2014 PMO OF THE YEAR FINALIST
To rebuild a community’s infrastructure—and bolster its bottom line—utility company DTE Energy relies on its project management office.
BY TEGAN JONES ▪ PORTRAITS BY MARVIN SHAOUNI
From left, Steven Kurmas, president and COO, Ron May, PMP, executive vice president, major enterprise projects, and Victor Allen, PMP, director of the project management office, major enterprise projects
The once-legendary car capital of the world, the city of Detroit, Michigan, USA has endured decades of economic struggles and, along with it, a dwindling population. In its heyday, Detroit boasted 1.8 million people, but that number has dropped to roughly 700,000. Without enough taxpayers to support municipal services, the city was forced to file for bankruptcy in July 2013.
Local power company DTE Energy, one of the largest energy organizations in the United States, had to find a way to upgrade Detroit’s aging electrical infrastructure and improve service in long-neglected areas. But it had to do that while protecting its bottom line—and without raising rates for its statewide customer base.
“Many of our customers are economically challenged. So we’re very focused on how we spend money, because ultimately it increases rates.”
“Many of our customers are economically challenged,” says Steven Kurmas, president and COO. “So we’re very focused on how we spend money, because ultimately it increases rates.”
To ensure it’s making the most prudent project investments in Detroit and the areas beyond, DTE opened a project management office (PMO) in 2006.
“If you don’t have a PMO, you’re building everything on the skill of each person, and consistency from one project to the next is divergent,” says Ron May, PMP, executive vice president, major enterprise projects. “At the end of the day, you simply don’t know if you’re going to get the results.”
While Detroit may have gotten the high-profile press, the PMO delivered bottom-line results across the company.
Laying the Foundation
One project in particular highlighted the company’s urgent need for a PMO. Broken into six phases over 15 years, the US$1.7 billion expansion of the Monroe Power Plant in Monroe, Michigan involved retrofitting a coal-fired power plant to meet updated environmental regulations. Yet despite the project’s high profile, its first phase closed behind schedule, over budget and with operational problems.
“We benchmarked externally and found out that we were in the bottom of the pack of companies doing similar expansions,” Mr. Kurmas says. “We recognized that this project was so big and would dominate our business results so significantly for the next several years that we had to do something. Project management was our answer to that problem.”
The big question was how to convince the rest of the company of that. To secure internal buy-in, the PMO communicated the outcomes it could help achieve, such as meeting regulatory requirements, avoiding costly fines and penalties, meeting company goals and cutting costs.
“At first it was a leap of faith,” Mr. May says. “Then it became clear that we were delivering value to the enterprise.”
To address performance issues on the Monroe project, and across the portfolio, the PMO developed two centers of excellence: one responsible for providing resources and the other for ensuring quality. The resource-focused center of excellence helps the PMO increase project efficiency by staffing to the precise needs of each initiative, says Victor Allen, PMP, director of the project management office, major enterprise projects.
“We’re able to react quickly to changing demands—whether we need to staff up or staff down—rather than have people inside of a particular project permanently,” he says of the PMO’s 240 staff members. “By having employees in a pool, we’re able to allocate them out at the exact amount that’s required to complete that project work.”
The quality management center of excellence provides oversight on standards and processes, helping to improve project management maturity across the entire enterprise, not just within the PMO. “That includes coaching and mentoring, doing assessments to determine where they’re at and then helping them get better,” Mr. Allen says. “We also provide them with tools and processes and templates so that they can raise their own capability.”
The PMO bases these processes on PMI’s A Guide to the Project Management Body of Knowledge (PMBOK® Guide). By going through the Knowledge Areas one by one, the PMO made the company’s processes more comprehensive and consistent, Mr. May says.
“The PMBOK® Guide has turned out to be a really important tool for us. It provided a really good framework for us to use to improve,” he says. “And it isn’t about some score, it’s about getting better and better at what you do—delivering value back, getting projects done on time or under budget.”
To get the most value from the best practices outlined in each Knowledge Area, the PMO has implemented a system of gates that correspond to each project phase. At each gate, a Knowledge Area leader confirms that the team followed all the required processes before it can move forward.
“The PMO’s standardized processes have improved our project outcomes dramatically,” Mr. Allen says. “We have gotten to a point where we deliver our projects on time, on budget, with the required scope—and we do that consistently across the board.”
Building the Framework
Bringing stakeholders together around standardized processes not only improved project results, it allowed the PMO to increase interdepartmental collaboration, Mr. Kurmas says. “The PMO is independent from the individual business units. As a result, it has a natural ability to bring together those silos within our organization, which sometimes don’t work together,” he says.
As part of this collaboration, the PMO works closely with business units to develop the organization’s five-year plan, gathering insights and feedback that determine the portfolio’s future course. While long-term planning is the goal, the process is also responsive to change.
“We revisit that plan every year,” Mr. Allen says. “And we also have monthly check-ins with our business units to make sure they’re kept aware of the progress and are able make any realignments that are necessary with the strategic plan.”
▪ Project Fermi Combined Operating License
Completion March 2015
Goal Obtain approval of a combined license for a nuclear power plant
Challenges The project team must manage relationships with federal and state regulatory agencies, as well as community stakeholders concerned about the safety of nuclear power plants.
▪ Project Monroe Power Plant Flue Gas Desulfurization and Catalytic Reduction
Goal Install emissions control systems that will allow a coal-fired power plant to meet new environmental regulations
Challenges The team had to find a way to build up rather than out and keep the facility running during construction.
▪ Project Detroit Substation Construction
Completion March 2014
Goal Improve service reliability for customers in Detroit
Challenges With the rollout of a new substation automation standard, the team was forced to respond to unforeseen issues on a tight timeline.
▪ Project Advanced Metering Program
Completion 2017 for DTE Electric customers, 2022 for DTE Gas customers
Goal Improve the performance of the electrical system
Challenges The massive scope includes 3.8 million meters, which means careful project oversight is needed to make sure no details are missed.
Monroe Power Plant, Monroe, Michigan, USA
“We have gotten to a point where we deliver our projects on time, on budget, with the required scope—and we do that consistently across the board.”
—Victor Allen, PMP
To manage shifts on a smaller scale, the PMO has implemented a detailed change process. A change-control board evaluates any revisions to scope, budget or requirements, and facilitates the relocation of capital as necessary.
That rigorous process helps the organization navigate the sector’s often-tumultuous waters.
“The utility industry is really dominated by federal and state regulation, particularly in the environment front,” Mr. Kurmas says. “Rules are changed, they’re implemented, they come at us unexpectedly, and we’re expected to respond quickly.”
In 2008, for example, the Michigan state legislature passed a law requiring utilities to provide at least 10 percent of their energy from renewable sources by the end of 2015. For DTE, this required a multimillion U.S. dollar investment in wind technology—an area the company had never worked in before.
“I can remember the chairman of the board coming to me at that time and saying, ‘What makes you think you have the ability to build renewable energy?’” Mr. Kurmas says. “I said, ‘I don’t have anything to point to other than our success in project management and our absolute trust that the process will deliver results.’”
Using the standardized processes established by the PMO, DTE implemented 10,000 megawatts of wind energy before the regulatory deadline. By tracking the team’s progress and making improvements throughout the project, the PMO also helped deliver the new technology under budget.
“At every iteration of construction, we were able to lower our costs until the point where we’re building wind farms at a rate lower than anybody else in the state,” Mr. Kurmas says.
Last year, DTE encountered another change when it learned it needed to reallocate capital to address distribution service reliability issues. Once again, the PMO found the way: It helped the company respond by locating surplus capital in an environmental project that was running under budget.
“As a direct result of the PMO’s efforts, we were able to redeploy that capital and meet the requirements without altering our existing budgets,” Mr. Kurmas says.
The PMO even managed to turn around the Monroe Power Plant initiative, bringing the project across the finish line early—and saving the company over US$100 million.
“We’re now leading the pack of utilities that are implementing similar projects, and people are externally benchmarking us to see how we did it,” Mr. Kurmas says.
PHOTO BY SUSAN MONTGOMERY / SHUTTERSTOCK
The PMO’s strategy has helped DTE deliver projects that benefit both the company and its customers—without increasing costs.
“By using effective project management, we’ve been able to successfully improve customer service while holding our cost and our rates flat for a long period of time,” Mr. Kurmas says. “That’s improved us relative to other geographies around us. It’s benefited our customers and the communities in which we live.”
By updating infrastructure and encouraging economic development, the organization also fuels its own future growth. The M1 Rail project, for example, aims to construct a streetcar line along 3.3 miles (5.3 kilometers) of Woodward Avenue, Detroit’s largest thoroughfare. DTE Energy and the Michigan Department of Transportation kicked off construction in July 2014, with the project expected to wrap up in late 2016. The streetcar line, funded through a wide-reaching public-private partnership, is expected to spur a flurry of business activity in downtown Detroit.
“That rail is going to connect the various community and neighborhood activities up and down Woodward Avenue such that it will drive brand-new businesses into vacant buildings,” Mr. May says. “It will create the opportunity for small businesses to flourish. And those businesses should be a driver for the neighborhoods just beyond to flourish.”
As part of its Neighborhood Revitalization Project, DTE has repaired over 19,000 streetlights and is moving many businesses and buildings off the city’s outdated system and onto its grid.
“Those efforts are specifically aimed at increasing load for DTE Energy. The more vibrant the city is, the better that outcome will be,” Mr. May says. “But it’s also very rewarding to be in a community that is becoming safer, becoming more well lit, becoming a place where you’d like to live and play and enjoy yourself.” PM
“It isn’t about some score, it’s about getting better and better at what you do—delivering value back, getting projects done on time or under budget.”
—Ron May, PMP
LIGHTS, CAMERA, ACTION! Watch a video of this PMO, as well as videos of other finalists for the PMO of the Year Award, at youtube.com/PMInstitute.
PM NETWORK FEBRUARY 2015 WWW.PMI.ORG
FEBRUARY 2015 PM NETWORK
Developing a Project Management Office in the Department of Energy, Energy Information Administration
This case example, a supplement to the report, PMIAA: Strengthening the Government Delivery Foundation, highlights project and program management capability building within The U.S. Energy…