Removing the Ian Heptinstall my CV Main Barrier to Improvement · Main Barrier to Improvement on...
Transcript of Removing the Ian Heptinstall my CV Main Barrier to Improvement · Main Barrier to Improvement on...
Removing the Main Barrier to Improvement
on capital & construction projects
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Ian Heptinstall – my CV
• 15 years managing projects - chemicals/ process
• 10 years in procurement – chemicals, pharma, construction
• 10 years management consulting –procurement & supply chain
• Now independent
Collaboration Why the lack of collaboration is the main driver of poor productivity
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And what you can do about it
The Project Alliance (Integrated Project Delivery – IPD)
CollaborationCollaborative teams deliver better results• They need less ‘policing’• Are more creative• Waste less• Are more fun and less
stressful to be a member of
Collaboration• Those of us in the UK are aware that Latham, Egan,
etc al have been saying this for years
Collaboration• In the USA the CII found
these results over 20 years ago
• And more recently, in 2015, the University of Minnesota looked at 59 collaborative project teams• 90% -> Better overall
value
+25% Profit
+30%Satisfaction
-10% Cost
-20% Time
-65% Changes
-83% Claims
-99.8% LTA
The impact on productivity
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And it isn't just a tiny issue
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• McKinsey have identified collaboration one of their major enablers of productivity improvement
• But these are not independent improvement opportunities that you can pick-and-mix
• Collaboration – or the lack of it underpins many of the other opportunities. It is a PREREQUISITE for many of the other value-enhancing methods.
• Meaning its impact is MUCH MORE than the 6-7% from27-38% implied in this report
Levers for productivity improvement
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Main Categories Saving Levers
Regulation
Collaboration & Contracting
6 Time & cost reduction from process & admin
Design & Engineering
8 Value Engineering, Constructability, Repeatable & standardised design, “Production System”, Tighter
integration with contractors
Early involvement. Reduced waste – design for bidding
Procurement & SCM
4 Consolidation, Digitisation, Category Management, Planning & transparency
Coordinated logistics
On-site Execution
4 Rigour in planning, Last Planner®, Owner/Contractor alignment, Synchronisation &
coordination between different contractors
Technology 5 BIM & PMIS tools, allowing common data base across whole project
Capability Building
4 Reskill – esp digital tools. Which skills are needed. Reduced resource needs.
Reduced stress levels
31%
Highlight => Work much better in a collaborative project team & lack of collaboration seriously inhibits their power
It doesn’t look like we have got it right!
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201020001990
In 3500 projects drawn from all over the world in several different industries, [cost] overruns are the norm, being typically between 40 and 200 per cent. [1987]
90% of projects overrun their budgets at an average rate of 28% [2002]
The Main Barrier to collaboration
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Contracts &Procurement
Procurement - The Main Barrier• The common forms of contract used on capital and construction
projects are inherently un-collaborative in nature• Fixed Prices, GMP, and associated penalties for breach
• I can win, you can lose• Very high risk to suppliers• Add to the overall cost• Waste time because they take longer to agree, and for change to be managed• Incentivises conservatism and behind-the-scenes cost cutting
• Reimbursable or basic cost-plus• Incentivises suppliers to increase billings• Penalises suppliers who uncover savings and improvements
• Adding a “Partnership Charter” over the top of other contract terms adds a potential conflict• But it is possible, with luck and senior-level support
Removing the commercial barriers to collaboration
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•Use a Project Alliance
• Also known as IPD – Integrated Project Delivery
•This is BOTH
• A form of contract
• A philosophy or mindset
What is an Alliance?
What I’m not talking about…
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• A legal organisational structure• PPP style formal joint ventures (SPV)
• Supply chain JV’s
• Long-term, multi-project, agreement or framework
• A “let’s be nice and things will work out” partnership charter, added to a traditional contract
A Project Alliance/IPDA few key features• Exists for a single project.• A multi-party contract (usually).• Removes the obstacles to team-wide collaboration.
• Aligns the commercial interests of the client and supply members• Win together, Lose together
• Consensus, unanimous, decision making• Limited ability for members to claim & litigate
• A “relational contract”, based on principals rather than detailed obligations.
• Team selected early, based on competence. • Though still selected competitively.
• Works collaboratively with whole supply chain.• Focus & resources on the problem/opportunity.
• Not on the contractual relationships between team members
A Project Alliance/IPD
Sub-contractors
Sub-contractors
Sub-contractors
Main Contractor
Client
Traditional Contracting
Advisors
Sub-contractors
Sub-contractors
Sub-sub-contractors
Project Alliance (IPD) TeamMember
1Member
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Client
A Project Alliance
Member 2
Member 3
Shared risk/reward Traditional Contracts
Sub-contractors
Sub-contractors
Sub-contractors
Sub-contractors
Sub-contractors
Sub-sub-contractors
Collaboration on a Project
Case Study: The “Fix 7” Project
Integrated Project Team
Alliance Contract
Project Alliance Case Study: Fix-7Project Alliance3-company contractReduced waste & “policing”Difficult Goals
Client
EPCM
Construct
SuppliersSub-
contractors
Client
EP CM
SuppliersSub-
contractors
Traditional Approach
Project Alliance Case Study: Fix-7
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• 3-party contract: Client | Engineer &Procure | Construct• 4 week selection for $10M construction work• RFP was 3 pages• Payment using CFV method
• Cost + Fixed Fee + Variable Fee
Contin.y
Constr
EPCM
Cost
FF 1
VF 1
FF 2
VF 2
FF 1
VF 1
FF 2
VF 2 SafetyShutdownScheduleCostBehaviour
… 30%… 25%… 15%… 20%… 10%
3rd Parties
SalariesN
ot to
sca
le!
Performance Fee Breakdown
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• Variable Fee – “Profit at Risk” = £300,000 total• Co.1: £200,000 67%• Co.2: £100,000 33%
SafetyShutdownScheduleCostBehaviour
… 30%… 25%… 15%… 20%… 10%
£90,000£75,000£45,000£60,000£30,000
£300,000
£180,000£22,850£45,000
£168,135£60,000
£475,985 159%
CFV Payment: Cost + Fixed + Variable
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• Cost• Should be just that – no margin• 100% money flowing through the
supply partner• Fixed
• Fixed in £/$/€, not in %• A contribution to overheads
• Variable• Each member gets a defined
percentage of the performance fee pot
Performance Fee Pot
Co. 1 Co. 2 Co. 3
Co. 4 Co. 5 Co. 6• Client Changes• Change the targets, F and V
Performance Fee Pot
Co. 1 Co. 2 Co. 3
Co. 4 Co. 5 Co. 6
Example Variable Fees
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Quality
Customer Experience
Operating Cost
EfficiencyLCC/TCO
BehavioursAesthetics
Income/Profit/ROI
You can get complicated with the performance fees
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• My recommendations• Keep it “as simple as possible, but not simpler”• DON’T make the Variable Fee payment dependant upon
savings
A Project Alliance/IPD• A single contract binding the client and
one or more of the main project suppliers• Meaning usually it is a multi-party contract
• A relational contract with high-level mutual commitments• Work together to achieve the agreed
project objectives.• Manage the project well.• Collective responsibility, with much less (or
no) importance to who did what. “No Blame”.
• Collaborative decision making• Disputes are resolved by the alliance as
much as possible. “No Claim”.• Risks are either retained by the client, or
collectively managed and shared by the alliance.
• Commercial obstacles to collaboration are removed• CFV (Cost-Fixed-Variable) payment
mechanism that ensures team members’ commercial interests align with the project client’s.
• There will be a learning curve• Simply because it is different• You may need to change corporate
processes, or at least get an exemption• But it isn’t hard to do: Some will be able
to read a book and do it. You can learn on-line and on-the-job, or use a part-time coach
Planning Selection Contract Deliver
ALLOW TIME TO PREPARE
1. Ensure senior-level support
2. Prepare the supply market
3. Selection strategy: • Team or separate
members?• Role of price & cost
COMPETENCE-BASED SELECTION
1. Select the team early and quickly
2. Multi-stage process
FINALISE THE AGREEMENT
1. Proactively build the leadership & core teams
2. Draft the contract3. Link payment to
performance4. Multi-way due
diligence
EXPLOIT YOUR COLLABORATION
1. Contract Governance
2. Project Management
3. Integrated, team-based actions
4. Value-enhancing practices & tools
5. Visible leadership
Alliance/IPD Standard Contracts
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• Most projects use bespoke agreements• Unique, or based on standard form contracts
• Some of the best known standards are• USA: AIA C191• USA: ConsensusDocs 300• Aus: Australian National Alliance Contract Guidelines• UK: PPC2000• UK: JCT/Construction Excellence• UK: NEC4 ALC (draft)
Governance Structures
Alliance Board
Management Team
Steering Committee
Dispute Resolution Body
Independent 3rd
party
Facilitation Support (technical & team)
Project Team
Timing – when to choose the alliance members
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Business
Case
Concept
Design
Detailed
DesignBuild
Detailed Design
Build - Construction
1-stage, after concept finalised
2-stage, established during concept development
But they are worth it?...
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+25% Profit
+30%Satisfaction
-10% Cost
-20% Time
-65% Changes
-83% Claims
-99.8% LTA
The Alliance/IPD is just the start!If gives you a great foundation
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You get some benefit from the alliance itself
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• Reduced ‘policing’ and ‘man-marking’ resources• Reduces time-related costs from early selection• Reduced waste in design time (design for selection)• Improved client ROI from earlier completion• Cost risk aggregation• Facilitates creativity
Team
Critical Success FactorsA Project Alliance/IPD is necessary…but not sufficient
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• Exploit the collaborative team & use value-enhancing methods & tools• BIM/PDMS & PIMS technologies• Standardisation & modularisation• Lean Construction tools• Value-analysis & engineering• PDRI - (Project Definition Rating Index)• ESI/ECI - (Early Supplier/Contractor Involvement)• Collaborative planning & control – such as CCPM- (Critical Chain Project Mgt)
• Lead the collaborative team• Visible leadership from the top• Facilitation & challenge-driven leadership• New member induction process• Throughout the project team, not just those who sign
the agreement• Co-location
Alliances aren’t for everyone
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• You will need senior stakeholder support• Or great delegation
• You will need to ‘call the shots’• There will be resistance, so be ready and willing to take it on• Not everyone likes the idea of collaborative, team-based
projects.• They like command and control
• BUT• There is no reason project alliances cant work on all types of
projects, in all environments, and at all scales• The potential benefits are significant
How you implement this?
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• Just give it a go• Find out more yourself
• Read case studies, and freely available guidance• Go on a training course
• ….if you can find one, and if it suits• Get specialists to support your project
• Lawyers• Alliance Facilitators
• Get online coaching• Join my pilot development
programme in the New Year
Get support to learn how to implement a Project Alliance/IPD
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• The full programme will launch in April 2018• Opportunity to join the PILOT from January 2018• 6 Module Development Programme• The Pilot will include
• Live presentations – about 8-10 hours• Live group coaching & discussion – about 10-12 hours• Preparation materials – to read or watch• Ability to shape the content• 2 x 1-hour coaching sessions• Lifetime access to the full programme, with updates.
• Videos, Discussions, Templates, Workbooks, Guidelines & Checklists
Modules 1-3
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• Alliance Critical Success Factors
• The CFV Payment Method
• Applications of Project Alliancing
• Public Sector Considerations
• Change management and obstacles
1: Introduction
• Why you might need to• Internal & External• How ready is your supply
base?• Motivating suppliers,
and pro-actively addressing their concerns
2: Preparation
• Procurement Planning • Competency-based
selection• Early, fast & multi-stage
selection process• Assessing proposals &
bidders• Role of price/cost• Public Sector
Procurement rules
3: Selection
Modules 4-6
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• Build the leadership team
• Governance processes• 360º due-diligence• Targets• Risk allocation• Planning & Scope
4: The Deal
• Standard v Bespoke• Standard forms• Drafting process & link
to team building• Key features checklist• The contract v the
project
5: The Contract
• This is just the beginning!
• Exploit your collaborative team –value-enhancing methods
• Key leadership skills• Risk areas• Action planning
6: Get Going
Do you want to join us?
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• There will be a maximum of 15 places on the pilot programme• It will start on Tuesday 9 January• Timing of the live sessions will suit the locations of members• Everything will be recorded• It will cost £1470 to join the pilot
• Or 4 months @ £430• 45% saving on the full price of the programme & coaching
• Learn more at https://ianheptinstall.com/PA-pilot • To join go to https://academy.ianheptinstall.com
• Or email [email protected]
Project Alliances & IPDKey Takeaways
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• A truly collaborative team should always deliver a better, faster, lower risk & lower cost project.
• You have to remove contractual obstacles to collaboration & disincentives.• There is no better way to form a collaborative project team than a Project Alliance
(IPD).• The project alliance is a one-off arrangement for a project, with competition used to
select the members.• Project alliances are not complex, and they don’t cost more.• But they are different, and to many will constitute a major change.• Payment – Align supplier margin & contribution to overall project success.• Warm people up to the idea – supply base & internal stakeholders.• Collaboration itself will deliver benefits – but the significant benefits come when
you use it as the foundation for delivering good project management and innovation.
What unanswered questions do you still have?
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• Type your comments, worries, and questions in the Q&A panel.
• And if you don’t have a question, please let me know what you thought of the presentation
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The Project Alliance & IPD – Integrated Project Delivery
I hope you found this useful and interesting.
To learn more about how you can implement a project alliance on your next project, and to get my support in doing so, take a look at my online programme at
academy.ianheptinstall.com
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Project Alliances & IPDThe key to improving the performance of
capital & construction projects.
Find out why and how by joining my FREE webinar on Tuesday 28 November 2017
FASTER | CHEAPER | LOWER RISK
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Project Alliances & IPDThe key to improving the performance of
capital & construction projects.
Find out why and how on myFREE webinar on 28 November 2017
FASTER | CHEAPER | LOWER RISK
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Project Alliances & IPDThe key to improving the performance of
capital & construction projects.
FASTER | CHEAPER | LOWER RISK
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Join my FREE webinar to learn why using Project Alliance (or IPD) contracts is such a powerful way to improve project performance.
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