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.

Monday Mar 07, 2016

Two Worlds Colliding

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

Bringing together the best of both worlds

Site foremen are formidable people. You don’t want to feel the force of their frustration. When someone else’s mistake plays havoc with their plans or makes them miss deadlines, it can create unbearable situations.

But you can avoid frustrating your foremen with short interval planning. It’s a technique used in Lean Construction, designed to flush inefficiency out of the system. The technique relies on frequent and open collaboration on the job. The idea is that short-term plans are created daily to adapt to changing circumstances, ensuring employees are not left scratching their heads with nothing to do.

But it has its shortcomings.

It could miss important dependencies in the project which, if ignored, could delay completion. Since the 1940s the critical path method has been developed to seek out these dependencies, showing project managers where to focus their energies if they want to avoid being late.

And yet the critical path method is often set against short interval planning as if project managers and planners must pick one method or the other to succeed. But this doesn’t have to be the case.

The tools and technologies to bring the two approaches together – and get the best from both – are available today. The reality is that an open approach can help you stay in touch with the project whatever is thrown at you at any stage of the project giving you greater control.

To discover more, read our latest business brief.

Thursday Mar 03, 2016

How can I deliver better projects in my Smart City?

By: Werner Maritz, Public Sector and Infrastructure Industry Strategy

The world is watching - 10 Game Changing Characteristics

Globally city managers are faced with an ever-increasing city population and a decrease in financial and human resources to deliver adequate services across the city region. The challenge of ensuring the city’s sustainability must be seen against a backdrop of increased environmental and social awareness, economic pressure and competition for public and private investment in and around the city. City managers are often faced with challenges related to ensuring basic human rights, dignity, safety and security for the poorest of residents while delivering on the life style demands and expectations from the richest of residents. Often these diverse groups are living in close proximity of each other and resources must be allocated and shared. Given this familiar situation, city management need to prioritize capital and social investment to deliver on the strategic objectives of the city, a fine balancing act indeed.

City managers need to take a holistic approach in planning the future growth and improvements across the city to ensure not only cost-effective services delivery of and new infrastructure but also ensure synergy across the city responsibilities related to Built Environment, Economic and Social Infrastructure to ensure the economic, environmental and social sustainability of the city. From breaking down the traditional silo approach of the City departments to having real-time insight of the transversal infrastructure demand and backlog across these departments is critical to effective investment planning in the city. Eliminating duplication of effort between departments and leveraging synergy to achieve common objectives is key to a successful Smart City Transformation Roadmap.

Leveraging continuous technology advances and improving cost-benefits ratio of technology to improve the productivity of the city’s infrastructure, city managers face an ever-increasing portfolio of new projects to be delivered across the city. Often these are complex, long term programs consisting of multiple sub-projects to plan, co-ordinate, and implement with due regard to operational effectiveness improvements in the process. Monitoring performance and taking timely corrective action is critical in delivering these long-range programs on time and within budget in a complex delivery environment with multiple stakeholders.

Effectively transitioning the city’s new assets into the operations and maintenance phase is critical to ensure early value generation from these investments, and to manage and maintain these assets at their design capacity and capability over many years to come.

 

Oracle Primavera Smart City Projects Solution

A significant challenge in the implementation of Smart City Transformation Roadmaps across the world is related to securing adequate funding for the projects on the roadmap. Development Financing Institutions (DFI) and potential Public Private Partnerships (PPP) indicate that adequate funding is available to realize the Smart City Transformation goals but they have two main investment decision considerations:

  • The availability of investment grade project opportunities, and
  • The assurance that adequate financial control and governance processes are in place during the project implementation phase.

The Oracle Primavera Smart City Projects Solution delivers 10 characteristics, which will significantly contribute to meeting these requirements:

1. Implement a detailed project portfolio management process to show the alignment of the investment opportunity with the overall strategic objectives of the city. Track the development and approval of deliverables across project development phases. Show how the business case for the project supports the longer term vision of the Smart City transformation roadmap and how benefits realization will be tracked once in operation;

2. Establish a standard platform for program and project set-up, project management and project close-out processes. Ensuring predicable and repeatable project processes and structures facilitate effective project administration;

3. Set a standard for project performance monitoring and reporting. Standard performance reporting across all projects enables decision makers to take early corrective action based on real-time metrics indicating deviation from planned cost and schedule objectives. Poor performance from contractors and suppliers is a leading cause of project failure

4. Enforce project and financial governance processes through configurable workflow for change requests and financial approvals. Ensure the auditability of actions taken by project team members and tracking of contractual deliverables;

5. Implement a formal project scope and contract change management processes. Align the interim contract payments with a formal schedule of values under the contract terms and conditions. Only make payments for work actually completed and certified;

6. Enable electronic correspondence management, document tracking, document control and electronic document handover across all project team members, city operating divisions and external stakeholders. Create a full electronic record of the project to ensure proper project hand-over, close-out and dispute resolution support;

7. Leverage transactional control data in the City’s ERP to enable informed cost and cash-flow management and forecasting. Integrating the Oracle Primavera Smart City Project Solution with the City’s ERP solution will promote operational efficiency and financial data integrity.

8. Implement a formal program and project risk management platform, integrated with the cost and schedule management of the project. Effective program and project risk management is one of the most under-estimated forward looking management tools within the overall project governance framework;

9. Establish a collaborative environment between the city project owner’s team, engineers, consultants, main contractors and sub-contractors. Clear and timely communication between team members reduce project schedule delays due to delayed decisions caused by slow communications;

10. Implement a formal post contract award management environment in support of the chosen contract format. This will facilitate contracts administration, contract change management, interim payment certification, partial and full contract deliverables handover and acceptance. Ensuring compliance with the conditions of the contracts between the city and the contractor will reduce the project cost growth due to uncontrolled contract changes. Preventing litigation related to contested contract changes is an effective manner to contain cost growth and wasteful expenditure on a project

 

Easy to deploy

In todays fast passed city environment the deployment of integrated management systems need to provide the agility the Smart City Transformation Roadmap demands. Unfortunately city IT managers often face challenges to deploy any form of integrated management systems to stakeholders outside of the city administration. In part, this may be due to cost consideration, the city’s procurement policies or data security considerations.

The Oracle Primavera Smart City Projects Solution is a fully web based solution which can be deployed as a Software-as-a-Services (SaaS) solution from Oracle or as an on-premise solution in the city’s own IT environment. The Oracle Primavera solution is designed for the extended enterprise. Cost effective licencing models put the solution within reach of all project stakeholders. The user access and security model is designed to enable deployment outside of only the city administration, allowing the operational efficiencies of a truly integrated project delivery platform across the city and its stakeholders.

The Oracle Primavera solution supports the use of mobile devises to facilitate a productive workforce across the city. Leveraging the city’s communication networks allow project team members and stakeholders to access project planning and contract information, status activities and contracts, and access reports and dashboards while on the go from their mobile devices.

 

1PPM for Intermodal Transportation & Infrastructure Organizations: Select, Manage and Maintain Transformative Projects. Aberdeen Group, March 2015

 

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.

Tuesday Dec 08, 2015

The Risks of ‘Word of Mouth’

By: Garrett Harley, Director, Engineering & Construction Strategy, Oracle Primavera

Where’s Bob?

When a kitchen appliance isn’t behaving as it should, it’s best to consult the manual. That’s if you can find it. In the digital, searchable, online world, it is easy to forget how much valuable information is hidden away. Until someone really needs it.

Multiply this problem by thousands and the difficulties in the maintenance of large capital assets become clear. Information needed by maintenance engineers might be in the architect’s drawings, the engineer’s calculations or in any documents from thousands of suppliers. It might be in the notepad of Bob, who heads up electrical engineering, his team made some changes to the set-up of the security schematics. Where is he? And where is the information?

The problem is that it might even have been mentioned in any number of project meetings and even the handover meetings between the construction contractors and the owner-operators. But where was the information captured?

With many different specialists (Bob#1, Bob#2, Bob#3, etc) working on a single capital asset, information gets stuck behind ‘tribal’ boundaries and sits in silos. Bob’s scenario is all too frequent and the complexity throughout the project lifecycle is magnified.

A lack of clear, consolidated, searchable data on components, materials and construction techniques can making maintaining buildings highly inefficient. It also creates a risk of the building being poorly maintained. Mistakes here lead to costly reactive work further down the road. It’s not a good place to be.

But there are better ways to manage the hand-over of large-scale capital assets. There are tools available that allow the main contractors to capture all the data in a coherent but flexible workflow. With so many people involved in a large project, keeping track of all the adjustments – it can make maintenance a lot easier, creating massive savings in the lifetime cost of the asset and more to the point – fewer ‘where’s Bob’ moments.

To discover more, read our latest business brief.

Monday Oct 05, 2015

Don’t Be Late

By: Garrett Harley, Director, Engineering & Construction Strategy, Oracle Primavera

Don’t be late, be better informed

If nothing else, construction and engineering projects present ample opportunity to fail. Complexity in assets, supply chains, finance, workforce skills and client requirements all present risk that could jeopardise success. A small slippage or error in any of these areas can easily cascade through the project to contribute to catastrophic failure. It’s little wonder construction and engineering project management is such a tough job.

In a survey of 304 senior executives from a variety of asset-intensive industries, more than a third said they miss their budget (39%) and schedule (34%) targets on major projects at least a quarter of the time[1]. The study by the Economist Intelligence Unit also found more than 60 percent blamed unexpected change for at least half of all project overruns.

The answer is in the data

It’s true that data is everywhere. But finding that nugget of data can help to reduce risk and improve the chances of success. To achieve this, you need to have the ability to manipulate your data in searching for better questions….this is where there is real value.

Every project creates a huge volume of data. From the bid process through to the project’s handover to clients or operators, there is a myriad of Word files, spreadsheets, PDFs and databases. But is the small valuable data easy to find and use? And is it available to the right people at the right time?

There are five main areas where construction and engineering firms are benefiting from improving how they organize and access data:

1. Lead to contract execution: win the right work with the right customers, at the right margins

2. Project and construction execution: manage change while reducing risk and improving margins

3. Digital handover: simplifying the transition to Operation and Maintenance

4. Project visualization: simulating construction sequences and spotting challenges

5. Lifecycle data hub: organizing data and making it coherent

But as with anything in life, it’s impossible to eliminate risk. But you can improve the chances of success.

To discover more, read our latest business brief.



[1] Building in change: Project construction in asset-intensive industries http://www.oracle.com/us/products/applications/primavera/building-in-change-eiu-report-1489240.pdf

Wednesday Jan 21, 2015

Is your company ready to successfully execute a business transformation?

Intelligent Utility – January 18, 2015

Author: Guy Barlow, Director of Industry Strategy, Oracle Primavera

For companies that don’t want merely to succeed in the utilities industry but to lead, continual business transformation is a must. It appears, however, that actually achieving this transformation is also one of their most vexing challenges. New research from Oracle Primavera and Forbes, “Making the Change: Planning, Executing and Measuring a Successful Business Transformation,” shows that while the ability to execute transformation is critical to remaining relevant, nearly half of the 534 executives surveyed---from a number of different industries, including utilities---say their organization is only somewhat or not at all ready to successfully execute a business transformation today.

Continual business transformation is crucial for companies to stay ahead of emerging players and maintain a competitive edge. From bringing new offerings to market to embarking on major capital expenditures, business transformation can take countless forms. Many utility companies, however, are struggling with their transformation efforts. Despite strong agreement that business transformation is fundamental to success, 48% of total executives surveyed say their organization is only somewhat or not at all prepared to successfully execute a business transformation today.

Beyond the preparation, it’s the execution of the business transformation initiatives and projects that make or break its success. The most often cited cause for failure in the rollout of a business transformation initiative is inefficient execution (41%), followed by resource and budget constraints (35%). Additionally, top reasons for successful initiatives include support from leadership (51%) and strong, competent execution (48%).

When it comes to tools needed to ensure successful business transformation, respondents from utility companies say that having a summary of all costs associated with transformation initiatives is the single most critical capability (55%). More than half of utility industry respondents (55%) cite inefficient execution as the top reason for transformation failure while noting that the top reason for transformation success is support from leadership (48%). And, those who have successfully implemented transformation initiatives in the last three years say that business transformation met their expectations (47%).

Transformational change in utilities is needed. Given, among other factors, the volatility of commodity pricing, heightened regulatory scrutiny and diminishing talent, boards and executives realize the need for a step-change in their business. And it often depends on the successful planning and execution of strategic initiatives – that is, projects. (…)

Read the complete article here.

Tuesday Jun 17, 2014

Why Time-to-Market is Critical for Today's Automotive Suppliers

After years of slumping sales, the auto industry is rebounding at an unprecedented pace. Auto parts and components suppliers, who were equally battered, now face the challenge of quickly retooling and re-staffing to regain status with OEMs.

This White Paper looks at the current trends and how automotive suppliers can get back on the fast track.

Learn how automotive suppliers can position themselves to help OEMs meet their new model goals.

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.

Monday Oct 21, 2013

In the Firing Line: The impact of project and portfolio performance on the CEO

What are the primary measurements for rating CEO performance?

For corporate boards, business analysts, investors, and the trade press the metrics they deploy are relatively binary in nature; what is being done to generate earnings, and what is being done to build and sustain high performance?

As for the market, interest is primarily aroused when operational and financial performance falls outside planned commitments for the year. When organizations announce better than predicted results, they usually experience an immediate increase in share price. Likewise, poor results have an obviously negative impact on the share price and impact the role and tenure of the incumbent CEO.The impact of project and portfolio performance on the CEO

The danger for the CEO is that the risk of failure is ever present, ranging from manufacturing delays and supply chain issues to labor shortages and scope creep. This risk is enhanced by the involvement of secondary suppliers providing services critical to overall work schedules, and magnified further across a portfolio of programs and projects underway at any one time – and all set within a global context. All can impact planned return on investment and have an inevitable impact on the share price – the primary empirical measure of day-to-day performance.

Read this complete complementary report, In the Firing Line and explore what is the direct link between the health of the portfolio and CEO performance. This report will provide an overview of the responsibility the CEO has for implementing and maintaining a culture of accountability, offer examples of some of the higher profile project failings in recent years, and detail the capabilities available to the CEO to mitigate the risks residing in their own portfolios.

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