Project recovery

Abstract

Projects that are recovered are mostly recovered by getting the project objectives back on track. This is not always the case; sometimes the business objectives are neglected in the recovery process. This paper explores the use of a project recovery methodology in a case study, based on a troubled agricultural project in Mozambique, and illustrates some of the most common pitfalls a recovery team can find itself in when embarking on a recovery process. In this paper, remedies to not be trapped by these pitfalls are identified and discussed. Even though the case study relates to an agricultural project, the learning can be applied to any type of troubled project.

Introduction

Projects always start off with good intentions. Good intentions are in the forms of certain tangible objectives. These objectives are usually project objectives, derived from the business objectives. Once a project is in implementation, these good intentions sometimes become more difficult to obtain. As soon as the project deviates beyond a manageable threshold, distress signals are sounded and the project becomes labelled as troubled or a red-project. Once a project is troubled, a decision is required — to recover or not. If it is not recovered it is usually the end of the project and it is known as a terminated or failed project. However, if the decision is made to recover the project, a concerted effort is made to recover the project objectives as much as possible. A research study done by Project Management Solutions (PM Solutions, 2006, p 2) indicated that project recovery interventions led to successful completion in 80% of organizations, either with the projects recovered and completed successfully (43% of organizations) or by setting new project expectations and meeting those new requirements successfully (in 37% of organizations).

Williams defines project success as “(1) the project delivers value to all parties in the project; (2) The project maintains the scope, schedule, and cost established by the original definition, as well as any before the fact change orders.” (AMACOM, 2011, p 16)

Vargas defines troubled projects as “a project where the difference between what is expected and what has been accomplished exceeds the acceptable tolerance limits, pushing into a course that will inevitably lead to failure.” (PMI^® Global Congress 2007—Asia Pacific)

Stated differently, a troubled project is where there is a reasonable chance that the project might not deliver benefits to the stakeholders, or it is deviating significantly from the intended performance baselines, which are outside the acceptable thresholds.

Recovered projects are projects that have deviated past the acceptable thresholds, but due to interventions, the project objectives have been recovered to an appropriate level to still provide acceptable benefits to the stakeholders.

What happens when a project is troubled and a recovery effort is initiated and all the project objectives are back on track, but the project still fails in meeting its true objective – the business objective, the reason for existing in the first place?

The purpose of this paper is to illustrate some of the most common pitfalls a recovery team can find itself in when embarking on a recovery process. By means of a case study based on a true project, a troubled agricultural project in Mozambique, these pitfalls are identified and analysed. Even though the case study relates to an agricultural project, the learning can be applied to any type of project.

Banana Farm Case Study

The Mozambique Banana Plantation Project is a commercial banana plantation in the Northern part of Mozambique. It is a green field project aimed at producing bananas for the export markets of Europe. The major driver for the European market is high-quality fruit. The initial requirement was for the development of 3,000 hectares of banana plantations, divided into 10 farms, supported by a large infrastructure.

The opportunity of exporting high-quality bananas to the European market came about due to the high import tariffs on bananas from Latin America imposed by the European Union (EU). The EU offered the best import rates to many of the former colonies in Africa. It was therefore much more attractive for the major banana distributors to start up operations in Africa. The sub-tropical climate and favorable soil type of Northern Mozambique are ideally suited for growing the required bananas, and the possibility for diseases, such as Black Sigatoka and Panama Disease (deadly to bananas, which affected a number of Central American plantations) was not present.

The strategy of one of the large leading international marketers and distributors of high-quality fresh food products was to distribute 20 million cartons of bananas per year to Europe from Africa. They, however, were not prepared to start up their own farms because of previous failures on the African continent. The strategy was then to assist an associate producer with consultation services to produce the high quality fruit and purchase the fruit and distribute it to the intended markets. In this case study, the Mozambique Banana Plantation was selected as the associate producer.

The banana plantation was developed by a newly formed start-up company, which was also intended to manage the plantation. The project was to be financed through a conglomerate of companies and investment houses. The bananas were intended to be sold Free on Board (FOB), at a fixed cost per carton, to the large leading international marketer and distributor, who would then distribute the fruit to the intended markets. This leading international marketer would also dictate the quality standards for the exported fruit and provide consultation services to the grower, seeing that they had more than 100 years' worth of banana experience.

Exhibit 1: Typical banana plantation in Mozambique.

The business case required that the farm should have 3,000 hectares of bananas in order to generate enough sustainable income to pay back the venture capital for the first 1,000 hectares and associated infrastructure and to generate enough capital to finance the remainder of the farm. The banana plantation was to be developed in three phases, commencing in 2008 and ending in 2011. This plantation consisted of all infrastructure work, including access roads and bridges, electrical reticulation, bulk water supply, irrigation, packing stations, cable ways, dwellings, medical facilities, and educational facilities for both employees and the local community. The northern part of Mozambique only received seasonal rainfall and therefore required a large water management infrastructure to ensure all year-round irrigation, which included one of the 10 largest man-made dams in Mozambique.

The initial value of the project was estimated at US$60 million, which is quite a large amount for an agricultural project. The venture capital for the project, as already mentioned, would come from investors, after which the income generated would fund the remainder of the required capital. It was therefore critical for the project to meet the agreed-on timescales.

The following primary objectives existed on the project:

• Cost: The production cost per carton should not exceed US$4.50. A selling price of US$6.50 was agreed upon with the leading international distributor.
• Schedule:

• 750 hectares by the end of 2009
• 1,750 hectares by the end of 2010
• 3,000 hectares by the end of 2011

• Planting of 10 hectares per week per farm. This constraint is due to the design limits of the packing stations and the maintenance of the plantation, which is quite extensive.
• Full Global Gap and Rain Forest compliance before any export of the fruit to Europe.

The project commenced in 2008 with securing the use of the land and obtaining all the required environmental permits. The construction of the dam also commenced, seeing that it was the largest deliverable of the project. Mozambique receives a number of tropical storms, commencing in December of each year and lasting until the middle of April of the following year, which only allows seven to eight months of uninterrupted construction work on the infrastructure. All these elements were kept in mind when the project was planned.

Soon after the project commenced, it started deviating from the initial schedule. This was primarily due to the difficult logistical support, which was dependent on the provisions only by sea and also the remoteness of the location. Malaria was also rife, reducing efficiencies drastically, as well as a workforce, which for two generations, had not known what it meant to be employed — remembering that Mozambique was first involved in a war of independence (1975) and thereafter in a civil war for the next seventeen years. The local labor force had extremely few skills and a large amount of effort had to go into training and skills. Compounding this was a lifetime of malnutrition, resulting in low productivity rates. Communication was also a major challenge.

In order to plant a hectare, the following needs to occur:

• Land needs to be cleared of vegetation.
• The land needed to be prepared by ripping the compacted soil and the introduction of gypsum.
• Trenching and installation of the irrigation system.
• Planting of 2,000 plants per hectare.
• The installation of the cable ways only occurs later, but needs to be completed before harvesting commences.

The construction of the dam, weirs, pump stations, electrical reticulation, holding dams, packing stations, and warehouses takes place in parallel. Obviously planting the banana plants cannot take place unless the irrigation system is commissioned for the specific hectare.

Very little project management expertise existed within the project team, consisting of expatriate farmers and construction specialists from Zimbabwe, Mozambique, and South Africa. The international marketer, who was committed to deliver fruit to Europe by a specific date, insisted that professional project management services be introduced into the project as soon as possible. Soon a Project Management Professional (PMP)^® certified project manager was appointed as a consultant to assist with the project management activities on the farm. After two months, the project manager had to leave due to personal reasons and the project continued under the leadership of the general manager.

By the middle of 2009, only 191 hectares of a planned 270 hectares were planted. In order to recover the schedule, an expedited planting plan was adopted – plant whatever you can where irrigation exists, which led to inconsistent planting per farm as displayed in Exhibit 2. Wherever the planting rate exceeds the 10 hectares, the maintenance of the hectare for fertilising, pruning, and ultimately harvesting becomes a management nightmare. In some instances, the fruit will have to be diverted to other packing stations. This is a quality issue.

Exhibit 2: Planting rates for Farm 1.

The infrastructure development was within the required tolerances, except for the procurement of the cable ways. To ensure that the fruit is not damaged during harvesting, the cable ways formed a critical success factor for the transportation of the fruit from the plantation to the packing stations.

Spending on the project also became a major concern, with almost one quarter of the budget expended, but only 12% of the project earned.

The project steering committee, under the instruction of the concerned investors, decided to appoint an outside consultancy to recover the troubled project. This is where we got involved.

Project Recovery

Recovering a project that is really troubled is not for the faint hearted. It is the opinion of this author that recovery is not achievable and repeatable without a project recovery methodology. The more complicated a project is, the greater the importance of a recovery methodology.

A number of project recovery methodologies exist. The majority of the project recovery methodologies have a four-step process, namely (1) audit/identification of current status, (2) analysis of the problems (fault finding), (3) negotiate the recommended actions, and (4) implement the recovery plan.

Exhibit 3 depicts the high level project recovery methodology and associated actions:

Exhibit 3: High-level project recovery methodology.

Step 1: Audit the project. The primary aim of this step is to review all the project documentation to determine the current status. All the relevant stakeholders should be interviewed to obtain their understanding in terms of expectations, issues, and risks. The majority of the problems should be identified through the audit process.

Step 2: Analysis of the problems. Analyze every identified problem on the project. Identify the burning platforms. Also ensure that the basics are put in place, such as redefining or confirming the scope of the project. Identify the real schedule and cost drivers. Suspend or eliminate deliverables in the scope that are not immediate requirements for achieving the project objectives and re-schedule it as far in the future as possible. Draw up a new plan aimed specifically at the recovery effort. Be realistic in terms of what is achievable with the current funds and resources.

Step 3: Negotiate the recommended actions with the major principals. The principals' support is critical to implementing the recovery plan. Present the recovery plan to them, substantiate each and every action in the plan, and negotiate where possible. This negotiation will also create new expectations and ownership from the stakeholders and ensure that the new baselines will be the ones that measurement is made against.

Step 4: Implement the recovery plan. Follow a sound project management methodology. Control the project by means of the performance measurement baseline and manage issues actively. Make sure communication channels are open to the stakeholders, keeping them informed is a critical success factor for continued support; otherwise, they might get easily disillusioned. Escalate major issues to ensure that the steering committee also takes ownership in the project. Enforce discipline — this is no time to relax! Celebrate each and every achievement, because this will motivate the team.

Saving the Project Objectives

The project recovery methodology as described above was implemented. The audit revealed some of the obvious problems that exist on a troubled project. The scope was poorly defined and did not include all of the intended deliverables of the project. The poor scope definition resulted in an incomplete schedule and budget. Resources were not leveled or poorly planned. Issue management was not done formally, resulting in a number of the warning signs not recognized. There was no project management methodology defined, thus no real project controls. The project budget was not fully developed, thus the project manager had no control over the project costs. The development of the hectares and planting of the bananas were still the major drivers of the project. This made it easier to recover. On further investigation, it also appeared that the target set for the end of 2009 was to plant 1,000 hectares and not the 750 hectares as was stipulated in the project objectives. Thus recovering the schedule might not be as difficult as thought in the beginning.

The following recommendations were made to the project steering committee:

• Define the complete scope of the project; this will enable better planning and costing of the project.
• Return to the project objective to plant only 750 hectares by the end of 2009 and not the 1,000 hectares. Do not introduce actions now that will accelerate the planting schedule, but might complicate the steady state farming in the future; in other words, stick to the 10 hectares per week per farm. As soon as the planting rate of 10 hectares per week per farm is stabilized, one can always launch one of the other farms earlier and ramp-up the planting rate to 30 hectares per week over three farms. This will meet the schedule requirements.
• Determine which deliverables are critical for providing the fruit and determining which deliverables can be procured later. Thus, place all deliverables that are not directly related to the planting rate subordinate to those that are. One such deliverable was a major IT infrastructure that was not critical, but a major cost driver, and should be suspended or placed on hold.
• Introduce a project management methodology and execute the project according to it.
• Micromanage the planting activities by having a planning meeting the day before, an instruction meeting each morning before work commences, and a control meeting before the planning meeting for the next day. Bring back discipline, which is what project management is all about anyway.

The project steering committee accepted all these recommendations and the implementation of the recovery plan commenced.

The recovery effort, with a lot of effort, started yielding the desired results within two months. The planting occurred at the desired 10 hectares per farm per week and stabilized on 20 hectares planted per week. The third farm was introduced earlier and the rate increased to the desired 30 hectares per week for the three farms. The forecasts indicated that the 750 hectare target would be met before the target date and this without compromising the quality of the fruit. Efforts were also put in place to train the project team members in project management and the project management methodology to ensure that after the consultants depart, the expertise remains. The project was under control and back on track — success!

Failing the Business Objectives

The project was back on schedule and afforded some time to start focusing on other aspects of the project. One of the major deficiencies was still the uncompleted project budget. To revise the budget, the point of departure was to take the business case and work through it to determine whether all the necessary considerations were included or taken into account. It was during this investigation that a number of issues came to light. The expected cost of the project was underestimated significantly. To include the entire infrastructure, an additional US$10 million was still required. One of the investors also did not fully commit and a further shortfall of US$10 million existed on the original requirement. Furthermore, the business case consisted of a number of assumptions that were made and never validated due to unknowns at the time. The biggest concern was re-evaluating the true cost of a carton. It was not US$4.50, but rather US$6.45, which would mean only a profit of US$0.05 per carton! The primary reason was the high cost of fertilizers, which was largely underestimated. Suddenly the business case did not make any sense and the whole justification of the project was now in jeopardy. All the hard work and efforts to recover the project to meet the project objectives were in vain. If you cannot meet the business objectives, you cannot deliver the project successfully, no matter how good you deliver it against the project objectives.

The focus moved from the recovery efforts to the business case. There were only two options: (1) reduce the cost per carton, or (2) increase the selling price to the distributor. Unfortunately, reducing the cost would reduce the quality of the fruit, which would not be acceptable to the buyer; increasing the price would make the distributer's business case invalid. A number of options were evaluated to save money on the project. The project objectives were once again re-evaluated. As soon as the news was communicated to the investors, they started to become very uncomfortable and considered withdrawing further funding. Terminating the project was not even a consideration. The socioeconomic impact of the project made on the local economy was dramatic and it could have led to a major political catastrophe to the region. For the first time, the local community had access to employment, education, and health services, which all contributed to the project.

Negotiations with the international fruit marketers were unsuccessful. They remained adamant that the original contract was still in place and they would continue to enforce it. The associate producer was a captive supplier. There was no doubt the project was a failure. The associate producer started investigating other markets where the bananas could be sold. They even contemplated changing the produce to maize and starting cattle farming.

During this same period, the European Union lifted the high import tariffs on Latin America for bananas. This changed the entire environment and the justification of the Africa Strategy of the distributor. It was jointly decided that selling the fruit at the current price, considering the production costs it would not be viable to sustain a business. After some negotiation, the whole agreement was terminated and the whole Africa Strategy was abandoned. By this time, 621 hectares of the 750 hectares had already been planted and the harvesting of the first fruit was only a couple of weeks away. A different market was identified — the Middle East, where quality was not the primary driver, and without the distributor in the supply chain, the selling price was much higher; however, the market was not as large as Europe, thus the requirement was less. By compromising the quality of the fruit, the production cost is lowered substantially to US$4.90 and the selling price is increased to US$8.20 FOB. Due to the market demand, only 1,200 hectares are necessary; thus, a large portion of the infrastructure is no longer required. The lower quality standards also made it possible to plant more plants per hectare, increasing the yield per hectare. The project dodged a bullet — no thanks to good project management.

But how did this happen? Was the project flawed from the start? Does it usually happen that once the business case is developed and the project objectives identified that the focus changes from business objectives to project objectives?

It is after this experience and reflecting on the outcome of the project, that the real problems on the project surfaced.

It has become apparent from the case study that even though the agreed upon project objectives were recovered, the business objectives were not going to be achieved due to flaws in the business case. The recovery methodology started at the wrong place, it looked at recovering the project objectives and not revisiting the business case first.

Do Not Always Recover the Project — Rethink the Business Case

Project managers are usually measured by the performance of the project against the agreed upon project objectives, usually related to the constraints of time, cost, scope, and quality. It is therefore not often that a project manager would really focus on the benefits of the project as defined in the business case, even though one can argue that the project manager should. The saying of “show me how you will measure me and I will show you how I will act” is a testament to this. If you are not measured against the business objectives, then it is ignored. Usually the project sponsor and/or the project steering committee are the ones that would focus more on the business objectives because their performance is measured against it.

In the case study, the project manager never formed part of the development of the business case and would therefore not likely question the project objectives. Even from experience on other types of projects, once a project goes into execution, the focus is diverted to the implementation of the project and very little attention is given to the business objectives. In the recovery process, this is even more so, so recover the agreed on project objectives, because meeting this will lead to a successful project delivery — a popular, but mostly incorrect belief!

The project sponsor and steering committee are also not necessarily in a position, be it due to a lack of understanding or lack of communication, to fully comprehend the outcomes of the business objectives. They often rely on the project manager to provide them with the information on the outcome of the project, who would then still only focus on the project objectives.

The danger also exists that during the recovery process, the project manager, and project sponsor get fixated on the ruthless pursuance of the actions required for recovery, thereby neglecting the implications to the business case by compromises on the project objectives. Let's just get things back on track.

The business case often has a number of assumptions used for financial modeling and planning, which are never validated. Once the project goes into implementation, the focus is entirely on the execution and no one really revisits these assumptions. Thus, there is no owner to validate or invalidate these assumptions, revise the business case accordingly, and analyze the outcome.

Remedies

How do you remedy this situation? One can most definitely learn from the case study. Here are a number of remedies:

• Ensure that the project manager and/or project sponsor fully understand the business objectives and what the impact might be on decisions made concerning the project objectives. Involve the project manager in the business case; no single person focuses more on a project than the project manager.
• Always consider what the impact might be on the future operations or users when you are recovering the project and the subsequent actions that you take. In the case study, the decision to deviate from the 10 hectares per week per farm and plant bananas wherever there is irrigation might solve the schedule issue, but it will introduce a number of management issues to the steady state user.
• Never start a recovery effort before understanding the reason or benefits required from the execution of the project; you will be able to identify and question issues related to the business case. This will ensure that any decisions made on the recovery effort are made in context and with the implications and outcomes in mind.
• Project managers should always take ownership of the assumptions made during the study phases/business case development; chances are good that no one else will. A dedicated effort should be embarked upon to validate/invalidate the assumptions as soon as possible. Best practices from systems engineering can be implemented, traceability.
• The business objectives must always out rank the project objectives on a project. This must be a ground rule on the project whenever any decisions are made.
• Most recovery methodologies require focus on the basic elements of a project due to the burning platforms. Be aware that by only focusing on the burning platforms you might neglect other not so obvious elements that might lead to unknown consequences. Plan to address all issues once you have control over the project.
• The environment changes continuously; schedule environmental scanning sessions frequently to validate that the business case is still completely relevant.
• What quite often happens with external recovery efforts is that the project is recovered and the recovery team moves on. Where skills are lacking, provide training and also leave the project with enough momentum to ensure sustainability.
• When decisions are made on the project objectives, revisit the various options that were considered during the initial business case. These might be options related to the market, logistics, commodities, and so forth. The example from the business case is reflective of this. The intention was to ensure a sustainable revenue stream from the production of fruit; the fact that the market and distributer have changed, the scope and timelines changed, did not matter — the benefit was still obtained and, in fact, increased.

Conclusion

When you are asked to recover a troubled project, make sure that you approach the project correctly. Do not start off by neglecting what the true goal of the project was. Make sure that the business case is sound, and only then pursue the project objectives and recover the project. Take ownership of the business and project objectives; even though you might only be a part-time designated project recovery manager, chances are that no one else would. Remember: Don't always recover the project — sometimes you need to rethink the business case.