EUREGIO III Project 3rd Master Class Programme 22 March 2011

1. Efficient capital investment - experience from the Concept Research ProgrammeKnut SamsetProfessor, NTNU, Director, theConcept Research Programme EUREGIO III Project 3rd Master Class Programme 22 March 2011

2. 1.Projects – successand failure There is no shortcut to a successful project

3. Governance versus management Governance processes that define expectations, grant power, and verify performance. Enabling measures – to help realize expectations Regulatory measures – to avoid adverse effects Project Governance processes that need to exist for a successful project Project Management processes to organize and manage resources required to complete a project within defined scope, quality, time and cost constraints.

4. Successfulprojects: somestrategic and tacticalissues Effect Society Strategic performance Sustain- ability Rele- vance Success Tactical performance Cost Quality Project Time

5. High Tactics Low High Low Strategy Tactics vs. strategy and project success Wrong type of project Highly successful Complete failure Inefficient/ ecpensive

6. Four controversial projects: • Oslo Opera House [no strategic perspective] • Oslo airport high-speed shuttle train[not financiallyviable] • Regional aviationcontrolcenter[redundant] • Northern onshore torpedo battery[useless]

7. Hydro power plants + 2. Opera 4. Aviation control center Tactics (management > delivery) 5. Torpedo battery - 3. Airport Shuttle train - + Strategy (design > utility) Test: Strategic and tacticalperformance Wrong type ofproject Highlysuccessfulproject Complete failure Inefficient/expensive

8. Project cases: Up-front test ofsuccess

9. Relevance Sustainability + Tactical performance - Effective- ness Impact + - Strategic performance Efficiency

10. Four hospital projects: • National University Hospital, [(in)significantcostoverrun] • Regional University Hospital [oversized, huge cost overrun] • Retro type hospital [inefficient] • Future type hospital [Relevant, efficient, effective, sustainable] • Organisationalstructure • Integration public/private services • Health promotion vs. curativetreatment • Degreeofspecialisation • Etc.

11. 2. Quality Assurance and decision making Facts do not cease to exist because they are ignored. (Aldous Huxley)

12. Societal process Purpose (long- term effect) Goal (effect) Process Outputs Inputs Project Front-end phase Implementation Phase Operational- phase The project in context

13. Project Managing uncertainty Information Uncertainty Time Front-end phase Implementation phase

14. Front-end: Escalationofcostestimates Cost overun As it should have been Cost savings Strategic underestimation As it was Front-end implementation Initial estimate Final budget Final cost

15. Oslo Operahouse Regional University Hospital 400 1200 1000 300 800 200 600 400 100 200 0 0 1 2 3 5 7 9 11 10 1 3 5 6 9 12 14 17 Year National University Hospital Estimation and cost management Shipping tunnel Cost estimate Torpedo Battery Airport shuttle train

16. Someobservations • There is a strong tendency to choose the initial concept and stick to it • Incremental improvements of an inferior solution - rather than fundamental change • There is an overwhelming inertia: once set in motion - always impossible to stop • The window of opportunities is usually larger than envisioned - and largely unexplored

17. Decision process Needs Effect The project process Analytic process Project start D1 D2 D3 D4 A1 A2 A3 Analysis and Decision making: Technocracy Planning and implementation

18. Decision process Cabinet approval Needs Effect The project process QA1 QA2 Analytic process Project start D3 D4 D1 A1 A2 A3 D2 Analysis and Decision making: Anarchy Parliament approval

19. Needs analysis • Strategy document • Requirement spec. • Alternatives analysis • (min. 3 alternatives) • Overall strategy • document • Budget Cabinet decision Parliament decision Needs Effect Pre-project Project QA 1: Review : documents Analyze: economic analysis uncertainty Assess: relevance feasibility sustainability timing Recomm: ranking management strategy QA 2: Review: documents Analyze: management strategy success factors and uncertainty Recomm.: budget, contract and management strategy QA regime: scope and procedure Decision documents produced by responsible ministry/agency Scope of external quality assurance

20. Effect of QA scheme on cost estimation QA-advisors’ estimate as comparedwithAgencyestimate - percentages

21. Effect of QA scheme on budgetary compliance Average 5 % • 23 projects, total investments EUR 4 Billion • All projectswithinbudget (P85), but one • Final cost 5 per cent belowbudget on average • Half theprojectsbelowexpectancycost (P50) and half ofthemabove

22. Featuresofthe QA scheme • The most criticaldecisionsareanchored at thehighestlevel (Cabinet) • The qualityassurance is done by externalconsultants • The regime does not requirechanges in existingprocedures for analysis and decision making • It merelyaims to raisetheprofessional standard of underlying documents • The scheme is supportedwith a highlevel forum for exchangeofexperiencebetween all involvedparties

23. Somelessonsregardinganalysis and decision making • Analysis is oftenweak and thepotential for improvement is huge • Better analysis is not enough to improvedecision making • Most decisionsare de facto made at theexecutivelevel (agency) and centralgovernment’sinfluence is limited • Coalitionsof stakeholders tend to have an adverseeffect on decisions • High levelanchoring and transparencyseems to work by providing a feedback to theexecutivelevel

25. + Tactics (management > delivery) - - + Strategy (design > utility) Test: Strategic and tacticalperformance Wrong type of project Highlysuccessfulproject Failure Inefficient/expensive

26. + Tactics (management > delivery) - - + Strategy (design > utility) Test: Strategic and tacticalperformance Wrong type of project Highlysuccessfulproject ? Failure Inefficient/expensive

27. Idea Phase Concept Phase Pre-Project Phase B1 B2 B3 B4 Model for Front-end Planning and Decision making in Hospital Projects