Wednesday Apr 27, 2016

Shared Insight: Utilities Power Up with Lifecycle Approach to Capital Projects

By: Mike Sicilia, senior vice president and general manager, Oracle Primavera


Today’s utility executives, along with their colleagues in other asset-intensive industries, face formidable challenges. Growing business and regulatory complexity are constants. Layer on continued economic vulnerability along with an aging infrastructure and workforce retirements, the latter of which utility execs cite as their top two challenges – and enterprises are left at a significant disadvantage when managing capital projects.
In this precarious environment, utilities must ensure that their investments drive enterprise value, while reducing costs and improving operational efficiency. Mismanagement of capital projects can result in high cost overruns, delayed initiatives, and regulatory compliance issues ‒ further compounding present-day business hurdles. The stakes and hurdles are high – but far from impossible to surmount. Utilities that cultivate effective enterprise project portfolio management methodology and consistently embrace proactive strategies that address all stages of an initiative’s lifecycle are well positioned for success. Many of these same strategies apply and can be replicated across a wide spectrum of asset-intensive industries, such as communications, oil and gas, and engineering and construction.

A Challenging Outlook

Utility executives face a perilous balancing act when planning, building, and operating assets. While it’s vital for projects to continuously deliver results, many face an upward battle from the start, well before they become operational. For example, an Accenture report found that only 39 percent of utilities capital projects were completed on budget, and less than half on schedule.

Several factors are at work – each of which underscores the compelling need for careful management and precise execution at every turn:

  • Limited Capital: Limited availability, through either the markets or internal funding, means that capital for major projects is not only scarce, but also costly and requires close management to ensure an acceptable return-on-investment (ROI)
  • Aging Infrastructure: In the United States, the power delivery system – like many other types of national infrastructure ‒ is based on technology developed and installed decades years ago – resulting in an increasing number of power disruptions and heightened vulnerability to cyber attack
  • Regulatory Uncertainty: The regulatory environment continues to grow more complex, causing some utilities to err on the side of caution by stifling potentially innovative capital projects
  • Constrained Workforce: Thirty-two percent of the utility workforce will retire in the next 10 to 15 years, according to the 2014 Aging Utility Workforce report by Interactive Intelligence Group Inc., and many utilities are struggling to recruit new talent to replace these valued resources. The oil and gas as well as communications industries face similar realities. The highly skilled workers exiting the workforce will take 30 to 40 years of institutional and subject matter knowledge and expertise with them. Most of this knowledge has not been captured and operationalized in modern systems ‒ leaving enterprises at risk
  • Costly Raw Materials: As economic, regulatory, and environmental factors exert upward price pressures on many raw materials, utilities find it harder to acquire them at reasonable costs

Embracing All Aspects of the Project Lifecycle to Drive Success

So, how can a utility, and other asset-intensive organizations, overcome these challenges and ensure capital project success?

First, it’s important to consider the complete project lifecycle at the start of an initiative – from planning and execution to operation and maintenance, and ultimately, decommissioning ‒ and involve all key internal and external stakeholders throughout the process. Securing early input from employees, who will be responsible for infrastructure maintenance and ultimately have ownership of the asset, is crucial. Their insight and knowledge can reduce the long-term costs of operating the asset as well as the risk of decommissioning the project down the line.

There is no question that adopting a complete lifecycle approach to capital projects is a complex undertaking. It requires real-time enterprise-wide insight, sophisticated “what-if” modeling, and knowledge capture that traditional spreadsheet-based project management models cannot deliver.

That’s where enterprise project portfolio management (EPPM) methodologies and solutions enter the picture. In addition to automating and operationalizing processes, EPPM solutions equip utility executives to evaluate and prioritize projects across the enterprise. They also provide full visibility into the project lifecycle, enabling organizations to track performance and costs, model and mitigate risks, and manage people and resources across the organization to streamline processes and optimize available assets.

As utilities executives continue to face a vast array of challenges and scenarios, EPPM solutions have a distinct and essential role to contribute at each stage of the project management lifecycle:

  • Planning: Effective planning is particularly important when choosing the capital projects that will deliver the greatest value. A solid portfolio solution uses repeatable governance processes and consistent evaluation metrics – helping to ensure an enterprise is equipped to choose investment proposals, fund strong business cases, perform “what-if” scenarios, and analyze performance progress
  • Execution: EPPM solutions enable staff to review construction progress in various regions and on multiple projects, improving communication between all parties involved on a project, while helping project directors manage incoming demand and prioritize projects and activities based on the organization’s overall objectives. By providing these capabilities, an EPPM solution can successfully link people, teams, and projects – offering complete control of a capital project’s lifecycle
  • Operation and Maintenance: The tools a utility uses in the planning and building stages are just as essential during the project’s ongoing maintenance. A project’s profitability depends largely on scheduling and deploying resources in the most efficient manner across all maintenance activities. When an asset is offline for maintenance, it’s not generating revenue – but an EPPM solution can help a utility to plan, schedule, and manage maintenance to optimize resources, asset value, and uptime
  • Decommissioning: The decommissioning phase of an asset lifecycle is the last thing that a utility project manager wants to consider during the planning, execution, and even early operational stages. This mindset, however, can create additional expense and risk in the future. EPPM solutions can play a vital role in capturing and operationalizing information that is vital to the distant decommissioning phase. When it’s time for decommissioning, EPPM methodologies and tools are essential to a managing on-time and on-budget initiatives, just as they are when bringing a new asset online.

Set the Stage for Success

While EPPM solutions can drive success across the end-to-end project lifecycle, they can also have significant impact on asset optimization during individual phases.

For instance, a large utility in Canada uses EPPM methodology and solutions to manage its resources. In the past, the company filled service orders for construction and maintenance work via multiple manual processes and a series of highly customized and poorly integrated software systems for workforce management. The company, which deployed Oracle’s Primavera solutions, has improved its ability to plot work activities and determine what resources will be required to supplement existing resources. It can now also easily consolidate requirements for the peak project season by specific geographies. The utility has increased efficiency by shifting dispatching of resources to schedules in local offices and has gained the ability to effectively coordinate and manage resources based on local conditions and constraints – yielding greater efficiency and value from assets.
Utilities – as well as other types of asset-intensive enterprises ‒ have witnessed dynamics business transformation in recent years to a much more volatile and competitive marketplace. Now, more than ever, these organizations depend on EPPM solutions to propel capital projects forward through a gauntlet of challenges by improving collaboration and communication, better managing resources to ensure the right people are on the job at the right time, and mitigating and managing project risk.

Thursday Jan 14, 2016

When The Unexpected Strikes

By: Krista Lambert, Director, Engineering & Construction Strategy, Oracle Primavera

Tales of the Unexpected

Expect the unexpected. That’s a mantra every construction manager could do with heeding. But it’s easier said than done. The one thing we don’t want is the unexpected.

The bigger the project the harder it seems to keep it on track. In the US, the Big Dig, which involved rerouting and tunnelling Boston’s Central Artery to the heart of the city centre, was set to be finished by 1998. In December 2007 the project was finally finished, with a cost overrun of 190 percent at $14.6 billion, much of which was attributed to unexpected changes.

Such is the complexity of these mega-projects it’s tempting to think that overruns and cost inflation are inevitable. Certainly change is unavoidable in a project of this scale and length. But how you manage change, can make a big difference.

Preparing for change

In a recent Economist Intelligence Unit survey of 300 executives in asset-intensive industries like construction, more than 60 percent blamed unexpected change for at least half of all project overruns. More than half of respondents rank their organizations as average or below average at anticipating change (55 percent), measuring the impact of change after its implemented (55 percent) and making contingency plans to accommodate potential change (51 percent).

There is clearly room for improvement. The question is, what can be done about it? Enterprise project portfolio management software can now track and aggregate all sorts of data vital to complex projects. This helps project managers map out “what if” scenarios to assess the impact of possible changes before they happen, and figure out how much to invest in mitigating these risks. Data can be shared with all internal and external stakeholders. It can also be extracted and integrated from ERP, finance and other enterprise systems.

Managing change has always been tough, but now there are tools to help. Ignoring them could simply lead to digging a bigger hole.

To discover more, read our latest business brief.

Monday Jul 14, 2014

Managing Change on Engineering & Construction Projects

By Krista Lambert, Engineering and Construction Strategy Director, Oracle

As the saying goes: change happens. But the recent report from the Economist Intelligence Unit (EIU), Building in Change: Project Construction in Asset-Intensive Industries revealed that for engineering and construction projects, change is not only inevitable, it creates its own set of challenges. According to the report:

  • More than 60% of survey respondents blame unexpected change for at least one-half of all project overruns.
  • 55% of the executives surveyed consider their companies as average or below at anticipating change.

Clearly, both owners and EPC firms feel that they could vastly improve their ability to manage change. An enterprise-wide project management system not only provides greater visibility and insight into changes, but also improves communication across organizational boundaries, so you can quickly adapt to cost overruns, scope and schedule and quality impacts. To find out more, read the article Critical Components to Effective Project Execution in the latest issue of Construction Connection.

Monday Jan 06, 2014

University of Minnesota Saves Millions with Fewer Construction Change Orders and Claims, Improves Collaboration with Project Management Solution

The University of Minnesota is one of the most comprehensive public universities in the United States, offering more than 370 fields of study at campuses in the Twin Cities, Duluth, Morris, Crookston, and Rochester. It also has six agricultural experiment stations, two biological stations, one forestry station, and regional extension services throughout the state. Project Management Solution for university of Minnesota

The university’s capital planning and project management department oversees approximately 300 capital projects annually, valued at US$250 million. Typically, 10 to 15 of those projects have budgets exceeding US$2 million.

Challenges:

  • Deploy a robust project management solution to support the university’s new capital planning and project management group, which oversees more than US$250 million in projects annually across multiple campuses and school facilities.
  • Standardize and automate processes and closely track the cost of capital projects, which range from classroom building construction to campus infrastructure initiatives, to ensure on-time, on-budget completion.

Read complete list of challenges here.

Solutions:

  • Gained a consistent project management methodology and process for the university’s construction projects with Oracle’s Primavera Unifier, improving the team’s ability to complete projects on time and within budget and achieving return on investment in three years.
  • Integrated contract and financial management and enabled the capital projects group to track and benchmark costs to gain a more accurate picture of expenditures associated with building certain types of campus structures, whether instructional buildings or infrastructure projects.
  • Reduced the number of change orders by 15%―saving US$3.7 million in 2009 alone―thanks to more detailed cost and scope information, audit trails, and transparency.

Read complete list of solutions here.

"With Oracle’s Primavera Unifier, we have introduced standardized project management methodologies, resulting in significant savings and enabling us to be better stewards of the projects entrusted to our group.” – Kevin McCourt, Business Manager, Capital Planning and Project Management Department, University of Minnesota

Read complete customer snapshot here.

Friday Aug 16, 2013

SOLV Provides Accurate Risk Estimates for Oil and Gas Customers with Monte Carlo-based Simulation—Saves Customer US$550 Million

SOLV is an engineering consultancy and software developer based in the United Kingdom. It provides flow measurement engineering and consultancy services for fiscal, allocation, and process flow

measurement in upstream oil and gas production, pipelines, transportation, downstream petrochemical

refining, and power generation.SOLV’s experience stems from North Sea oil and gas, fiscal,

and allocation flow measurement, which is subject to stringent regulation by the

UK Department of Environment and Climate Change, the Norwegian Petroleum Directorate,

and other regulatory bodies.

 Challenges:

- Provide accurate estimates of uncertainty around the measurement of oil and gas output from pipelines

to enable global oil and gas organizations to manage exposure to risk.

- Assess accuracy of oil and gas allocation to multiple partner organizations, working in oil fields with

shared interest throughout the world.

Read more

 Solutions:

- Deployed Oracle Crystal Ball to perform Monte Carlo simulations to more accurately measure

the uncertainty around oil and gas flow measurement and calculate the probability that

measurements and allocations of oil to individual partners are correct.

- Saved one oil and gas client US$550 million by providing better risk estimates with the help of

Oracle Crystal Ball.

Read more….

"Oracle Crystal Ball enables us to use Monte Carlo simulation to estimate allocation uncertainties

in oil and gas flows and advise oil and gas clients on minimizing risk exposure."

– Martin Basil, Senior Flow Measurement Consultant, SOLV Limited

Read complete customer snapshot here.

Monday Jun 03, 2013

Western University of Canada Controls Capital Projects with Oracle Apps

Western University of Canada was able to improve its capital project management practices & lower their IT costs with the implementation of Oracle Primavera solutions and Oracle PeopleSoft. Discover why they are a success story and how they were able to free up cash for re-investment in facilities and research for its 35,000 students and faculty.

Watch the video today!

 

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