Project Management Institute

Nuclear plant delays challenge project management

Arthur D. Little, Inc.

The growing demands for electric power have turned attention to nuclear energy. At the present time, 55 nuclear plants are under construction. Over a hundred more are on order, and new announcements are made frequently. Despite a number of environmental and safety problems which need to be overcome by the electrical power industry, nuclear plant construction will require increasing management talents over the next decade. It will also require solutions to some of the greatest challenges faced by project management.

A nuclear plant represents an investment which can be as high as half a billion dollars. Depending on the availability of replacement power, the cost of a month of slippage in completion of the plant may run over six million dollars. For this reason, one would expect nuclear construction to provide excellent examples of on-schedule project management. Actually, the opposite is true. A recent study by the Atomic Energy Commission shows that the average slippage for 51 plants which the agency had been monitoring had been 26.9 months from the base target date. What this means is that the completion date of a nuclear power plant had slipped on the average one month every two and one-half months. In dollar terms, this average slippage could mean an additional cost of over 160 million dollars.

In view of these costs, it is not surprising t hat schedule delays combined with the rising cost of construction have resulted in large overruns for the nuclear projects. While the cost increase may not significantly affect the utility rate structure over the life of the plant, its short-term effects can be drastic by causing cash shortages, and delaying other important projects planned by the utility companies. Furthermore, the consumer organizations as well as regulatory agencies have become increasingly concerned with the cost effectiveness of utility operations. Having observed large cost overruns on utility projects, the Michigan Public Service Commission recently announced its intention to monitor construction planning and implementation of regulated utilities. Other states are also showing an interest in this area.

The reasons for the schedule delays and overruns are hardly a matter of general agreement. The Atomic Energy Commission has found that contributing factors include shortages of certain labor skills, work stoppages, major equipment delivery problems, and regulatory requirements. Others blame environmentalists, changes in government regulations, and inefficient construction management. Some people have assumed that since nuclear construction projects are on a cost plus basis and the financial risks are carried by the electrical utility, the designer/constructor has little incentive to keep tight control over costs and schedules.

Most of the utilities depend on experienced designer/constructor firms to build the plants. Unfortunately, many of these organizations have such a heavy workload that they have had to dilute their capabilities to cover a large number of projects. The utilities’ experience to monitor and manage such large and complex projects is even slimmer. Although the utilities on the average employ five times as many people to monitor the nuclear contractor’ activities as they do on fossil plants, some observers feel that most utilities do not adequately understand the status of their nuclear construction projects.

Under these circumstances, the project management initiative is left to the designer/constructor firms. The amount of project control exercised by these firms varies. Bechtel, for example, which has built the most plants, puts great emphasis on its project management capabilities. Nevertheless, Bechtel plants have their share of significant schedule problems. A review of the frequency with which the names of the six most active designer/constructor firms show up in relation to schedule slippages reported by the Atomic Energy Commission (Figure 1) shows very little consistency in the schedule control achieved on projects managed by these firms.

Schedule Slippages by the six most active designer/constructor firms

Figure 1. Schedule Slippages by the six most active designer/constructor firms

Despite the extensive project management systems used by many designer/constructor firms, some utilities feel that they are not getting the information which they need to realistically evaluate project status. Some observers have gone so far as to suggest that the designer/constructor firms really do not want the utilities to know the exact status of the project because this permits them to shift scarce resources between projects. Attitudes such as these do not lead to the good working relationships which are necessary to successfully attack the schedule maintenance problem.

Obviously, the construction of nuclear plants represents a unique and difficult project management problem to which there is no simple answer. What is more, given the current inflation and equipment shortages, it appears that the situation may get worse before it can get better. Recognizing the facts of life, what can the utilities do by way of project management to achieve better schedule and cost performance?

One way which is being followed by some is to acquire their own project management system packages in the hope that this will enable them to get a better feel for the pulse of the project. Unfortunately, most of these packages have been designed by computer programmers without an understanding of the management problems in nuclear construction. Utility personnel who do not have hands-on project management experience cannot make effective use of such packages. For one thing, they may not make allowance for schedule interactions involving the organization, the individuals and the public, thus presenting problems which are not readily handled by the average engineering executive.

Another way to attempt to deal with the schedule problem is to concentrate on external constraints. In this process, project management may be neglected because serious external constraints can have a greater impact on the schedule than anything that management can do internally. While it is true that there will often be externally caused delays, this is no reason to relax controls over the entire project. In one case, in fact, such advanced tools as decision networking have been combined with critical path planning to evaluate the potential effects of delays and to resume progress in the most effective manner once the external constraints are eliminated.

Other possibilities for improving cost and schedule progress include closer control over changes, and better understanding of the design, procurement and construction alternatives. A better visibility over the status of the project, both in terms of schedule and cost, can strengthen the position of the utility in the face of potential criticism or controls which may be imposed by regulatory agencies. A more active and in-depth interest in the planning and control activities of the designer/constructor may lead to more effective working relationships and improved performance of the project. The ability to react quickly to uncontrollable outside constraints can reduce schedule slippages and cost.

Recognizing these possibilities the question still remains — Where does a utility start and what are the prerequisites for meeting this project management challenge? It seems that three points have to be considered:

(1) The utility must recognize that improvement in schedule and cost conditions is possible and necessary. In some cases, this will mean that it will have to overcome the natural tendency to keep things as they are and not to rock the boat. It will be worthwhile to expect that it will be more difficult to justify increasing costs in the future than it has been in the past. When the demands for such justification come, the utility management systems must be ready to respond to them quickly and effectively.

(2) The utilities should involve the designer/constructors as partners and not as adversaries in this process. However, to accomplish this, the utilities must start from a position of strength and they need to be informed in more detail about the status of cost and schedule progress on their projects than they have been before. Such involvement must begin in the design phase because it is largely in the design where much of the cost has been already determined.

(3) The information system for top management of the utility must be tailored to provide clear and informative project management information. Summary level work packages may need to be established to reflect cost and schedule relationships. New reporting formats may need to be designed to extrapolate current status into projected trends. Top-level critical item reporting may need to be initiated for each work package in terms which permit ready communication between utility management and the designer/constructor management.

Although the problems of controlling nuclear plant construction are large, considerable improvements in project management are still possible. Because of the various external and market factors affecting the construction process, one would not expect that even the most sophisticated techniques would result in drastic improvements in plant completions. However, because of the large costs involved, even a modest improvement will be greater than the total cost of many projects in other industries.

June 17-19, 1974 Problem Solving Techniques to Improve Project Management (Product Programs)
   
June 20-21, 1974 Project Cost Analysis
August 5-9, 1974 Industrial Engineering and Management Techniques to Improve Productivityin Plant Operations
   
September 9-11, 1974 & March 3-5, 1975 Problem Solving Techniques to Improve Project Management (Facility Programs)
   
March 6-7, 1975 Planning for Occupancy
   

For more information write:

University of Wisconsin-Extension

432 North Lake Street

Madison, Wisconsin 53706

or call 608/262-2061 (Dept. of Engineering).

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.

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