Project Management Strategic Issues - Assignment Example

?TABLE OF CONTENTS 0 INTRODUCTION TO THE SCOTTISH PARLIAMENT 2.0 ANALYSIS OF THE REASONS FOR FAILURE 2 Quality vs. Cost factor 2.2 Lack of BudgetClarity 2.3 Lack of Leadership, Responsibility Sharing and Communication Gap 2.4 Weak Role of the Construction Manager 2.5. Absence of Cost Control and Reporting activities 2.6 Sub-Optimal use of the Risk Management Methodology 2.7 Role of the Architect 2.8 Integration of Change Control Procedures 2.9 Closing Comments    3.0 RECOMMENDATIONS   3.1 Project Procurement Method 3.2 Effective Utilization of Project Risk Management Techniques 3.3 Project Management Office Set Up   3.4 Project Design Management and Project Sourcing Approach 3.5  Lean Management   3.6  Earned Value Management 3.7 Other Recommendations for Project Improvement 4.0 CONCLUSION 5.0 REFERENCES       1.0 INTRODUCTION TO THE SCOTTISH PARLIAMENT The Scottish Parliament is situated at Holyrood, Edinburg. The design of the building was given by Enric Miralles and the construction of the building started in June 1999. The project was a constant target of disagreement and condemnation for the choice of the site, complex design and costs incurred. The final completion date of the building was in 2004, which was almost three years behind the original schedule and the project overran the cost of ?40m to ?414m which was many folds higher than the allocated budget. The major reason for the cost overrun as explained in the public enquiry by Peter Fraser in 2003 were the inefficient methods in which most important design changes were executed by the Holyrood project team. The paper undertakes a detailed study of the Scottish Parliament project, the reasons of the failure of the project, the course of direction as the project advanced to its final stage and the recommendations that could have saved the failure of the project followed by conclusion. Fig 1: Costs for Holyrood Contracts 2.0 ANALYSIS OF THE REASONS FOR FAILURE This Section studies the various causes of failure of the Holyrood Building Project. The main reasons are as follows: 2.1 Quality vs. Cost factor There was an abnormal increase in the project cost of the Holyrood Project—as much by ten times. What was even more baffling was that the Project team seemed to be unclear at every stage about what the final shape of the Project was going to be, in terms of quality and costs. The Management appeared to be unable to give a clear perception of the Quality v/s Cost aspect of the Project, which led to complications later on. The initial cost estimate of the New Project at Holyrood was GBP 40 Miilion, subsequently revised to GBP 50 Million. However this was never believed to have any sanctity. The Acting Minister of Scotland, Mr. Donald Dewar desired the project to be completed as early as possible. The process of selecting the Construction Management was done without adequate regard for the risk factors. Quality was the over-riding priority in the scheme of things, rather than cost and timely execution. It was much later when the delay became a very visible issue that stress was laid on completing it early. Even at that stage no rescheduling of the work to reflect the acceleration of pace was done. The cost escalated unreasonably because of the numerous design additions and alterations demanded by the client. Fig 2: Escalated Costs since Sep 2000 2.2 Lack of Budget Clarity The Project was managed through Construction by Contracting. The utilization of this type of project management methodology permits the initiation of the on-site construction before the finalization of the complete project design. This strategy helps to reduce the time. However, in the case of the Holyrood project, no main contractor was hired initially and the client hired as many as 60 small time individual contractors whose services were taken up at different times. These individual contractors were to work under a construction management firm and the client remained the employer at all times. However, this method turned out to be unsuitable for this Project. The Client went on insisting that the budget is fixed. Except for the frequent re assertions by the Client and the Contractor that the costs are fixed the actual amount of the Budget was never stated in precise figures, (Taylor, 1999). In 2000 a Budget limit was laid down by a Parliamentary Committee, but it was rejected by the Client and the Contractor alike. The Committee also did not set any revised target or Budget. Eventually the total project cost ran up to GBP 431 Million, which included 72% in Construction costs alone, and included VAT amounts which were non-recoverable. In the four years between 2000 and 2004, construction costs raised from estimated GBP140Million to GBP 311 Million - an increase of over 220%, (Taylor, 2002). Fig 3: Reported Costs between 2000 - 2004 2.3 Lack of Leadership, Responsibility Sharing and Communication Gap It is the standard norm for every Project that a single point of power and accountability is established for finalizing decisions affecting the Project’s time line, quality and costs. Normally, this point of power and responsibility is the Project Leader or Project Head. In this case, even though a clear Organizational Chart was laid down, its purpose was defeated. Neither the goals were clearly set, nor controls exercised. The Parliamentary Committee had initially identified an Accountability Officer, but he passed on the responsibility to a Project Director working with the Project Group .The Project Director discharged his duties well, but there was hardly ant involvement of the Project Team in his efforts to control the Project through result oriented and timely execution of the Project. The dilution of the Authority of the Project Director through multiple control points sharing the authority led to deviations at all points. The agreement with the architect should have factored in the possibility of additions and alterations to the original designs and some incentives should have been built in, to encourage the designer to strive for keeping the over-all costs down to the minimum, (Taylor, 2002). The Joint Venture of EMBT and RMJM Ltd turned to be inefficient in carrying out the expected task. Their work cultures were disparate and their organizational goals also did not have convergence. There was poor communication between the two throughout the Project duration. Even their plans for tackling the delay in the execution of the Project and controlling the galloping costs differed widely. Lack of a single point of accountability further made the project to suffer. 2.4 Weak Role of the Construction Manager It was the function of the Construction Manager in this Project to manage the work and the cost involved. But he had no authority over the Design Team and was not to instruct the Client on cost and delivery issues. The result was a total absence of informed control. Reports from the Construction Manager who was well conversant with the ground realities of the Project about rising costs and the time lag in delivery of the Project, made to the Project Management Group, were ignored and remedial action not taken. The Cost Consultant who was aware of the escalating costs was in a similar situation of not being able to discharge his duties as the specialist in his field. The Project was mired in controversies right from the selection of Holyrood as the site and the appointment of a Non-Scottish Architect and the subsequent appointment of Bovis as the Construction Manger when he was not one among the initially short-listed ones. The proposal for Joint Venture between EMBT and RMJM Ltd was not given an adequate examination as to its viability. The fact that there was capital inadequacy was lost sight of. This was a major fault in the Project Management set up, (Taylor, 1999). Appropriate Guarantees and warranties were not obtained from the Company from the individual companies which were individually financially viable, but the Joint venture Company was not. 2.5. Absence of Cost Control and Reporting activities Good Project Management methodology would have required the periodic reports on the progress of the Project and the cost of achieving that. Such report should have been communicated to the Client. This strategy of Cost control was not adopted by the Holyrood Project. There was a total absence of cost analysis and control measures at every level, until July 2003.Added to this, there was a communication gap between the Cost Consultant and those managing the Project. At no point of time the precise Budget figure for the Project was determined, and hence there was no comparison of the progressive expenditure vis-a-vis the Budget.  Fig 4: Costs and Expenditure between 1999 - 2000 2.6 Sub-Optimal use of the Risk Management Methodology While the Project Management team set out with a good practice of having a Risk Management Methodology in place, the exercise of Risk Analysis and  Management  became a mere ritual, with no follow up action taken on the results of the thirteen sessions held till 2002. The practice of taking the review sessions at site was given up after December 2002. Perhaps the only action taken on the Risk Management side was to enhance (top up) the Risk Reserve Budget after the Cost Consultant had identified certain Risk Factors. Between 2000 and 2004 the forecast estimate of the Project Construction cost shot up substantially. Here was a case where Risk Management was done by raising the budgetary allocation for Risk provision rather than by addressing the factors that were causing the risk and trying to mitigate them and reducing or eliminating the risk.  2.7 Role of the Architect The function of the Architect is to manage the details of the designing at every stage of the Project. His professional skills enable him to visualize the implications of every minute change at site for the over all scheme of the Project. He would thus be able to revise the Design details and provide appropriate Blue prints for the remainder of the project. The Designs for the Scottish Parliament Project at Holyrood were selected after a competition. The selected Architects were a Joint Venture team of two highly reputed firms EMBT and RMM ltd. The Architect selected was Mr.Enric Miralles, who died soon after the Client had selected his proposals. Naturally he was not available for consultation when changes were made to the design later on by the Client. Drastic changes to the original design team were made after the death of Mr.Miralles. This created considerable amount of haphazard situations in the progress of the Project, resulting in mismanagement, (Taylor, 2002). Such haphazard changes in design were the major cause of cost escalation in the Holyrood Project.  2.8 Integration of Change Control Procedures The Scottish Parliament Project at Holyrood underwent several quick changes in the design of the Building. The changes led to cost over-run and delay in the delivery of the Project. These factors impacted the value of the money spent on the Project. A thorough review of the Project Planning was needed in this situation. Until June 2000 the Project Management system did not have a Change Control system in place, (Taylor, 2002). Such a procedure could have left a record of how each change was assessed for the over all impact and was allowed after its inevitability was established. Material changed made even during the design phase did not get scrutinized by the cost Accounting team and their report of cost implications did not become available for the project Management. There was also no agreed Budget arrived at through a consensus of all involved in the Project, for each phase of the work. Such a budget would have served to better control the progress of the work and facilitated the delivery on time and also prevented budget excesses. Also, the events of 9/11 found their echo in the revision of the design of the building to incorporate suggestions for integrating security precautions and provisions. This disrupted the tight delivery schedule. The management should have intervened and adopted additional measures that would have helped complete the project on time and control costs. Even though the Construction Manager Bovis had given schedules to the designer and the project team, the schedules were never followed and the defaulters also were not penalized. The Project was finally handed over at a much enhanced cost and with time delay. The Quality of the delivered Project was exceptionally high and was the only saving grace, (Taylor, 1999). The same level of quality could have been achieved at a much lesser cost and in shorter time duration, if there was better planning and control over the Construction. Even after setting clear goals for time span and cost limit initially, the client became vague in perception as to what exactly it wanted and appeared to be chasing excellence in disregard to time and costs. Fig 5: Impact of Design Variations 2.9 Closing Comments   This section summarizes the assessment carried out in the Project Management style and issues concerning control over the Project. The causes of failure and weaknesses, the limitations of the control mechanism adopted by the Project Management team in the initial phase of the Project were discussed here. It arrives at the conclusion that more vigilance was needed on managing the risks and that the reporting system could have been better, in order to highlight the escalation in costs. Another suggestion emerging from this section is that the expertise mix could have been better and incentives to the Project Consultants could have resulted in better input from them in reducing costs and eliminating delay.    3.0 RECOMMENDATIONS   The dominant concern in the selection of procurement ought to have been the attaining the right value of money for the project. The procurement approaches that have evolved in the industry with time facilitate co-ordination of the various aspects of the project like - process enhancement, substitute designs, cost, risk management and other methods that are useful to enhance the value of the invested money. These procurement strategies have their inherent advantages and disadvantages according to the way they are applied. The procurement approach is decided at the initial stage of the project as per the project objective. This method helps to identify the risks linked to the project, and manage those risks appropriately.   3.1 Project Procurement Method   The project management group had selected the method of contracting for the development of the project. It was obvious therefore that implementation of the Project should have been split into constituent units for watching the progress of the implementation. A premeditated concern of the procurement method should have been right from the initial phase in 1999 / 98. It should have existed simultaneously with the assessment leading to the decision to continue with an intercontinental competition for the design of the new building. The Procurement policy should have been chosen after a thorough evaluation of the risks involved with each option and after factoring in the responses to such risks. As the subsequent turn of events and the related records show, the risks ere evident right from the design stage and persisted and evolved through the life of the Project and the aftermath—the escalation in cost and time over-run were easily anticipative and  remediable or manageable. 3.2 Effective Utilization of Project Risk Management Techniques One of the important features of good Project Management, having a bearing on the successful completion of the Project, is a well planned methodology for Risk Management. Its function is to analyze the risks involved and their impact on the Project, and identify and assign a specific person or a team the responsibility for managing the risk, (Morris, 1994). There may be several kinds of risks and it may become necessary to assign to different persons or teams the responsibility of managing the different risks. This Project also required regular risk assessment sessions and discussions among the Project Team, Cost Consultant’s team and a Risk Management expert employed by the Cost Consultant. It was important that risks were identified at every stage and methods were devised to avoid these risks through consultation with the management, contractor and independent experts. This could consist of documenting such incidences which were risky and taking actions to prevent the re-occurrence, (Kerzner, 1998). Also, making smaller design models of the project and assessing the main problems and risks could have led to de-escalation of costs. Regular quality surveys and cost analysis by the financial department may have helped to keep a check on the costs.   3.3 Project Management Office Set Up   Setting up a project management office reflects good project management practices. Establishing a PMO during the conception phase of the project would have relieved a number of concerns. The Scottish office should have set up a project team in unison with the senior administration and the contractor party. The team should have been made up of members with a blend of appropriate expertise and familiarity. Also, each member should have been allotted a clear responsibility and vivid communication strategies were required to be enforced within the team. This would have helped the team to work in unison at the early stages of the project. Also, the project team leaders should have been experienced experts, (Taylor, 1999). Also, it was important that the management should have assessed and evaluated the skill of the designer and his capability to preserve the design standards as per the needs of the project. At the same time, the management should have studied the previous experience of the designer to be able to integrate modern design and techniques into design planning aspect. 3.4 Project Design Management and Project Sourcing Approach Another aspect related to effective project management is the manner in which the design team and the contractor manage their resources and promote the team to deliver on time and with quality. Use of design planning software methods by the designer and his abilities to respond to various design changes and queries, and his ability to make changes as required should have been evaluated by the management before hiring. Also, the sourcing strategy employed by the contractor and the architect / designer to collect and gain access to suitable resources on time for timely completion of work is also important. 3.5 Lean Management Lean management is described as the application of a management style which improves a supply chain or an operational chain in order to reduce the waste, time, provide for faster replenishment and increase the delivery schedules. In the case of the Holyrood project, time and cost did not meet the targets. A lean method of management could have possible reduced the waste activities, synchronize activities, and perform better communication and downstream flow of information.   3.6 Earned Value Management EVM is a different form of project management method in which a systematic, multi-disciplined progression is shaped in order to capitalize on the price of money being spent for a project. Some concerns in the mind of the management like Actual project value, planned project cost, budget on completion and earned value of the project can be analyzed with the help of EVM method.  Similarly, Gnatt Chart to prepare and monitor schedules and milestones could have also been utilized by the project manager. 3.7 Other Recommendations for Project Improvement This part of the study makes some suggestions for the Project Managers involved in such big sized, complex designed construction projects. Due to the shortage of word length, these suggestions are presented in concise form – Create and manage a premeditated strategy, operational procedure and the financial plan structure allocated with the confines of cost, quality and time, (Morris, 1994). Manage regular performance of the team members, contractor party and on site labor to assess their work and quality of work rendered in the project. Project schedules and milestones should be set in agreement with both the parties and consistent efforts should be made to follow the schedule and meet the milestones on time. Regular usage of forecasting methods, change control procedures and design implementation should be included in the supervising measures to be taken by the project manager. Efficient procurement, on time delivery of resources on the site, skilled and sufficient man power and optimal utilization of resources should on the agenda of the project manager managing big sized construction projects, (Kerzner, 1998). The project manager must be very careful while hiring and recruiting contractors, labors, designers and suppliers in such projects. Domain Expertise, Behavior management and leadership style, Procurement methods, capacity of Process Improvement and integration of modern techniques, and optimal utilization of operational procedures should be some of the issues that should be carefully looked upon while hiring / recruiting the above. Distributing the work into packages and making the team members responsible for their packages will help the project to be completed on time and schedule deadline being met. Daily teleconference and assessment meeting concerning all linked parties should be held to confer and reduce troubles among parties, labors, and contractors. 4.0 CONCLUSION The main advantages that could have been reaped by the implementation of project management techniques at a suitable time and manner included availing the information related to the level of work completed, and remaining, categorizing important development design areas and maintaining support to project professionals and driving them towards better project management approach, on time delivery. Irrespective of the size, and scale of a project, applications of project management techniques in an efferent manner definitely aim to benefit the team and the project as a whole. Application of Good Risk Management practices could have proved to be a life saver for the project. There were innumerable times,when the project was devoid of a focused detailed activity plan. The main aim of the risk management approach would have managed these challenges and would have easily identified the potential threats to the project. Also, the application of EVM, Gnatt may have been used to identify the performance of the Holyrood project with respect to the cost, time and quality standards. Without doubt a strong Project management approach would have assisted the management to reduce the various inefficiencies of the project and render the construction project on deadline. A well defined solution of project management strategies will further help the management to place the resources at the accurate constructs.Comments on the application of Project Management skills by the Management team at Holyrood Project  need to be logical, analyzing the challenges they faced, the opportunities they missed for rectification of lapses, and the over all sustainability of the Project. The paper discusses the Project Management system in its application to this particular Project with the aim of enabling the reader to understand the concerns a Project Manager is required to address when dealing with a large Project of this magnitude. In other words, this case study shows the integration of the theory and practice of Project Management and also shows how viable solutions can be created for complex issues that arise in implementation. 5.0 REFERENCES   Kerzner, A. Project management, A systems approach to planning scheduling and controlling, 6 th Edition, Wiley, 1998, ISBN 0471288357 Taylor, Brian (1999): "The Scottish Parliament", Polygon, Edinburgh, ISBN 1-902930-12-6 Morris, P W G. The Management of Projects, Thomas Telford Ltd. 1994, ISBN: 072771693 Taylor, Brian (2002): "The Scottish Parliament: The Road to Devolution", Edinburgh University Press, ISBN 0-7486-1759-0 http://www.scottish.parliament.uk/vli/holyrood/inquiry/sp205-00.htm http://www.scottish.parliament.uk/vli/holyrood/inquiry/sp205-18.htm http://www.audit-scotland.gov.uk/news/pr/pr120903.pdf http://www.scottish.parliament.uk/vli/holyrood/projHistory/ Holyrood Inquiry conducted by the Rt Hon The Lord Fraser of Carmyllie QC : http://www.holyroodinquiry.org/FINAL_report/report.htm                   Read More