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TOCICO International Conference - PROGRAM

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July 16-19, 2017
Melia Hotel in Berlin, Germany.


 

Ian Heptinstall - Mechanical Engineer - Fellow of the Chartered Institute of Procurement and Supply

  Co-Presenter Robert Bolton (Click to view Bio) - General Manager Newport Consulting 
   
 

The presentation will use the Shoulders of Giants framework to present the overall idea:

1. Identify a "giant” not a choopchick

There are 2 giants that we will be considering
• CCPM – which we all know about
• The global construction & CAPEX projects industry (capex).

2. Identify the enormity of the area not addressed by the giant

The global construction market is worth $9 trillion a year, with growth averaging 3% between 2010 and 2020, according to IHS Economics, and accounts for 6-7% of both GDP and employment in developed nations.

Whilst CCPM has had some success in capex projects, and its original development with Statoil focused on capital projects, the authors suggest that capex projects are significantly under- represented in the data base of successful CCPM applications. There is nothing inherent in CCPM that would explain why it is so under-represented in capex projects.

CCPM requires a truly collaborative team to be successful. The idea of aggregating risk and using shared buffers to manage uncertainty, is key to its success. In circumstances where there are no major structural obstacles to team-wide collaboration, then CCPM by itself is sufficient to bring significant improvements.

However, with projects where most of the work is carried out by third parties, such as capex projects, such collaboration cannot be assumed. There are some common, embedded practices that make collaboration very difficult, and which are not addressed by standard CCPM.

The giant that is the capex projects field is also struggling to find a way forward. There is a realisation that the traditional adversarial nature of this industry causes significant performance problems, but it has still not managed to make project-wide collaboration the common way.

4. Identify the conceptual difference between the reality that was improved so dramatically by the giant, and the area untouched.

Capex projects have a significant inherent obstacle to collaboration between those responsible for different parts of the project – the commercial contracts that bind the supply chain. .

On capex projects, very little of the work is done by the project client’s own staff. Contractors and suppliers usually carry out at least 90% of the work. And the form of these contracts, in almost all circumstances, is incompatible with CCPM.

As mentioned above CCPM requires uninhibited collaboration between project team members. The prevailing practice of using fixed-price contracts significantly inhibits this collaboration.
Fixed price contracts require fixed deliverables, and change is seen as a ‘bad thing’ by project managers. The free use of CCPM buffers, and the CCPM principle that ‘we know something will cause is a problem, the only difficulty is that we do not know which parts of the project will have problems, and which will not’, are diametrically opposed to the assumptions behind how most capex projects procure, and the way contracts are administered. Most contracts require one party to be at fault for changes to time and cost.

Another conceptual difference is that CCPM assumes time and cost are relatively independent and that most of the project resource is a fixed cost (part of OE). But for much of a capex project this is not the case – it is a variable cost, so directly impacting the T and NP of the suppliers and contractors. This is the case where a contractor’s price is driven by how much resource is used on the project, for example in design and installation work. CCPM will deliver projects using less resource and in shorter time, and so this will have a potential negative financial impact on the project supplier (under today’s contracts).

With CCPM on projects where the amount of externally-sourced work is relatively low, this impact can be ignored, buffered, and maybe managed as described by Goldratt in Critical Chain. However, where 80%+ of the work is contracted, such buffering could make a CCPM project longer and more costly than a traditional one!

Many of the successful capex-type projects that have used CCPM with external resources have taken the approach of contracting based on time used, or on occasional, giving some local incentive for an earlier completion. This is one approach that can work, but it does come with the downside that it requires the client to take a more hands-on responsibility for synchronisation and coordination between the various work packages.

5. Identify the wrong assumption


CCPM assumes that the right leadership, management and interpersonal behaviours are enough to ensure collaboration across the team.

Where most of the work is contracted, we believe this to be invalid. These are necessary conditions, but not sufficient.

6. Conduct a full analysis to determine the core problem, solution, etc.

Our analysis, and the main part of the presentation, will include

  • The main conflicts that this situation causes on capex projects (clouds)
    • The project client
    • The project suppliers/contractors
    • Individuals working on the project
  • Possible injection
  • A recommendation for how projects are procured that the authors believe will address the core problems, and allow CCPM to deliver its potential in this field
    •  We will describe a method called the Project Alliance, a collaborative contracting approach that aligns the financial goals of all the project team members – client and supply chain alike. The project alliance is an established method, and like CCPM, came to prominence in the 1990’s, has had many notable successes, but is still seen as a minority method
  • Integrating CCPM across many different companies
  • Global planning (CCPM) and local work package planning (using any number of methods)
  • Cost and time buffers, and integrating with existing project management systems

    Footnote:
    The capex project industry is well aware of the problem of the adversarial nature of the contracting process, and there is a growing body encouraging more collaborative approaches to contracting. These approaches (including the Project Alliance mentioned above), have had some success, but their use is not universal, and is mainly limited to very large complex projects. The authors feel that introducing CCPM to these bodies will bring them a technique that will allow their more collaborative project teams to virtually guarantee shorter durations and lower costs, and allow more collaborative contracting methods to be used with all size of projects.

In his early career, Ian managed projects in the process industries in the UK, France and Belgium, followed by time as a project management coach and advisor.

In the late 1990’s he held a lead role in an award-winning project that was one of the first to apply the Project Alliance principles developed in the Oil and Gas industry’s CRINE initiative to smaller projects outside of the Oil and Gas sector.

Around 2000, he moved into a global procurement role in the pharmaceutical industry, and later that decade was Chief Procurement Officer for a UK construction company before moving into full-time consultancy in 2011.

Ian is a qualified mechanical engineer, and Fellow of the Chartered Institute of Procurement and Supply. He was fairly late to TOC, although he did read the Goal in the 80’s and Critical Chain in the 90’s. He lives in the UK and Switzerland.