t have a real one then that’s your Number 1 Risk)
  3. The Cost Book
  4. The Project Location Map

Looking for Risk

The Contract

When a contract is awarded very few people, if anybody, will know what is actually in it. Legal will know the legal parts, Treasury the finance parts and so on. Who has read the document back to front and made notes on the differences between the contract as it was intended v actual contract that will be enforced on the project?

So – you’re looking for 2 things. The risks inherent in the intended contract and the changes made in the contract as negotiated and issued.

Specifically go through the Bid Q & A and check against the final contract – there are usually gaps or differences in interpretation.

Then check key phrases to look for…

  • Novation of Sub-Contracts
  • Early Milestone Dates. Specifically, ‘start work on site’ date.
  • First Deliverables Dates
  • Penalties
  • Client Generated Dates – Access to Site/ AFC Drawings/ Fee-issue Materials/ Project Start and Finish Dates
  • Insert your key phrase here – what contract clause gave you the greatest grief on your last/ current projects?

 

The Project Plan

At the start of projects there are 2 + ½ plans

  1. The one used in the bid. It will be optimistic because you want to win the contract. It will be aligned with the client’s milestone dates because you don’t want to put in a non-compliant bid AND you don’t have enough information for a proper plan AND you didn’t have enough resources to build a proper plan. This is probably the one you’re looking at. It’s toilet paper.
  2. The one you’re going to use to run the project. If you’re not planning to use a plan to run the project then you don’t need to read any further. Your project’s finished before it starts. This is also the plan mentioned in the contract where it says, ‘a full project plan will be issued by 28/35/42 (pick a number) days after award of contract’. It’s probably 14 or more days after contract signing right now and you don’t have any more information than what was available at bid stage.
  3. The ½ plan you think you have but you probably do not. The killer risk. The Mobilisation Plan. You don’t have a specific one, I know. Produce one now and hope it’s not a career buster.

Plan 3) is obviously a sub-set of plan 2) but make it a stand-alone plan. Because it is not a work plan (like – install a generator) it’s a business plan that will need the input from HQ, Resourcing, HR, Travel, Legal…and so on. Expert(s) on the location(s) of the project is essential. You need someone who really knows how it works out there. They’re quite easy to find, right after hen’s teeth and rocking-horse poo.

Whether the project is offshore/ inshore/ desert or tundra there is a unique set of circumstances around the mobilisation of personnel, equipment, offices, IT and a hundred other things you need to do a project.

Fact 1: If the project is in Iraq it takes 152 days to get a welder on site. And that’s after you have the in-country infrastructure in place. That number of days is not so different for Saudi or Offshore.

Stock up on Imodium and gather your people.

Now you’ve gathered all the risks, changes, half-truths, maybes and scraps of this and that, the only thing you can do is to update the plan as best you can using the latest dates (Time Now is a great phrase to throw around). Then run the network with no restraints. This is your plan.

Prepare for the Project Kick-Off Meeting with the client. Will you table the new plan? If not, this risk goes to the head of the queue.

 

The Cost Book

I love cost books. Especially the beginning where it says, ‘Once Upon a Time…’ although fairy stories usually have more substance.

Steps…

  • go through the spreadsheet and fix the errors There are always errors.
  • uncover hidden cells. Ask Google how to do it.
  • update the book against the Contract as Issued. (Mega Important Point)
  • update the book against the Plan you just revised. The Cost Book never ever matches up with the contract or the plan. After this exercise it might match for a week then the three documents will start to deviate again.
  • Identify how much you have for project contingency. Your financial wiggle-room.
  • Prepare to meet your boss to advise him on what you’ve found.
  • Phone the pharmacy and double the Imodium order.

Everything you found goes on the risk register – rank them in Cost Impact Order.

The biggest impact should be the fact the project end-date has moved substantially, but it could be anything.

 

The Project Location Map

This item may have puzzled some readers. Read on.

There is a sentence in your contract that says ‘the contractor will have visited the site and assured themselves that the work can be done’. Or similar.

When did the bid team have time to go to site or have access to it? It could be in the Gobi Desert or 50 Leagues Under the Sea or…

But that’s not the real problem – access to the site now is the issue. If it’s in Saudi you’re 42 days away from visiting the site (if you use a Businessman’s visa) or 70 days away (Work Visa) and they just get you to Khobar.

Time to revisit the Project Mobilisation Plan. Take a big syringe and inject a dose of realism into it.

The rubber, as they say, has met the road.

Now. If your company has never worked in the contract area or does not have someone experienced in the site area? You’ve found another Category 1 Risk.

For light relief Google the area. It will read…

‘UpYoursIstan has the hardest igneous rock known to man. The lower lying areas are subject to flooding for 11.5 months of the year. The judiciary have been executed following the last coup’.

Great pipeline country.

The Risk Register writes itself at this point.

 

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