When my kids were young, we used to sing “The Song that Doesn’t End” together at the top of our lungs. If you don’t know the song, the lyrics at the end of the verse run into the lyrics at the beginning so that you can keep singing the song forever.
A recent study of energy “megaprojects” shows that 64% run over budget, and 73% have schedule delays. But this doesn’t have to be the case. By following these simple, albeit challenging, rules, you can finally stop that "song that doesn't end."
Most companies don't have the expertise to manage a project with internal resources. A prime contractor engages with the project owner and executes the project’s primary scope either by themselves or by hiring and managing subcontractors.
Whether you're choosing a shipyard for a major rig upgrade, or a company like Trenegy for a major IT project, choosing the right prime contractor is key. In this important role, picking the lowest bidder isn't always the best choice.
Would you hire a company to install a pool in your backyard based strictly on price? Probably not. Why choose a prime contractor for your company’s major capital project that way? You would be surprised how many companies take this approach and end up paying more in the long run.
Have you ever started a home project only to find yourself making six trips to Lowe’s to get the right supplies? I have. Making a good plan prior to starting the project would have probably eliminated the additional time and cost. Now multiply that effect by a thousand... or a million. That’s the effect of a poor plan on a major capital project.
A good plan should include some basic concepts:
Many companies fall into the trap of accumulating deferred maintenance as they prepare for a capital project. They think a small maintenance item won’t interfere with the project’s critical path, and there will be more time during the project than during operations. This line of thought is a fallacy. When possible, maintenance is better performed during operations. Consider this example:
A home owner decides to change the AC filter while a contractor is doing a major kitchen remodel. The homeowner thinks: I’ll be home then, and such a small task won’t affect the kitchen remodel. While the remodel is going on, the homeowner borrows the ladder to install the air filter, which forces the kitchen contractor to delay the installation of a cabinet by a day. A few days later, the kitchen contractor paints the whole kitchen, fouling the air filter the home owner just installed and causing the home owner to install another one after the project.
The scope of capital projects should include only the capital work scope for which the project was planned.
Great real-time tracking is necessary to ensure course corrections can be made during a project so it ends on time and under budget. To know if your tracking is effective, you should know the answer to these questions at any point during project execution:
If you cannot answer these questions confidently, then your tracking needs to be improved.
Almost everyone who buys a new home develops a punch list of items (quality deficiencies or incomplete scope) to be corrected by the builder before closing on the home. Many home owners have allowed these items to roll past the closing date, relying on the builder's word to complete them sometime in the future. If you've been in this situation, which of the punch list items was the builder more motivated to complete?
Your original plan and continuous tracking should include provisions for completion of punch list items during the planned execution of a major capital project. It's more likely that the prime contractor will act on these items prior to the project end date. A project should be as complete as possible by the completion date.
Although these rules seem simple, they aren't always easy to implement and require a disciplined, deliberate approach to realize the desired results.
This is the fourth in a series of articles on operational excellence. Trenegy helps companies successfully manage operational excellence using a proprietary methodology. We help our clients get value of out their new programs quickly and relatively painlessly.
Alan Quintero is the Senior Vice President and Chief Technology Officer at Rowan Companies. Immediately prior to joining Rowan, he was a Partner at Trenegy. He previously served in executive leadership positions at Transocean and Atwood Oceanics.
