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How to Create a World-Class Project Management Organization?. Dr. Nick J. Lavingia, P.E. Chevron Project Management Consultant APEGGA Annual Conference, Calgary April 26-27, 2007. Dr. Nick J. Lavingia, P.E. Project Management Consultant Chevron.

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how to create a world class project management organization

How to Create a World-Class Project Management Organization?

Dr. Nick J. Lavingia, P.E.

Chevron

Project Management Consultant

APEGGA Annual Conference, Calgary

April 26-27, 2007

Nick Lavingia

dr nick j lavingia p e project management consultant chevron
Dr. Nick J. Lavingia, P.E.Project Management ConsultantChevron

Nick has over 30 years of Global Project Engineering, Management, Consulting and Training experience in the Energy industry. As a Project Management Consultant at Chevron, he provides Consultation and Training to Project Professionals worldwide.

Nick has a B.S. and M.S. in Chemical & Petroleum-Refining Engineering and a Ph.D. in Engineering Economics & Management from the Colorado School of Mines. He is a registered Professional Chemical Engineer in the State of California.

Nick is a member of Project Management subcommittee for Athabasca Oil Sands expansion project. He has published and presented many papers at technical organizations and is a recipient of industry award from Pathfinder for outstanding Contribution to the advancement of Project Management Technology and Chevron Chairman’s award for implementing Value Engineering throughout the corporation.

Nick Lavingia

agenda
Agenda
  • Business Case for Improvement
  • Five Steps to Success:

Step 1: Common Language (PMI’s PMBOK)

Step 2: Common Project Development & Execution Process

Step 3: Application of Value Improving / Best Practices

Step 4: Total Cost Management

Step 5: Training & Certification

  • Summary
  • Q&A

Nick Lavingia

business case for improvement
Business Case for Improvement

Improved Capital Stewardship

Lower Costs

Better Projects

More Projects

Improved

ROCE

Higher Earnings Growth

Higher Market Confidence

Higher P/E

Improved TSR

Nick Lavingia

slide5

REVENUE MINUS EXPENSES

CAPITAL EMPLOYED

Project Management’s Impact on the Bottom Line

Project Management Improves ROCE by

Increasing Revenues, Decreasing Expenses,

and Reducing Capital Employed

=ROCE

Nick Lavingia

project management leads to pacesetter performance cheaper faster and more predictable
Project Management Leads to Pacesetter Performance (Cheaper, Faster, and More Predictable)

1.25

Company X

Industry Average

30%

Improvement

Industry Average

1

Facility Cost

Pacesetter

Company

0.75

1

0.75

1.25

30% Improvement

Execution Schedule

Nick Lavingia

pmi s pmbok
PMI’s PMBOK

Project Management Skills from PMBOK:

--Project Integration Management

--Project Scope Management

--Project Time Management

--Project Cost Management

--Project Quality Management

--Project Human Resource Management

--Project Communications Management

--Project Risk Management

--Project Procurement Management

Nick Lavingia

project development execution process
Project Development & Execution Process

A Process that Facilitates the Optimal

Use of Resources (Dollars, People and

Technology) Over the Life of an Asset /

Project to Maximize Value.

Desired Outcome

  • Select the Right Projects by Improving Decision Making
  • Improve Project Outcomes through Excellence in Execution of Decisions

Nick Lavingia

project management vision
Project Management Vision

High

  • Consistent Success
    • Good Projects
    • Good Execution
  • Random Success
  • Good Projects
  • Average Execution

Decision

Quality

Mid

  • Success Unlikely
  • Poor Projects
  • Poor Execution
  • Random Success
  • Poor Projects
  • Good Execution

Low

Mid

High

Execution Quality

Nick Lavingia

slide12

Project Development & Execution Process

AFE

1

2

3

4

5

PHASE 2

SELECT from

Alternatives

PHASE 3

DEVELOP Preferred

Alternative

PHASE 4

EXECUTE

(Detail EPC)

PHASE 5

OPERATE &

Evaluate

PHASE 1

IDENTIFY & Assess

Opportunities

Produce an Operating Asset Consistent with Scope, Cost and Schedule

Evaluate Asset to Ensure Performance to Specifications and Maximum Return to the Shareholders

Determine

Project

Feasibility and

Alignment with

Business Strategy

Finalize

Project Scope, Cost

and Schedule

and Get the

Project Funded

Select the

Preferred Project Development Option

AFE = Appropriation For Expenditure

Nick Lavingia

slide13

Project Management’s Impact on Creating Value

Value Identification

Value Realization

Good Project Execution

Good Project Definition

A

B

VALUE

Poor Project Execution

C

Poor Project Definition

D

AFE

Phase 3

Develop Preferred Alternative

Phase 4

Execute

Phase 5

Operate

Phase 1

Opportunity Identified

Phase 2

Generate & Select Alternatives

Nick Lavingia

slide14

Project Development & Execution Process

AFE

1

2

3

4

5

PHASE 2

SELECT from

Alternatives

PHASE 3

DEVELOP Preferred

Alternative

PHASE 4

EXECUTE

(Detail EPC)

PHASE 5

OPERATE &

Evaluate

PHASE 1

IDENTIFY & Assess

Opportunities

Operate Asset

Monitor & Evaluate Performance

Identify New Opportunities

Clearly Frame Goal

Test for Strategic Fit

Preliminary Overall Plan

Preliminary Assessment

~1 % Engng.

Phase 1 Estimate

Generate Alternatives

Preliminary Development of Alternatives

Develop Expected Value

Identify Preferred Alternative

Phase 2 Est.

Fully Define Scope

Develop Detailed Execution Plans

Refine Estimate

Submit Funding for Approval

~25 % Engng.

Phase 3 Est. (+/- 10 % Accuracy)

Implement Execution Plan

Min. Changes

Finalize Operating Plan

Business Plan for Phase 5

Project Review

AFE = Appropriation For Expenditure

Nick Lavingia

influence vs expenditures
Influence vs. Expenditures

Major Influence

Rapidly Decreasing Influence

Low Influence

Final Authorization

INFLUENCE

EXPENDITURES

Front End Loading

OPERATE

IDENTIFY

SELECT

DEVELOP

EXECUTE

Gate

Gate

Gate

Gate

Gate

Gate

Gate

Gate

DSP

DSP

DSP

DSP

DSP

Front End Loading

DSP = Decision Support Package

Nick Lavingia

key players
Key Players
  • Decision Makers
  • Multifunctional Project Team

--Business, Technical, Operations and Maintenance

  • Stakeholders
  • Contractors
  • Vendors / Suppliers

Nick Lavingia

management s role 1
Management’s Role (1)

Accountability—Business evaluation should be conducted 1 to 2 years after project completion and Project Sponsor should be held accountable for the financial outcome.

Accessibility—Management should actively participate in gate keeping meetings at the end of each phase of the Project Management Process and communicate frequently with the project team.

Nick Lavingia

management s role 2
Management’s Role (2)

Leadership—Management should establish clear expectations and objectives for the project team.

Resources—Provide resources of right people and funding to support the project team.

Behaviors—Demonstrate visible support and provide positive consequences for following Project Management Process, Best Practices and sharing Lessons Learned.

Nick Lavingia

value improving best practices
Value Improving / Best Practices

Value Improving / Best Practices are tools to improve project planning and execution. In conjunction with a structured Project Management Process they can optimize:

  • Cost
  • Schedule
  • Performance
  • Safety

Nick Lavingia

value improving best practices21

$

$

D

AFE

D

D

PFD

D

P&ID

D

EST

EST

Value Improving / Best Practices

Phase 1

IDENTIFY & Assess

Opportunities

Phase 2

SELECT from

Alternatives

Phase 3

DEVELOP Preferred Alternative

Phase 4

EXECUTE

(Detail EPC)

Phase 5

OPERATE &

Evaluate

(Share)

  • Pre-Funding Assessment
  • Decision & Risk Analysis
  • Project Execution Planning
  • Lessons Learned
  • (Seek)
  • Value Improving Practices by IPA
  • Peer Review
  • Post Project
  • Assessment
  • Business Evaluation

Legend: AFE = Appropriation for Expenditure

D = Decision Point PFD = Process Flow Diagram

IPA = Independent Project Analysis, Inc. P&ID = Piping & Instrumentation Diagram

Nick Lavingia

slide23

$

$

D

AFE

D

D

PFD

D

P&ID

D

EST

EST

Total Cost Management

Phase 1

IDENTIFY & Assess

Opportunities

Phase 2

SELECT from

Alternatives

Phase 3

DEVELOP Preferred Alternative

Phase 4

EXECUTE

(Detail EPC)

Phase 5

OPERATE & Evaluate

  • Economic Analysis
  • (NPV, ROR, Payout)
  • Cost Estimating
  • (Conceptual)
  • Planning/Scheduling
  • (Milestone)
  • Benchmarking
  • (Cost / Capacity)

(Definitive)

(Cost Collection / Analysis)

(Funding +/- 10% Accuracy)

(CPM Bar Chart)

(CPM Resource Loaded)

(Monitor & Update)

(Pre-Funding Assessment)

(Post-Project Assessment)

(Set Pacesetter Target)

  • Contracting/Procurement
  • (Strategy)
  • Cost Control/Forecasting
  • (WBS)
  • Progress reporting
  • Finance/Audit

(Pre-Qualification)

(Award / Monitor)

(Closeout)

Performance Measurement

(Establish Progress Payments)

(Earned Value)

(Establish Cost Accounts & Budgets)

(Trend / Forecast)

(Capital versus Expense)

(Asset Accounting)

Legend: AFE = Appropriation for Expenditure NPV = Net Present Value PFD = Process Flow Diagram

D = Decision Point ROR = Rate of Return P&ID = Piping & Instrumentation Diagram

EPC = Engineer, Procure & Construct CPM = Critical Path Method WBS = Work Breakdown Structure

Nick Lavingia

training
Training
  • Project Management Skills from PMBOK

--Project Integration Management

--Project Scope Management

--Project Time Management

--Project Cost Management

--Project Quality Management

--Project Human Resource Management

--Project Communications Management

--Project Risk Management

--Project Procurement Management

  • Business Decision & Risk Analysis
  • Leadership Roles & Behaviors

Nick Lavingia

certification
Certification
  • All Decision Makers should be certified in:

-- Overview of PMBOK Areas

-- Business Decision & Risk Analysis

-- Leadership Roles & Behaviors

  • All Project Professionals should be certified in:

-- PMBOK Areas

-- Business Decision & Risk Analysis

-- Leadership Roles & Behaviors

Nick Lavingia

summary
Summary

Common Language, Common Project Development & Execution Process, Application of Value Improving / Best Practices, Total Cost Management and Training / Certification can help create a World-Class Project Management Organization that Delivers:

  • Better
  • Cheaper
  • Faster
  • Safer

PROJECTS

Nick Lavingia