IPA helps a plastics recycling company identify gaps in its project system
THE PROBLEM
A European startup with licensed technology in plastics recycling and demonstration plants in execution in Europe asked IPA for help in improving its capital project performance. The client’s project system was new and developing, with a lack of processes, procedures, and experienced project professionals. As a result, ongoing projects were struggling with late changes, cost growth, and schedule slip.
The short-term success of these ongoing projects was critical to the client: it faced a loss of investor interest if it failed to demonstrate its technology on a commercial scale, driving a need to accelerate ongoing projects. The client’s goal in working with IPA was to ensure the ongoing projects were completed as quickly and cost effectively as possible to avoid a loss of momentum.
WHAT IPA DID
IPA begins any engagement with a current state assessment to get to the root of the problem. We first benchmarked three of the client’s ongoing projects using IPA’s driver metrics (including team development, project definition, and project controls). IPA analysts spoke to all project teams and systematically collected data to compare the project development and performance against the industry average and Best Performers. In addition, we interviewed stakeholders to gather information about system performance.
For the system analysis, IPA follows the Project System Excellence Model (PSEM®). This framework shows the relationship between the project system elements (governance, work process, organization, and performance management) and project success. The work with this client clearly demonstrated that its poor project performance was due to an unsupportive system.
Gaps in the organization, lack of work processes, and missing accountability throughout the governance process directly resulted in late changes for the client’s ongoing projects:
- Missing owner project controls allowed the engineering, procurement, and construction management (EPCm) contractor to go unmonitored through execution and issue infrequent and inaccurate progress reports
- Lack of an established work process allowed the projects to pass through the definition gates with undefined project deliverables, resulting in late changes to plot plans, P&IDs, and execution strategies
- Absent accountability in the governance process allowed the technology function to continue making scope changes to the project design in execution, adding to the cost growth and delays
ROOT CAUSE ANALYSIS
Fundamentally, issues within the governance process drove and magnified gaps in other elements of the project system. The missing accountability structure in the governance process contributed to the poor project drivers and outcomes:
- Decision Support Package Development—The lack of accountability assigned within the work process allowed the projects to approach stage gates with undefined project deliverables, resulting in late changes to plot plans, P&IDs, and execution strategies
- Assurance—The missing accountability for an independent assurance review resulted in significant project risks not being relayed to decision makers
- Endorsement—The lack of sponsor accountability led to poorly defined business cases and project managers attempting to define scopes with no clear constraints or boundary conditions
- Decision Making—Poor behaviors from decision makers resulted in promising unachievable targets to shareholders
Uninformed decision making by the CEO as the only approver of capital was ultimately what led to projects suffering from significant late changes due to poor front-end definition. The decision maker’s inexperience with capital project definition and execution, along with missing input from an independent and knowledgeable assurance reviewer, led to late scope changes, such as an insufficient warehouse capacity and laydown area, plus inadequate contracts established with suppliers that resulted in the owner having infrequent progress reporting.
These gaps in pre-FID project definition should have been captured and the risk of approving the project communicated to the decision maker. Although this step was missing, the CEO would have likely approved the capital and progressed the project regardless due to a lack of understanding of capital project front-end complexity. This project system was plagued with an absent governance process and lack of accountability throughout.
RESULTS
IPA’s analysis demonstrated that the poor project performance was driven by system-level issues. These issues, if not remedied, will drive the same results for upcoming opportunities. To quote the client (taken from Albert Einstein), “Insanity is doing the same thing over and over again and expecting different results.”
IPA developed a recommendations path to support existing projects and to form a process to better develop future projects. The system recommendations addressed key gaps in the Project System Excellence Model, which were prioritized in order of ease of implementation and importance.
Look for more articles in our governance series coming soon.