Lessons learned from risk situations in projects
Over 300 risk situations in industrial projects in Brazil, mainly in the mining sector, were registered along 15 years in different project phases and management processes (engineering, procurement and construction). They were synthesized in 32 typical RSP and submitted to the assessment of 40 other Project Managers(PM) in Brazil whom were requested to assess the frequency and impact (low, medium or high) that these events may impose to projects cost, schedule and quality should they occur. Examples of procedures proposed to avoid their occurrence were based on the study of the PROJECT MANAGEMENT BODY OF KNOWLEDGE – PMBOK®, on other specialized literature and the lessons learned based on the analysis of the risk situations.
Along 15 years I have developed the habit of recording situations, mainly the failures I saw in projects I was either working on or failures that I listened from colleagues about other projects they were engaged in or which they were responsible for. With these notes I have built a data base that I frequently visit, either to add new facts, or to recall those problem-situations and try not to repeat them. Often I presented it to other colleagues to stimulate them to do the same. The structure is simple: a single key word, a small notice about what happened or was observed, year, place, and the area or knowledge field (civil, mechanical, electrical, automation engineering, management, etc) to which that situation refers to according to my perception. Initially I gathered essentially technical issues, later I started to include situations in procurement and other Project Management areas including occupational safety. By 1996, after becoming a member of PMI and receiving its journals and the PMBOK I understood that what I was doing had a technical name: Historical Records and Lessons Learned. “Lessons learned should be documented so that future project managers can learn from past mistakes” (Kerzner, 2003, p.688). I have decided then to take more serious that practice and methodically analyze those situations by checking their occurrence, frequency and impact with other PMs in Brazil and to share that experience with others. Finally, based my own experience better structured by the study of specialized literature including the PMBOK to suggest procedures to mitigate the potential risks of most of those situations I've observed and recorded.
The purpose of this paper is to use these examples of practice of recording historical RSP: a) to emphasize the importance to debate these and other historical records of RSPs, according to the nature and complexity of a project, in the project initiation, planning and during team formation and training, and to formulate ways to mitigate them based on the study of applicable Project Management Knowledge Areas and on team members experience; b) to stimulate individuals (Versuh, 2000, p.117) and organizations to record historical data of mistakes, errors and also of success factors occurred in their projects; c) to emphasize that, during progress status presentations, documentation of and the debate about lessons learned should be dealt as a relevant issue and kept for future consultation. The model below (Exhibit 1) synthesizes the route followed to conduct this work.
In the 80's I have read in a Brazilian Magazine named “Engenheiro Moderno” an article by Cyro E. do Valle, eng., entitled “Check List de Mil Items Para Construir Uma Indústria” (1973), in which the author listed hundreds of technical, functional, environmental and safety issues that should be checked to assess, design and implement an industry in Brazil. I concluded, at that time, that missing some of those key items could be a risk to an industrial project. That check-list by Mr. do Vale helped many engineers in the Brazilian industry not to fall into mistakes as they covered in detail important aspects. During the study to structure my historical notes, I have made contact with the work and list of Project Risk Situations in Wideman (1992) and with that of Prichard (1997). This last one directed to the software industry. I'm still looking for similar organized historical notes of RSP in other Brazilian industries, as mining, steel etc. Interesting researches of RSPs, most of them in the software industry are being done in the post graduation courses. Therefore, my work can bring new stimuli to this research in the basic branches of industry on which Brazil and other Latin American countries are still strongly dependent.
From the pedagogical point of view I felt great support in a simple phrase I have read recently in Senge (1990, p.154): “A mistake is an event, the benefit of which has not been turned to your advantage ” and in a methodological statement read in 1979 in the work of an Argentinean writer and thinker G. Pecotche (1978, p.27) who says “Hay que experimentar lo que se estudia y estudiar lo que se experimenta”.
Exhibit 1 – Assessment Model
Among 368 notes (as of April 2003) on risk situations, problems and failures observed or experienced in industrial projects, I have selected those I considered most frequent and meaningful, internal to the project, i.e., which depend on the attitude, knowledge and experience of the PM to cope directly with them, and synthesized them in 32 nominated Risk Situations in Projects (RSP). I have to say that this selection have been also influenced by the difficulties I had undergone in a recent project implementation case. The list was random, without any ordered structure. How representative are they for other PMs in Brazil? I have asked to myself. To help me to answer this question I submitted the selected RSP to other 40 project coordinators, managers and project directors to indicate as to their perception the frequency and impact, low, medium or high that those RSP could represent to a project if they would occur. The public was formed by 40 persons of the PMt community in the States of Rio de Janeiro and Minas Gerais, with average experience of 20 years, ranking from 10 to 30 years, and who have dealt with projects so big as the Itaipu Dam, and so challenging as the installation of world class mining plants in the Amazon region. To collect the answer I have used a survey software, rent in the web.
The following question has been presented to them :
1-Based on your experience, classify as low, medium or high the frequency and the impact that the situations below may represent in risk for the schedule, cost or for the quality of a project.
From the 40 PMs consulted, 32, or 80%, answered the question. To rank the frequency in which a RSP may occur weights of 10% for low, 30% for medium and 50% for high frequency were adopted. These weights were nominated Frequency Index(FI). The percentage of respondents who perceived a RSP as of low, medium or of high frequency was named Frequency Perception(FP). The Rated Frequency (RFr) was the result of ∑(FI*FP). Exhibit 1 is a list of the ten most frequent RSP ranked as to descendent RFr.
Similarly weights of 1% of the project budget for RSP of low impact, 5% for medium and 9% for high impact were adopted. These weights were nominated Impact Index(II). The percentage of respondents who perceived a RSP as of low, medium or of high impact was named Impact Perception(IP). The Rated Impact (RIm) was the result of ∑ (II*IP). Exhibit 2 is a list of the ten most impacting RSP ranked as to descendent RIm.
Exhibit 1- Frequency Index, Perception and Rated
Note: L=Low, M=Medium, H=High
Exhibit 2- Impact Index, Perception and Rated
Exhibit 3 below is the rank of RSPs as to the Risk Exposure Index (REI), defined as RFr*RIm, including my perception on i) In which Project Knowledge Area are the selected Risk Situations(RS) most frequent, and ii) In which Project Life Cycle are the selected RS most common.
Exhibit 3- Rated Frequency and Impact, Risk Exposure Index, Knowledge Area and Life Cycle
Note: RFr= Rated Frequency; RIm=Rated Impact; REI= Risk Exposure Index; KA=Knowledge Area; LC= Life Cycle; IN=Initiation; PL=Planning; EX=Execution; CT=Control; CS=Closure; I=Integration; S=Scope; T=Time; C=Cost; Q=Quality; H=Human Resources; CM=Communication; R=Risk; P=Procurement
Risk Situations and Responses – Two Examples of Lessons Learned
After ranking and identifying to which core process groups each RSP belongs to and studying how the situation occurred in my experience, procedures to mitigate them are suggested. In the team formation phase the discussion of these RSP and the response to them would be a teamwork. As example are RSP 9 and 12.
- Inadequate planning for receiving, storing, tracking and control of materials for the erection services.
I have observed and registered many flaws in the management of materials and equipment parts which resulted in delays and additional costs for projects.
Failure in the integration of the drawing coding system with the codification of materials list, from which purchase orders, orders for inspection, orders for transportation, control of reception on site, invoice, and timely tracking for the erection, are typical as proved in this survey.
Problems generated as construction delays but material and equipments are delivered on time: the site may be filled up with material and equipment parts to be stored in precarious conditions if these events are not adequately dealt with. These flaws and consequent costs I've observed not only during the seventies in the construction of steel plants but also in the late nineties in the car industry with well-advanced information technology tools at hand. For projects in remote areas with difficult problems of logistics, this becomes even more critical.
The processes and responsibilities: Who specifies, approves the specifications, purchases, inspects, controls manufacturing, approves modifications, assure quality requirements, accept the deliverable, defines transport, deals with the insurance company in case of problems, receives the parts on site, stores and timely delivers it when requested by the erector. All this is part of a chain that must be well managed in industrial projects otherwise delays and costs will be inevitable, due to lots of crews and equipments waste of time.
1) Identify in the WBS which are the deliverables related to the management of materials, equipments and miscellaneous;
2) Identify all processes and steps beginning from specification of each important part or equipment, going through logistics, delivery control, storing and till its application in the erection. Assign responsibilities to monitor each step;
3) Communicate these responsibilities to the Project and Functional Team directly involved in the project;
4) Establish performance indicators: time required to find any material or part of structure to be erected;
5) Match the delivered time of parts, materials and equipment to the construction schedule to avoid the anticipated deliver of items which would lay on inadequate storage area.
• Assumptions for important aspects of the Project not sufficiently discussed with stakeholders or not well registered
Projects are based upon hard data but also on assumptions (CLELAND, D & IRELAND, L, 2002, p.195) as market evolution, inflation rate, etc, which are out of the Project Manager control, but which must be documented in the Project Plan. There may be, however, other assumptions that are proposed by one person or by a team, without involving other stakeholders as the functional manager, a community official, a stockholder, or an equipment or system operator. This can be the beginning of a technical problem or of a problem of communication, at least. These stakeholders may later claim that such and such issue related of the Company policy, the community interest, or of the operational or maintenance targets, including safety requirements have not been taken into consideration. Therefore, the project can not be accepted, or is accepted with restrictions.
Another common failure is not to register the assumptions and basic criteria in a structured way and not to communicate them through the formal reporting ways and periodically revisit them or revise them as necessary.
In mining in which chemical and physical quality of ore may vary in time, assumptions based on past data are not necessarily valid in the future projects. On the other hand, surveys of the ore body done to assess the future characteristics of the ore are subject to statistical errors which may affect the future mining plan and the operation of the treatment plant. I have experienced the situation in which the ore chosen as typical to design an ore treatment plant was of type x and three years later the typical ore was completely different, as another team would take charge of the plant. That difference in ore characterization caused various problems and several changes had to be implemented in the plant during its start-up. The documentation of the assumptions consensually adopted based on at the beginning of the project, rid me off enormous quarrel.
1) During Project Plan Development, make sure that all stakeholders are well informed about the project assumptions which may affect them;
2) In Projects involving impacts in communities, time assumptions to public discussions and negotiations with Environmental and community officials may turn into a risk;
3) In formal project presentations to stakeholders, remember to emphasize which were the basic project assumption, their changes and why's.
The analysis of the REI shows that risk situations in the Initiation and in the Planning processes are the ones which can turn into major harms to a project, what is a well-known fact, unfortunately not always taken seriously. The fact that the situation of inadequate planning for receiving, storing, tracking and controlling of materials for erection services is one of the most risky in my survey is probably because most of the respondents have come from site management. These persons suffered the costs of idle resources as a simple piece was not timely delivered or found to build or erect something in remote areas in Brazil or anyplace where this process was not well structured. The various assumptions, for example, if not exhaustively discussed with the stakeholders, at the beginning, and not duly agreed and recorded, can bring delays, cost problems, changes of project directives and failures. Also the insufficient information and documentation for acquisitions denotes lack of a clear coordination of activities.
The RSP number 32, about how risky divergent concepts on project management practices among team members and key stakeholders can be to a project, contrarily to what I have imagined, was not seen as so dangerous to a project for most of the respondents. I still think this is an important issue to be specifically researched. Based on the statement of Verma (1995, p.10) that says, “ In most cases, project management problems are of behavioral nature. Therefore the project manager must understand the dynamics of human behavior and how it influences relationships, perceptions and productivity” and on that of Conner (1992, p.190) which states: “Team work, requires shared insights and ideas, open discussion, and respect for the values and input of others”, I intend to go further into these particular aspects in future researches in the Brazilian PMt community.
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Conner, Daryl R.(1992). Managing at the speed of change. Villard. New York.
Kerzner, Harold.(2003). Project Management: a systems approach to planning, scheduling and controlling.(8th.ed). John Wiley & Sons, Inc. New Jersey.
Pecotche, C.B. González.(1978). Curso de Iniciacion Logosófica(2th.ed). Editora Logosófica. São Paulo. (Original published 1963).
Pritchard, Carl L.(1997). Risk Management, Concepts and Guidance. ESI international. Arlington, Virginia.
Project Management Institute. PMBOK Guide. 2000 Edition.
Senge, Peter M. (1990). The Fifth Discipline. Currency Doubleday. New York.
Verma, Vijay K.(1995). Human Resource Skills For The Project Manager. Project Management Institute.
Verzuh, Eric.(2000). MBA Compacto: Gestão de Projetos. (André L. Cardoso, Trans.). Ed. Campus. Rio de Janeiro. (Original published 1999)
Wideman, Max R. (1992). Project & Program, Risk Management, A Guide to Managing Project Risks & Opportunities. Project Management Institute.
© 2004, Roberto Antônio Alves, Email:[email protected]
Originally published as part of 2004 PMI Global Congress Proceedings – Buenos Aires, Argentina