Last edited 14 Jul 2017

A new theory for managing large complex projects

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Contents

[edit] The challenge - Revolutionary improvements in project execution and delivery are required

The current theory of project management was developed at a time when projects were more readily decomposed and well bounded. Today’s large complex projects do not demonstrate these characteristics and current project management approaches result in unacceptable project failure rates and high levels of uncertainty with respect to cost and schedule.

Changing the fundamental theory of project management inevitably means that consequent developments need to take place in policy, innovation, legal framework, and knowledge management and education systems in order to reach the full potential of the industry-wide transformation.

This article aims to identify the areas of the management theory that need to change for the purpose of addressing the complex and innovative needs of infrastructure projects and classifying the areas of practical implementation of this new theory to contemporary and future needs.

In two distinctive parts, this article first analyses the idea behind the need for revolutionary improvements in project management theory and then the impact, the barriers and the way forward for transforming those interests to opportunities for innovation and development.

[edit] The idea - A new theory of management of large complex projects

[edit] Strengthened project foundations and frameworks

The current theory of project management does not adequately address the unique characteristics of large, complex projects. Project fundamentals are not well founded and some framework processes are either absent, break down at scale or are not adequately addressed.

Reinforced project foundations must encompass:

A heightened and structured focus on owner readiness, not just project readiness. Three aspects must be addressed:

  • Strategic Business Outcomes/Objectives (SBOs) must be clearly articulated, agreed to and continuously communicated.
  • Owner’s framework processes for decision-making and approvals must be strengthened and streamlined.
  • Project SBOs must be committed to by all owner elements including legal, procurement, contracts and accounts payable.

Project readiness must be further strengthened along the lines of traditional readiness elements but also expanded to ensure SBO alignment and use of big analytics starting from the planning stage.

Project baselines must include an expanded basis of design (BODX) that encompasses not only the traditional basis of design associated with meeting the owner’s project requirements but also:

  • A Construction Basis of Design (CBOD) that reflects desired means and methods (prior to the start of design; more than just a constructability review) such that a project is designed to build. Safety is taken to a new level through hazard elimination rather than mitigation during construction. Incorporation of a CBOD changes design packages requiring more granularity in design package definition.
  • An Operations & Maintenance Basis of Design (O&MBOD) that brings life cycle consideration to the very front end of the project, influencing design choices from the outset rather than seeking to improve the O&M characteristics of a developed design at a later stage.

New technology, including BIM, can readily support this.

  • Foundations must further strengthen project baselines, especially for large, complex projects where two out of three fail by recognising the inadequacy of current risk models that ignore the observed 'fat tails' and optimism bias in project performance.
    • Risk models must avoid screening out risks prematurely and provide for Monte Carlo risk modelling with 'fat-tail' distributions such as a Cauchy distribution.
    • Assumption capture and tracking to address assumption migration in long duration projects.
  • Risk focus must be expanded to address:
    • White space risks that exist in complexity.
    • Stakeholder risks which act on today’s more unbounded project.
    • Changed risk profile associated with data and tool sharing such as seen in shared BIM models.

Formal owner readiness assessments are a first step in an improved project initiation process. They precede project readiness activities and new guidance documents must be developed.

Project governance training is required, and adoption of governance principles, distinct from project management, must occur.

Standards and guidance documents related to the use of an expanded basis of design must be developed.

Optimism bias must be addressed through required use of reference class forecasting for cost and schedules on large, complex projects. These can be facilitated by shared industry data and best practices.

Refinement of traditional industry-risk models and modelling to account for risks in complexity and scale as observed in the 'fat tail' performance outcomes is required.

An expanded project control focus must be developed, recognising the inherent risks from stakeholder action/inaction that today’s projects face. The role of big analytics is significant but requires looking at the right data.

New risk models to identify and manage the new risks of collaboration, such as we see emerging in shared BIM models, must be developed.

[edit] Increased focus on flows, not just the progressively decomposed tasks

Project delivery heavily focuses on decomposing a project into a series of interrelated tasks and then managing the activities within each task. These tasks are reflected on schedules and network diagrams with little arrows showing directional flows. These arrows are not dimensionless and inadequate attention to flows is a significant source of project disruption and degraded performance.

Project management must strengthen its focus on flow management by:

  • Increased attention to interface identification and management, including identification of underlying constraints which may 'couple' otherwise disparate tasks on a project.
  • Recognition that previously established interface requirements may change as underlying assumptions and conditions migrate over time.
  • Greater use of 'last planner' techniques and improved workface planning from a knowledge-enabled work force.
  • Use of 'knowledge assemblies' that bring together all the informational resources required by a particular task together with the associated computational and analytical tools and methods.
  • Recognising the growing importance of flow management as supply chains are more tightly integrated. This is in addition to the flow complexity associated with distributed execution and challenging project logistics both in remote and urban areas.

Development and owner acceptance of big analytics appropriate to support higher-level project delivery requirements must occur.

Development of a knowledge assembly strategy to improve productivity throughout the project delivery process is required as is real-time, dynamic project modelling and management.

[edit] Recognition of the implications of the unbounded nature of these projects

Today’s largely unbounded project is subject to the debilitating impacts of stakeholder-derived influencing flows that sweep across a project’s semi-permeable boundary, impacting not only the project’s tasks but perhaps more importantly, its various transformational flows.

Addressing this challenge requires:

Development of a new paradigm for project controls that includes equal attention to potentially impacting flows arising from changes outside the project proper. This new paradigm will require increased use of big analytics not only on project performance data but also on a myriad of external data sources. Project controls must also be outward looking.

Shifting our stakeholder perspective from one of management to one of engagement. This begins by posting outward looking 'sentries' (new project control efforts); looking over the horizon with 'scouts' to ascertain changes that may lead to potentially impactful influencing flows (big analytics); and finally engaging the broader stakeholder 'mesh' that surrounds the project with 'ambassadors' who seek to influence stakeholders and control 'time', the rate at which a change unfolds.

Greater project transparency is essential if this engagement is to be successful.

New project control disciplines, training and tools to assess project impacting externalities must evolve.

[edit] Embracing the use of modern technology

The construction industry has typically been slow to embrace technology, but this is now changing for the good. The use of technology to deliver projects is accelerating and appropriate use of the correct technologies can help to deliver successful projects.

New construction technology (e.g. autonomous plant, drones, mobile application, smart logistics, sensors, 3D printing) helps improve the efficiency of onsite operations, but it can be argued this is simply the latest development in the ongoing advancement of technical capability. Effective project management must recognise and embrace new technologies as they become mainstream.

Of more relevance to the issues identified above is the potential for technology to assist and support the processes required for project success. BIM, if used to its full potential, can facilitate the development of stronger project foundations and frameworks and also assist project management teams to understand, organise and optimise the increasingly complex project frameworks, multiple tasks and change. Other technologies that support improved project management and stakeholder engagement also exist.

Notwithstanding the availability of technology it is ultimately the capability and approach of those involved that will determine whether or not a project is successful. Without a new theory of management of large complex projects, as mentioned above, new technology in itself will not make the improvements required.

[edit] The impact

Changes in theory cannot perform on a stand-alone basis. Modern approach in all relevant areas will enhance industry transformation. We have identified five areas that are most impacted and need to change for the purpose of implementing the new project management theory.

[edit] Impact on policy

Today’s policy frameworks are inconsistent, often providing for disparate and distorted treatment of similar project types from a regulatory, design and financing standpoint. These weak frameworks begin with the very selection frameworks used to prioritise projects from a societal as well as financial perspective.

Improved project selection frameworks to prioritize projects are required. These must encompass commonly accepted prioritisation methodologies as well as widely accepted common classes of factors for prioritisation. These factors must adopt a strong and well-founded life cycle focus. This is essential if we are to be able to afford the built environment we will require.

A second key framework demanding improvement are those related to codes, standards and regulation. Increasingly these must not just allow for incremental innovation but instead promote broader efforts of innovation and continuous improvement. Performance-based codes, standards and regulations must become the accepted and preferred norm.

Business and financing frameworks that promote life cycle performance must also be put in place and existing ones further strengthened. This strengthening should see enterprise asset management as a life cycle extension of today’s current BIM efforts.

Similarly, debt covenants and accounting standards should treat built assets commonly and with an emphasis on life cycle performance and asset sustainment.

[edit] Impact on industry-wide systemic innovation

Truly revolutionary improvements in project execution and delivery will require a transformation of industry. In particular, we need to evolve from serial incremental innovation to broader systemic innovation. The latter requires industry to change as a whole, which, in turn, requires common driving forces and enabling frameworks.

Specific enabling solutions include:

  • Establishing an industry-specific 'grand challenge' – An example of a 'grand challenge' could be to reduce life cycle costs by 50% and put in place the required skills, education, evaluation methods and metrics.
  • Strengthening government-sponsored, industry R&D emphasizing life cycle cost reductions and project delivery productivity while incentivising commercialisation.
  • Creating an industry-sponsored intellectual property commons addressing cost and benefit sharing as well as promoting cross-industry sharing of best practices and lessons learned.
  • Creating a 10 year R&D tax bonus period for efforts related to life-cycle cost reduction and improvements in construction productivity – An example could be a $2 tax deduction for every $1 spent.

[edit] Impact on legal framework

Currently, various legal, insurance and other financial frameworks may act as unintended barriers to overall improvement in engineering and construction industry improvement. Focusing narrowly on those areas of improvement solely within the control of the engineering and construction industry would be self-limiting with respect to transformational improvements that are desired.

Legal frameworks – laws, regulations, contract forms, dispute resolution guidance – must be modified to reflect changed and changing business models that inherently rely on and encourage closer industry collaboration. We see such closer collaborations developing in a number of different ways including:

  • Integrated project delivery.
  • Design build with designer as a partner not just a subcontractor.
  • Shared BIM model development by multiple parties including owner/operator O&M staff.
  • Tighter supply chain integration including direct BIM input.
  • Long term obligations associated with migration to life cycle contracts (PPP) or life cycle contract performance requirements.

Insurance frameworks to support collaborations such as those identified must be created or strengthened.

These modified frameworks must include coverage for the myriad of newly created or modified risks and risk postures.

[edit] Impact on knowledge: Establishment of industry-wide knowledge sharing frameworks

Revolutionary change and improvement are required within the engineering and construction industry. They must be driven by innovations of all kinds including in how we share and mobilise our collective knowledge. This includes the progressive establishment of industry-wide knowledge-sharing frameworks.

Specifically the engineering and construction industry should consider:

  • Establishing an industry best practices forum with user ratings of best practices used (Best practices YELP). Today, best practices are scattered across various industry and academic sites and usability and assessment of outcomes achieved are generally lacking. There is no compendium of best practices sites.
  • Creating a construction industry intellectual property commons to promote awareness of valuable knowledge and solutions while protecting the rights of IP holders. Analogs exist in various creative commons and the innovations connection model designed to connect IP creators with commercial innovators.
  • Developing a 'knowledge assembly' concept that draws all knowledge required for a task together for ready access by a doer of task (knowledge enablement)

[edit] Impact on education: Improved alignment of education system to emerging industry needs

The engineering and construction industry’s needs are changing and if the transformations that are viewed as necessary are to be realised then the education and skills of our labour force are also going to have to change. Several elements are required for this dimension if change is to be successful and the educational system that serves the industry will also have to change.

Tomorrow’s project managers will require enhanced project management training to recognise the growing need for general and business management skills. Engineering and construction curricula must recognise the growing integration and convergence of these respective disciplines. Education systems must also reintegrate education on tool-making with tool using so that the profession may innovate more directly, reducing reliance on potentially disconnected specialists.

Licensure/certification of project and construction managers must come with a stronger continuing education requirement, comparable to or even more robust than what we require of our engineering professionals.

There must be an increased emphasis on trade schools and craft training to recognize the changing skills needs of tomorrow’s digitally enabled craft worker.

[edit] The barriers to implementing change

There are roadblocks to improving these requisite frameworks for success, but they are within our control.

Examples of current roadblocks include:

  • Lack of ownership of standard setting for project prioritisation.
  • Resistance to change and entrenched structures of standards setting organisations.
  • Driving industry supporting change through the financial sector.
  • Broad embracement of Enterprise Asset Management practices and standards.

In addition the above, one principal roadblock to systemic transformation is the current fragmented approach to government-sponsored research with no overarching 'grand challenge', e.g. put a man on the moon.

Looking ahead, among the roadblocks such innovations will face is the multi-jurisdictional nature of laws; no longer fit for purpose precedents enshrined in existing case law; and the inherent difficulties in quantifying new and emerging risks.

Knowledge-sharing frameworks today suffer from the lack of an industry organisation to sponsor, create and govern the required industry intellectual property commons. The industry should explore other IP commons that exist in other industries.

In terms of educational barriers, the project management curriculum today under-emphasises and is not tightly linked with the necessary skills and training found in general management and business schools. Many educational insight articles lack consistent recognition of project management as a professional discipline even while recognition grows for construction management.

An emphasis on a college education often sends students to an undifferentiated liberal arts education with limited employment prospects while good-paying jobs are under-filled because of diminishment of trades as a desirable career option.

[edit] The way forward

We must transform, not merely improve the future of construction. Systemic innovation will require multiple parts of the industry to transform in tandem. These key transformations will require us to adopt an industry standard on project prioritisation methodology and the classes of prioritisation factors to be considered (as a minimum). These prioritisations must reflect life-cycle behaviour and requirements.

We must also migrate industry-affecting codes and standards from largely prescriptive standards to performance-based codes and standards. We have done this before in the areas of fire protection and seismic design.

On the financial front, we must harmonise debt covenants for asset classes irrespective of source of debt financing. Accounting standards related to these assets must require life cycle cost reporting; and backlog of deferred maintenance and/or replacement values for long-lived assets. Modified accounting treatment of costs classified as capital or routine maintenance for long-lived assets are also required for long-lived assets.

On a more tactical level, today’s BIM systems must integrate seamlessly into tomorrow’s enterprise asset management systems. BIM/EAM integration is essential to support life-cycle management.

Achieving the systemic transformation our industry requires will be significantly aided by establishing an engineering and construction industry 'grand challenge' that, in turn, requires improvements by the industry as a whole.

Moreover, industry should promote its research and development capabilities as well as issue a statement announcing its R&D priorities, i.e. industry-driven vs bureaucracy-driven. Knowledge sharing within the industry should be facilitated and barriers removed. One such approach to fostering cross-industry collaboration is the creation of an intellectual property commons.

Government R&D practices and industry tax incentives also need to be aligned with the outcomes that a Grand Challenge seeks to deliver.

To overcome these roadblocks and encourage the required legal and insurance industry evolution, we must create model legislation with supporting documentation related to regulatory 'technical' content and contract forms. In essence we must help define best practice.

New dispute-resolution guidelines that may be referenced in contract documents for emerging collaboration type risks are required and should build on the efforts that are underway in a number of jurisdictions.

The re-insurance industry also has the potential to play a key role by creating necessary products to pool these emerging risks and help set standards of good practice.

To achieve the systemic transformation that the engineering and construction industry requires, we must strengthen pan-industry structures and promote increased client recognition of industry IP rights.

The educational system must support the transformation the engineering and construction industry requires. There must be an embracing of project management as a discipline (not just CM).

Trade schools must be revitalised and minimum training standards for craft labour broadly established, recognising that they too are increasingly knowledge workers in a transformed digital industry.


Written by:

  • Roger Bayliss, Senior Vice-President, Global Operational Efficiency, Skanska, Sweden.
  • Robert Prieto, Chairman and Chief Executive Officer, Strategic Program Management, USA.

This article was originally published on the Future of Construction Knowledge Sharing Platform and the WEF Agenda Blog

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