BY STEPHAN AGNITSCH, STEVE COOKE AND THOR SOLBERG, PMP
Delay is a nagging risk in any project. Your best efforts can slip significantly for a variety of reasons, including an unrealistic schedule at project sanction, front-end problems during the detailed design and major equipment procurement phase, and poor project control techniques. Other setbacks occur due to scope creep or major scope change, unplanned contractor/vendor performance, misalignment on project objectives or even working out-of-sequence.
With so many potential pitfalls, recovery plans tend to be a dime a dozen. Unfortunately, feasibility of these plans often is questionable; they cannot be properly executed because stakeholders have not thought them through entirely, funds have not been committed, or the organizations that can actually make the difference toward recovery have not been included in plan development. If you don't account for external factors, your recovery plan could be just a paper solution.
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To ensure you establish a recovery plan that really works, take a systematic view of the main elements of recovery and apply them to your particular circumstances.
Recognize the Delay
All too often in developing recovery plans, the project team does not focus on all the items that can affect the critical path. The team must have spotted the obvious areas requiring acceleration but missed the fact that when the critical path was stepped-up, the converging paths reared their ugly heads.
To prevent this, the team (preferably supported by an experienced project mentor or two) should reexamine the schedule meticulously. Through analysis, an experienced scheduler can determine not only the critical path, but also all paths converging with, say, eight weeks float or less. This will paint a clear picture of the challenges ahead and point you toward each and every path that may become an obstacle to your recovery plan if left unaddressed.
For example, your team revisits the schedule critical path and the contractor's performance trend and discovers that, with six months remaining to start-up you are currently running one month behind.
Now that you recognize the schedule has slipped, what's next?
Decide if Recovery is Required and in What Form
At the project sponsors meeting, you and the stakeholders must answer the question: “Is it necessary or worth it, to attempt a recovery?”
If your project team has done its homework, your project already will have a vision and mission statement, which has been endorsed by all the stakeholders as supporting the business case and priorities. From this, a statement of requirements, also known as a project charter or scope document, should have been developed with detailed project goals. If the schedule is outlined as a must-have priority, then the decision already has been made.
If you don't have a clear statement of requirements, you first should consult with the stakeholders to determine whether there are any non-economic drivers to recovering the schedule. For example, there may be a reputation issue that the stakeholders are prepared to pay to keep. (“We always deliver our projects on time” or “We've already alerted the media.”) On the other hand, there may be circumstances where stakeholders not only dismiss recovery, but also decide that further slippage presents an opportunity. Examples could be financial (cash flow, tax year spending) or market-led (consider the number of projects that had their schedule priorities rewritten overnight during the Asian economic crisis). And let's not discount the possibility that the project is so troubled that termination may be the only option.
Once you have determined that some action is necessary and that it must be based on economic returns, you are closer to deciding what form the recovery will take. You must, however, do more work to discover the extent of the damage, the corrective action necessary, and have enough data available to help you make the choice as to whether you need to go with a “hard” or “soft” recovery.
Formulate Your Recovery Plan
Basically, soft recovery is characterized by actions that have no major financial impact, such as reorganizing the project/contractor's team or improving work processes to improve productivity. Hard recovery requires that you expend extra resources to accelerate progress and recover the schedule.
Normally, the first attempt at recovery will be soft, as it generally utilizes existing resources, can be initiated and implemented quickly, and promises to achieve success at little or no extra cost—an attractive combination. However, if soft recovery continues too long, the probability of a successful hard recovery will be reduced and more funding may be required to achieve the same results. Therefore, you must recognize early when soft recovery is not achieving the required outcome to enable the project to move to hard recovery quickly. Establish the early warning signs and metrics that will indicate that a move into a hard recovery is required. Set criteria and a milestone for declaring success or failure of soft recovery, then move on.
Normally, the first attempt at recovery will be soft, as it generally utilizes existing resources, can be initiated and implemented quickly, and promises to achieve success at little or no extra cost—an attractive combination.
Some of the project methods and practices may have been either inadequate or poorly implemented. By quickly improving these processes, the project team can make a significant contribution to recovery. After this, identify actions that will save more than they cost. For example, if delays along the critical path are caused by late deliveries of equipment or materials, air freight may then be cheaper than keeping the construction team mobilized for a longer time. Each item on the critical (and converging) paths must be examined systematically, and ideas for such schedule improvements brainstormed (see sidebar, “Soft Side”).
Successful project recovery requires special skills, cooperation and total project teamwork. Several critical factors can make or break the plan:
■ Check and double-check your project monitoring system to certify that progress is accurate
■ Ensure that your contractors and vendors are consulted and that they endorse the remedial plans toward recovery
■ Determine that the sequence of implementation (construction) is correct relative to the critical path
■ Get the stakeholders to sign a new charter document (with a budget appropriation and additional manpower loading plan attached) once the recovery plan is endorsed by the project team
■ Allow some float (as painful as it is) for the unexpected. “Murphy” doesn't leave the site during recovery plan execution.
■ Don't hesitate to bring on a few heavyweights to lead the plan execution. A recovery plan is needed often due to the shortcomings of the original staff.
Once you have exhausted this source of “self-funding” improvements, if you still don't believe you can recover the schedule, the next stage in cost/benefit analysis is used to decide whether or not to spend additional funds. Cash flow and interest payments are examined—later payments and earlier revenues from sales after startup (good) are weighed against the additional cost of the actions needed for recovery of the delay (bad). The outcome of this exercise will determine prudent fixes (see sidebar, “Hard Numbers”).
In hard recovery, be sure to spend enough planning time to fully analyze and understand when it is prudent and economical to spend money, and, how much can be committed before the returns become uneconomical. It can take a considerable amount of time and effort to develop this window of opportunity. After the plan is ready, you must obtain endorsement and approval from the project stakeholders to implement it.
Areas a project team can realize soft recovery include:
■ Adjusting attitudes (“can't do” attitude changed to “can do”)
■ Restructuring the organization
■ Streamlining procedures and methods
■ Expediting vendors through passive means
■ Bringing contractors together for integrated planning sessions
■ Reprioritizing critical path items
■ Establishing an elevated profile and communicating the schedule requirements.
Project areas considered for hard recovery are:
■ Adding manpower to management and support staffs
■ Accelerating contractor and design groups
■ Paying premiums for early deliveries and air freight costs
■ Working extended hours or implementing a night shift
■ Paying additional money for methods to reduce construction durations
■ Opening more areas where work can start
■ Improving access to work areas
■ Removing any resource constraint in the schedule.
Implement the Recovery Plan
Applying a recovery plan requires an extra, focused effort. You must be able to make decisions quickly and absolutely. Your project control team may have to be beefed up, and more people will be required on your management team to manage the plan's extra resources.
Mobilizing the right resources at the right time to support your plan is likely to be the most critical activity in the implementation of any recovery plan.
Monitor and Report Progress
Ensuring that the plan is implemented successfully is key to recovery—it was the failure of project control that got you into this mess. To regain credibility, everyone must have confidence in your ability to monitor and report progress accurately. Some of the elements are:
■ Day-to-day subscheduling, reviewing and updating
■ Regular reporting to rally management's continued support of your efforts
■ Constant communication and dialogue with vendors and contractors to obtain feedback and advice from those who are on the battlefield
■ Continual review of quality and safety requirements, to maintain the project standards and specifications
■ Faster progress review and payments to all vendors and contractors involved. PM
Stephan Agnitsch is managing director of programs with Atur Sdn Bhd, a Kuala Lumpur, Malasia-based construction management advisory company. He has 27 years experience in a variety of roles spanning 57 projects in industrial construction.
Steve Cooke is project development manager for BP in Asia. He has 20 years experience in a variety of roles in operations and projects.
Thor Solberg, PMP, is project manager for a major petroleum company in Asia. He has 20 years experience in project management and project control in the oil, gas and petrochemical industry in Asia and North America.
MAY 2002 | PM NETWORK
PM NETWORK | MAY 2002 | www.pmi.org