Leading from the front

Mike Murray from EPCM Global Engineering writes about creating a foundation for predictable and efficient project delivery

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There has been lots of evidence that the front-end of projects is where things can go badly wrong, and equally where there is the best chance of positively influencing the probability of achieving a successful outcome. Studies carried out by Morris and Hough, and Cooke-Davis respectively, concluded that the PMBoK Guide may be adequate to deliver projects correctly in terms of process and practice, but probably is not enough to ensure that the project can be completed successfully. To achieve the latter, much more emphasis has to be concentrated on managing the front-end1.

Benchmarking data by the Independent Project Analysis (IPA) in the oil and gas industry for example, shows conclusively that effort spent on front-end definition, ‘Front-end Loading’ (FEL), correlates with measurable improvement in project outcome performance.

Front-end planning in the project environment is defined as the period up to the point of official endorsement (project sanction) to proceed, when the appropriation for expenditure for full project budget funding occurs, and contract ratification with a major EPC/M contractor or multiple EPC contractors for project execution takes place. As shown in Figure 1 - Front End Planning, it is the period prior to commencing the detailed engineering, procurement, construction, and start-up / commissioning (EPCC) phases of the project.

Front End Planning (FEP) as defined by the Construction Industry Institute (CII) is; “the process of developing sufficient strategic information with which owners and contractors can address risk and decide to commit resources to maximise the chance for a successful project”. Front end planning is all the planning work that needs to be done before work starts on procuring, manufacturing, erecting, installing and commissioning and handing over the final product of the project.

CII research clearly demonstrates that well planned and executed front end planning delivers measurable benefits. It can reduce costs through improved design work resulting in fewer changes once execution commences; it leads to less variability in terms of cost, schedule and operating characteristics and performance; and it increases the project’s chances of achieving its environmental and social objectives.

A critical process

Front end planning is arguably the single most important process in the project life cycle. It creates strong foundational links between the business need and value drivers, and the project’s strategy, scope, cost and schedule, and it ensures a strong linkage is maintained throughout the project life cycle between the business strategy and need, and the achievement of measurable benefits on completion of the project.

Other industry terms used to define the planning work that is (has to be) done before money is committed to executing the project, are: Front End Loading (FEL), pre-project planning, programming, schematic design or design development.

Because reliable academic research has shown a direct relationship between project success and the level and quality of front end planning, the Construction Industry Institute has classified front end planning as one of its best practices.

Front end planning is all the planning work that has to be carried out before committing significant funds to executing the project, purchasing capital equipment and constructing or implementing complex systems and infrastructure.

Projects should progress through a series of well-defined phases from idea inception to project hand-over and close-out. Different industries and companies usually have a predefined project life cycle model they apply to govern and control the work of the project, ensuring that only the work necessary is performed without taking on additional avoidable risk or incurring excessive costs. The basic project life cycle model usually has three phases prior to execution that comprise front end planning, as shown in Figure 2 – Basic project life cycle.

The figure illustrates the three phases of front end planning within the bigger context of the typical project life cycle. The red diamonds in the diagram represent the key governance control points, or management decision gates that must be addressed before the project is permitted to progress to the next phase.

Many industries and companies have adopted a ‘gated’ project governance and delivery process in some form or variation. One of the main purposes of the ‘gated’ delivery process is to help the project owner or sponsor screen for the projects that create the most value, and once selected, to ensure the most appropriate solution is being developed, while at the same time minimising risk to the business.

Another key purpose is to ensure the project team are pursuing the right project for the business situation and that they are not exposing the organisation to unnecessary and wasteful expenditure that will not return the desired utility and benefits.

Most owners (organisations implementing projects to realise value) have a listing of potential opportunities and projects than thy have the resources (people, funds, capability) to execute them. By following and adhering to a project life cycle model, as shown in Figure 3 - Project Life Cycle Model, and utilising the front end planning processes, organisations will minimise the effort and expense to identify the feasibility of a project. At each gate, the process requires the project team to prepare and submit for approval a pre-defined set of process deliverables for approval, before proceeding to the next phase of the project. This evaluation process is repeated for each gate and will usually be focussed on:

Phase Gate 1 – Alternatives identified and verification of project feasibility
Phase Gate 2 – Identification and selection of preferred option
Phase Gate 3 – Development of detailed scope with a high degree of predictability for cost, schedule and performance
If the project does not align with or satisfy the business goals, objectives and risk appetite or regulatory requirements at any of the gates, then it can be stopped quickly and the organisation can focus its efforts on another priority.

Best practice

Front end planning is not merely a technical process.

It is a best practice that assists people to work better together and to align their individual objectives and methods of working. Team alignment is an important activity contributing to successful front end planning. Team alignment is a condition whereby the various project participants work together to develop and achieve uniformly defined project objectives to achieve a successful project outcome.

It always amazes that organisations rarely have the time or budget to properly establish a competent project team and to thoroughly plan each phase of the project. Mostly they rush in ill- prepared and ill-equipped to execute the project. Yet, when the project starts to fail, the organisation miraculously finds the people, budget and time to fix it (often far exceeding the original budget estimate!).

Surely, it would make sense to plan the project correctly and establish an aligned team from the start, keep costs low, maintain the tight schedule and increase the degree of certainty for the schedule and budget and delivery of an outcome that will achieve the defined benefits?

Analyse and assess

Front end planning is designed to analyse business opportunities and assess associated solution alternatives, asking three questions designed to keep organisations and projects away from running into serious problems. These questions are:

1. Are we undertaking the right project best suited to achieving the organisation’s objectives? Are we taking best advantage of the opportunities presented to us?

2. Have we selected the right alternative and scoped out the right details to minimise risk to the organisation and provide a path for the most efficient design and/or solution?

3. Have we achieved alignment between the core project stakeholders on the requirements, benefits, execution plan and delivery method?

Some of the common elements of a successful project are: great leadership, a sense of urgency, intensive and thorough planning, excellent stakeholder communication and team alignment and innovative problem solving in the face of obstacles. CII research has consistently shown that what pulls all of these elements together is better planning early on in the project.

The research also confirms that well-planned projects have a higher probability of achieving cost and schedule objectives. Studies have also demonstrated that thorough front end planning processes actually result in reductions in both project cost and schedule, and fewer changes.

Good front end planning is capable of achieving a reduction in total project design and construction costs by as much as 20% versus the authorised budget estimate; a reduction in total project design and construction schedule by as much as 39 percent versus the authorised schedule estimate; improved predictability in terms of cost, schedule and operating performance; and an increased chance of the project achieving its environmental and social objectives2.

While front end planning does incur costs and involve the expenditure of resources early in the project life cycle, this up-front expense has been shown to prevent costlier outflows as the project progresses. All of the CII front end planning studies have shown that at least three and up to 10 dollars are returned for each dollar expended2. Equally importantly, front end planning contributes to improved team morale and performance, improved client relationships, ensuring regulatory compliance and driving sustainable decisions, which together enhance business sustainability.

Research results from a 2004 CII study show that the typical cost of planning a project is between two and five percent of the total authorised project cost, depending on project type and complexity3.

A wealth of resources

The CII has a number of resources available to facilitate the front end planning processes. These resources are freely available to organisations that are members of the CII. They are also available for purchase from the CII’s web portal for non-member organisations. Front end planning resources are:

Front End Planning Toolkit – provides a web-based front end planning process map and toolkit with embedded tools to facilitate the organisation’s front end planning process and ensure it follows a structured approach. It also provides guidance on the essential steps that must be applied to a successful front end planning process.
Project Definition Rating Index (PDRI) – the PDRI is a tool used to analyse and measure the completeness of the project scope definition and planning process during front end planning. It also manages the process to determine the project’s readiness to progress to detailed design and execution. The project definition readiness assessment should be a facilitated process using an independent facilitator working with the project team to help them assess their front end planning progress in a non-adversarial environment.
There are three separately developed CII PDRI tools for: infrastructure, industrial and building projects. In South Africa there is also a locally developed PDRI tool that is specific to mining related projects.

Team Alignment Thermometer – project team alignment (establishing a common understanding of project objectives and methods of working) is critical to successful front end planning. Without alignment between the owner’s team and the contractor’s team, it will be almost impossible to achieve a successful front end planning outcome. The Team Alignment Thermometer helps the team to determine whether they are focussing on the issues and processes that significantly affect their alignment during front end planning.

The PDRI tool is implemented throughout the front end planning process at intervals to identify all the project’s planning elements that require greater definition and planning. A scoring system provides a qualitative rating of project uncertainty. As the project progresses, uncertainty should decrease until sufficient detail is available to design and construct the project components.

Each PDRI tool consists of a checklist of critical scope elements that are described in detail. Each element is weighted according to its relative risk to the project. The risk ratings were established from the input received from industry specialists who routinely plan and manage large and mega projects.

The PDRI assessment process requires the project teams to collaborate and to challenge and evaluate each element and then assign a score to the element dependent on the team’s determination of the completeness of the element being evaluated. The PDRI tool then calculates a cumulative project definition score.

Projects are scored on a decreasing score from a maximum of 1 000 points down to a minimum of 70 points, with lower scores indicating better and more complete definition.

Research has shown that a score below 200 points indicates that a project is well defined. Projects with low scores have been shown to perform statistically better in terms of budget and schedule relative to poorly defined projects.

Stakeholder alignment

Alignment among core project stakeholders is a critical factor in the planning and execution of a successful project. Alignment is present when all core project participants are working within acceptable parameters to develop and meet uniformly defined and understood set of project objectives. These project objectives must enable achieving business requirements and overall business strategy, and must be established early on in the project. Four key areas that must be addressed to achieve alignment are: culture, execution processes, information and tools.

Alignment evaluates the team’s alignment “temperature” at intervals during the pre-planning phases. This provides project management with the information necessary to implement corrective action to bring the team back into alignment before the team starts to become dysfunctional.

A question you should ask of your project team and the client:

“If you were offered an opportunity to potentially reduce total project cost by between six and eight percent, improve schedule performance by between six and 16 percent, and reduce change orders by between one and three percent, would you take it?” Would they say no to that offer? All it will take is carrying out effective front end planning. Achieving these improvement measures on capital projects is possible when project teams consistently use the CII front end planning tools4.

The best way to go fast over the long run is to have the courage to start slow and prepare for the long run. Therefore the challenge to your client and your project team should be to focus on effective front end planning in order to achieve the client’s performance requirements, on-time or early project delivery, within or below budget.

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