Project Management Institute

Capital gains

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GAINS

BY SARAH FISTER GALE || ILLUSTRATION BY KEITH NEGLEY

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“We are constantly fighting for a shrinking pool of resources, and the only way to get our projects prioritized is by demonstrating that we will have the greatest impact on the bottom line.”

—Dan Tuten, PMP, Centers for Disease Control and Prevention, Atlanta, Georgia, USA
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After decades of publicly funded projects running over budget without delivering substantial value, government agencies are acting to turn project failures into project successes.

The list of offenses spans the globe: An AUS$5 billion rail project in Australia has continually sputtered through lulls in funding. The United Kingdom's first commercial-scale carbon capture and storage project was canceled after the government spent £64 million. And Russia's space program has seen a string of costly setbacks, from rocket failure to an unsuccessful Mars probe effort.

“Major projects can become major embarrassments to the government if they go wrong,” says Bill Limond, who served as interim CIO for the City of London, England until May. To save face, improve outcomes and stake a claim to a piece of the ever-shrinking funding pie, agencies are making a conscious effort to mature their project management practices by drawing on strategies that have long been part of the private sector.

A February 2012 survey by Government Technology and Innotas found that 54 percent of U.S. IT policy-and decision-makers polled said their agency or department has a project management office (PMO); 40 percent have had a PMO for more than a year. In addition, 57 percent have a project portfolio management tool in place, up from 34 percent in 2009. And last June, the U.S. government instituted a formal career path for high-level IT program managers aimed at raising maturity across the board.

In the United Kingdom, the national government partnered with Oxford University's Saïd Business School to create a project management academy to reduce budget and schedule overruns across its project portfolio.

“The corporate world has more time-sensitive drivers of project success or failure than the government,” says Dan Tuten, PMP, IT project manager at the Centers for Disease Control and Prevention (CDC) in Atlanta, Georgia, USA. “If you aren't efficient with project investments in the private sector, you'll quickly be out of business.”

Though government agencies don't go out of business, per se, for being inefficient, they are under increasing pressure to cut waste and deliver more with less. The U.S. government, for example, is estimated to spend US$6.3 trillion this year—only nominally more than it did last year, reflecting a slowing rise in spending—and many federal agencies are scrambling to eke out even a small chunk for their projects.

“We are constantly fighting for a shrinking pool of resources, and the only way to get our projects prioritized is by demonstrating that we will have the greatest impact on the bottom line,” says Mr. Tuten, whose organization is part of the U.S. Department of Health and Human Services (HHS). In most government agencies, he says, the “bottom line” refers to services provided to the public, rather than dividends to stockholders. “By using structured project management practices, we can do a better job with taxpayer dollars and drive a better return on our investment.”

UNFAMILIAR TERRAIN

Mr. Tuten admits that improving project management practices in his department has been a long process—particularly when it comes to IT initiatives. “The government has been slow to do all that well with scope, schedule and budget in this area,” he says.

With that in mind, HHS implemented an enterprise performance life cycle (EPLC) framework, a formal project management structure that provides a framework for the agency's IT governance process. The EPLC also outlines interdependencies between the department's project management, investment management and capital planning components.

“The goal of the EPLC is to ensure that a project is constantly meeting its goals across its lifecycle,” Mr. Tuten says.

The CDC is bringing in private-sector experts to teach courses on techniques such as work breakdown structures and earned value management. It also added a governance process to identify troubled projects earlier through frequent phase gate reviews and better progress reporting.

“The biggest improvement we've seen is around transparency,” he says. “In the past, a project could go 100 percent over budget, and no one noticed. Now when there's budget creep of more than 10 percent, EPLC helps to identify it and bring the project back into compliance.”

Knowing scope creep is no longer tolerated has had a ripple effect, he says. Project leaders do a better job scoping projects, and no one low-balls estimates just to get approval, because they know they can't add to the budget later.

SUPPORT FROM THE TOP

With government comes bureaucracy, meaning support from each step of the hierarchy is necessary for these new project procedures to take hold. “Unless you have senior sponsorship from the very top ready to invest in this, it won't go anywhere,” Mr. Tuten says.

High-level gateway reviews have been the mainstay of the U.K. government's efforts to transform its project management practice, says Mr. Limond. Faced with increased scrutiny of spending decisions, coupled with added pressure to deliver more results with fewer resources, U.K. government teams are adopting increasingly sophisticated project management practices from the private and not-for-profit worlds.

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Agile and the Government

Government agencies around the world are exploring the viability of agile methodologies to improve efficiencies and reduce waste on IT projects. Adopting strategies such as iterative design, feedback loops and short sprints with fast deliverables helps government agencies increase the return on IT dollars, says Chris Bostian, PMP, project manager in the federal consulting practice at software consulting firm CSC, Marlton, New Jersey, USA.

“Agile project teams flesh out risks and deal with change on the fly,” he says. “That's a great model for government projects.”

By creating functioning iterations in short timeframes, teams reduce the impact of common government project pitfalls, including funding inconsistencies, risk identification and stakeholder involvement throughout the project lifecycle.

Doing so requires extra effort to get buy-in from everyone involved. “Stakeholder feedback is the key to agile, and it takes more effort and collaboration than some are used to,” says Christopher McDyer, PMP, project manager at CSC.

To ease the transition, CSC has found success using an agile hybrid project management model with the U.S. Department of Defense (DoD). The model uses many of the most valuable features of agile, including rapid prototyping and iterative feedback loops, but structures them within a foundation of more traditional project methods around defining scope, schedule and budget.

“We have found that agile is best implemented when there is a framework of core program management principles that are adhered to as well,” says Mr. McDyer.

The process started a few years ago, when the CSC team laid out an agile iterative method that included 10- to 14-day sprints followed by stakeholder feedback meetings. “Soon [the DoD] got used to the higher level of collaboration and the efficient feedback loop that resulted. This also led to a more efficient integrated change control process,” he says.

Early success has helped foster a relationship between the two groups and laid the groundwork for adaptations of agile for future DoD projects.

The project management academy is just part of the government's broader commitment to improve the outcomes of major project investments.

Mr. Limond, for example, is a mission-critical, high-risk gateway review team leader. Review teams are comprised of highly experienced, pre-qualified, senior-level people. The team evaluates all major projects during planning, and again at five key milestones, to ensure they stay on track. These major projects include any capital investment project that carries high risk, high exposure or high cost. The current portfolio features more than 100 projects worth a total of £440 billion, including the 2012 London Olympics, the High Speed 2 rail link from London to Birmingham and the successor to the Trident Nuclear Submarine program.

The review team meets with project managers, program managers and key stakeholders at each phase, beginning with the strategic planning phase. They examine several aspects of the project's health, including:

▪ Whether it has the resources, expertise and clearly defined scope to succeed

▪ Whether it has run into any roadblocks

▪ If it should be allowed to continue as-is or needs adjustment

The review team then writes a detailed report on the status of the project, including a red/amber/green status designation. Sometimes the problems discovered are well beyond the control of project managers, Mr. Limond says.

“It's all about risk management: Define requirements and try to minimize negative funding impacts to the project.”

—Paul Bosco, PMP, U.S. Department of Energy, Washington, D.C., USA
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“These gateway reviews are taken very seriously,” he notes. “And because the review team is made up of seniorlevel people, these projects get the attention they deserve.”

For example, he recently reviewed the strategic plan for an IT project to build an index of every child in England. In the first phase gate review process, the review team recognized that if the project lost funding at any point in its lifecycle, the whole thing would fall apart. “That was a major risk,” he says.

Normally such a project might receive funding in stages, but the review team determined it was too high-profile to risk potential budget cuts. So Mr. Limond acted as its champion and helped push through full funding from the outset as a condition of it proceeding.

A FINANCIAL ROLLER COASTER

Funding challenges, along with requirements definition, are almost always the biggest obstacles to successfully delivering government projects, says Paul Bosco, PMP, director of engineering and construction management for the U.S. Department of Energy (DoE) in Washington, D.C., USA.

This uncertainty not only raises risks that projects will be delayed, it forces project teams to mobilize and demobilize contractors based on near-term fund availability. That adds cost and time delays, and requires them to plan in short-term segments.

To minimize these risks, Mr. Bosco's teams rely on a host of project and portfolio management techniques common in the private sector. First, if a project is under US$50 million, his team fights to secure full funding for the entire investment up front. “That eliminates funding risks, and avoids the disconnect between budget needs and how funds get distributed.”

For larger projects, the team must rely on multi-year funding processes—and all the uncertainties that brings. To minimize the chance a project will get shut down or delayed because of lack of funding, his team frontloads the budget as much as possible so there are reserves in place to deal with near-term shortfalls.

“It's a question of efficiencies. These smaller groups can make better use of resources with less bureaucracy. It's the best way to get things done.”

—Darko Lugonja, Ministry of Agriculture, Zagreb, Croatia

Darko Lugonja, Ministry of Agriculture, Zagreb, Croatia

Darko Lugonja, Ministry of Agriculture, Zagreb, Croatia

PHOTO BY PETAR JURICA

“It's all about risk management: Define requirements and try to minimize negative funding impacts to the project,” he says. “If I have good cash flow up front, I can use those reserves to get through budget turbulence and keep the project moving.”

Last year, for example, the DoE leadership team considered two US$6 billion nuclear construction projects, scheduled to start simultaneously. Both were high-profile projects that, if done at the same time, would take more than 10 years to fully fund. Instead, many project management professionals within the department suggested doing the projects sequentially.

“Instead of giving each project US$500 million a year, for example, you could reduce risk by funding one at a time and getting the funding done in half the time,” he says. The construction team would have to handle fewer budget fluctuations, and the accelerated delivery would streamline costs, reduce risks and make better use of resources.

“We call it ‘funding turbulence,'” Mr. Bosco says. “When you have a project that takes five to 10 years, it may be subject to budget cuts, leadership changes, new regulations. That can all significantly impact cost and schedule.”

An independent review process led by someone with considerable authority also is advisable, Mr. Bosco says. “The project managers may know when a project is having challenges, but they generally are reticent to turn to outside help, and may need an independent party to bring those concerns to decision-makers.”

EMERGING MARKETS GET ON BOARD

Not all governments have been as proactive at seeking out project solutions, but as interconnectivity increases, particularly between developed and emerging markets, there's potential for a significant trickle-down effect.

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Bipartisan Project Management

In a rare moment of solidarity, two U.S. legislators from opposing parties joined forces with a common goal: to improve how the federal government manages its projects.

Congressmen Todd Young, a Republican, and Jim Matheson, a Democrat, launched the bipartisan Government Efficiency Caucus in April to consider best practices in program management being used by the private sector that can be adopted in the public sector.

PMI serves as a resource for the caucus, providing research and data that supports the objective to improve government operations and save money.

The first goal of the caucus is to bring together members of Congress with private-sector experts to discuss the role of effective program and project management in improving government operations and saving money.

“The efficiency movement has momentum on both sides of the aisle, but more needs to be done,” said Mr. Young and Mr. Matheson in a joint statement. “An efficient public sector utilizing best practices from the private sector will produce savings and improve delivery of services to the taxpayers, helping us move toward paying down our nation's debt.”

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For information on public sector project management best practices, visit the PMI Government Community of Practice.

The Balkan nation of Croatia, for one, is adopting private-sector project management strategies as it prepares to join the European Union (EU) in 2013.

“We are adopting project management techniques used by the EU, but we still need training,” says Darko Lugonja, head of section for work improvement and international cooperation, and senior expert for organizational improvement in the Ministry of Agriculture in Zagreb, Croatia. Currently, building inspectors oversee implementation of EU standards, and programs are offered to government employees on how to follow EU project management best practices.

The training infuses project management ideals into agencies overseeing projects across the country. Last year, Mr. Lugonja spent six months running a common-market organization standards compliance project to bring Croatia in line with EU standards for growing fresh fruit and vegetables. Following the strict project management guidelines defined by the EU, his team wrote a project plan that included a well-defined scope, key delivery dates and milestones, and consequences if the project failed to deliver. “It was a six-month project, so we had one month of leeway. If we didn't deliver by that point, we would be required to refund the budget,” he says. “Luckily, that didn't happen.”

To further improve project delivery, the Croatian government has moved responsibility for project management out of ministry headquarters and into the hands of specialized agencies, which have greater agility and flexibility to respond to project needs. Each agency represents a specific government concern, such as tourism, education and agriculture payments, investments and competitiveness.

“It's a question of efficiencies,” Mr. Lugonja says. “These smaller groups can make better use of resources with less bureaucracy. It's the best way to get things done.”

As those lessons continue to filter into the public sector, the headline-grabbing project failures that are the bane of governments everywhere may become a thing of the past.

SPECIAL REPORT: GOVERNMENT PM [CASE STUDY] img

The Funding Game

NSLS-II construction site in Upton, New York, USA

NSLS-II construction site in Upton, New York, USA

The US$900 million megaproject to build the state-of-the-art National Synchrotron Light Source II (NSLS II) could have been yet another high-profile, questionable government investment. Instead, it's a shining example of how portfolio management can help governments balance risk and opportunity.

Like a private-sector company, a government agency shouldn't have too many high-risk large projects going at once, says Paul Bosco, PMP, the U.S. Department of Energy (DoE), Washington, D.C., USA. As head of the agency's PMO, he helps the department's leadership team identify potential risks that could impact the viability of the entire capital projects portfolio. The goal is to support the right selection of projects.

In the government sphere, risk is tightly tied to funding, which can fluctuate wildly from year to year. When opportunities arise to access additional funds, he endorses grabbing them, and he urges team leaders to focus on how they can deliver a few key projects.

He points to the DoE's NSLS-II, a state-of-the-art, medium-energy electron storage ring designed to produce X-rays more than 10,000 times brighter than the current source. Located at Brookhaven National Laboratory in Upton, New York, USA, the facility will analyze new materials that are expected to transform the nation's energy usage.

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“ON CONSTRUCTION PROJECTS, WHETHER YOU ARE A PRIVATE COMPANY OR A GOVERNMENT AGENCY, OFTEN TIME EQUALS RISK.”

—Paul Bosco, PMP, U.S. Department of Energy, Washington, D.C., USA

The DoE approved building the facility at Brookhaven in 2007, and construction of the ring building began in March 2009. Had the project plan been carried out according to the original schedule, the facility would begin operation in 2015.

When President Barack Obama signed the American Recovery and Reinvestment Act of 2009 that provided a jolt of stimulus money, however, the NSLS-II team jumped at the opportunity and received US$150 million.

“The Office of Science could have used that money for another project or spread it over several projects,” Mr. Bosco says. Instead, the team focused the funds on NSLS-II, dramatically reducing the project's funding risk and increasing its odds of success.

“On construction projects, whether you are a private company or a government agency, often time equals risk,” says Mr. Bosco. “If you can secure additional resources, you can accelerate project progress where it makes sense, reduce its time aperture and minimize commodity risks related to price fluctuations.”

By recognizing the opportunities related to funding risks, the NSLS-II team accelerated construction of the ring structure along with adjoining office buildings and lab space, and put the project on track to be completed earlier than scheduled.

“Projects don't always go this well, but in this case, the project management team used innovative thinking to make a good decision,” he says. “They took advantage of the Recovery Act, and the project is a success because of that and good project management.” PM

This material has been reproduced with the permission of the copyright owner. Unauthorized reproduction of this material is strictly prohibited. For permission to reproduce this material, please contact PMI.

PM NETWORK AUGUST 2012 WWW.PMI.ORG
AUGUST 2012 PM NETWORK

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