31st International Conference of the TOC Practitioners Alliance - TOCPA www.tocpractice.com
KukonAskel 9 March, 2017 – Helsinki, Finland
CCPM and Construction Projects Necessary but not Sufficient?
Ian Heptinstall, UK 9 March, 2017
CCPM CCPM Works • Delivers projects in significantly less time that they would otherwise take • Highly reliable end dates • Demonstrated time and time again
So why is it hardly known in one of the largest parts of the global economy,
capital & construction projects? www.tocpractice.com
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31st International Conference of the TOC Practitioners Alliance - TOCPA
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The construction industry is worth $10 trillion a year. Even a 1% share is worth $10 billion a year! It represents 8-10% of global GDP, and 6-8% of all employees work in the sector
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Why is CCPM hardly known in construction? It isn’t … because their projects are different It isn’t … that they don’t experience the same UDE’s
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My take on capex projects Significant Inertia: • • •
Well established methodologies Pockets of good performance Significant vested interest in the status quo • Entrepreneurial Project & Contract Managers • Professional Advisers
•
Significant public sector market (typically 30-50%)
Cost needs managing as well as time Most of the work is outsourced www.tocpractice.com
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CCPM requires a collaborative project team CCPM focuses on the project • Project completion, rather than task completion • Buffers are shared, not pre-allocated But the prevailing contracting and procurement strategies are far from collaborative in nature, and thus encourage each of the contracted parties to focus on their local optimum. www.tocpractice.com
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The Contractors Dilemma
Maximise profitability
Do “A”
Help project client to be successful
Don’t do “A”
Be a successful contractor/ supplier
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To those outside the industry this might seem strange. However, in most cases a contractor makes more money under their contract, if the change is expensive. Typically they make a %age of the cost of the change. So if they point out errors in the client’s scope early, these are easy to modify – they might have no impact on the contractor’s contract. Or, worse for the contractor, the change might REDUCE their scope of work, and hence profit. www.tocpractice.com
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Direction of a solution From competition to collaboration
• Fixed prices
• Performance-related fee
• Independent Suppliers
• Aligned suppliers
• Push risk down WBS
• Manage risk across project
• Every one for themselves, separate measures
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• Single team, same measures
31st International Conference of the TOC Practitioners Alliance - TOCPA
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The CII carried out research in the mid 1990’s across several hundred projects in the US. The results alongside are the difference between projects using collaborative contract approaches compared to thus using more traditional construction procurement, which is more adversarial in nature
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Also in the 1990’s, there were 2 influential reports published in the UK. Both concluded that the industry was suffering from the adversarial relationships, and they recommended moving to more collaborative team formation. Whilst influential and well respected, clients and the industry didn’t follow their recommendations
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Project Team Collaboration A Holy Grail
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Lack of true project team collaboration is not only an issue for CCPM. Many other great ideas and practices, including Lean Construction, BIM, value analysis, and risk analysis, are inhibited by the lack of a collaborative team, selected early in the project programme.
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Common Construction Procurement Models Business Case
Concept Design
Detailed Design
Build
Professional Advisers
Architect/Technology Specialist Detailed Engineering Design Supply & Build So-called “traditional procurement”
Design
Bid
Build
Design & Build - EPC www.tocpractice.com
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31st International Conference of the TOC Practitioners Alliance - TOCPA
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An industry truism
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An industry truism
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Are fixed price contracts compatible with CCPM? If the procured content is relatively low, and not a significant part of the CC Sure – just buffer the supplier promised lead time But if your project is 80-90% outsourced, this is not practical.
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“Tell me how you measure me and I will tell you how I will behave. If you measure me in an illogical way... do not complain about illogical behaviour.” Eli Goldratt, Business Guru & Inventor of CCPM “Tell me how you pay me and I will tell you how I will behave. If you pay me in an illogical way... do not complain about my illogical behaviour.” Ian Heptinstall www.tocpractice.com
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The following slides summarise a project in the UK in the late 1990’s. This used the then novel approach of Project Alliancing. This formed a multi-party contract, where the supply members’ profit was linked to the overall project success. This aligns supplier’s commercial interest with each other and the client, removing most contractual barriers to cross-team collaboration. www.tocpractice.com
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Project Collaboration Case Study Rohm & Haas “Fix 7” Project
Project Alliance 3-company contract Reduced waste & “policing” Difficult Goals Client
EPCM
Traditional Approach
Client Alliance Contract EPCM Construct
Construct Suppliers
Subcontractors
Suppliers
Subcontractors
Integrated Project Team www.tocpractice.com
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31st International Conference of the TOC Practitioners Alliance - TOCPA
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Project Collaboration Case Study Rohm & Haas “Fix 7” Project
4 week selection for $6M construction work RFP was 3 pages Payment – Cost + Fixed Fee + Performance Fee PF 2 PF 1
Contin.y
FF 2 FF 1
Constr
PF 2 PF 1 FF 2 FF 1
Cost EPCM
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Safety Schedule Shutdown Cost Behaviour
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Example Variable Fees
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On time in less time On budget at lower cost No compromise on scope or quality
Higher client ROI
Higher Supplier Profit Project is faster, lower cost, & better
RESULTS DRIVERS
Plan & manage using CCPM Collaborative Project Team
Project Alliance Contracting
3: Exploiter: Ensure the collaborative team delivers great results
2: Foundation: Teamwork built on common goals and trust 1: Enabler: Remove all obstacles to project team collaboration
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If you think getting work package owners to put “their” safety into the project buffer …try getting the capex sector to move away from fixed price bidding as well!
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Ian Heptinstall •
Degree in Mechanical Engineering & Business Studies.
•
Early corporate career – project management in chemical industry, both as client and service provider.
•
Later corporate worked as Chief Procurement Officer in a UK construction contractor.
•
Consulting experience in supply management and procurement.
•
Author of The Executive Guide to Breakthrough Project Management, written with Robert Bolton
•
Ian’s current main project is to get the ideas shared in this presentation applied widely in the capex project sectors, and to build his own business supporting their application
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[email protected] +44 7807 848688 www.ianheptinstall.com www.BreakthroughProjectManagement.com
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