Finding opportunities in risk ensures informed decision-making

While the word “project management” could be described by some as a bland term, in reality, it is a dynamic, creative process.

08/08/2011


While the word “project management” could be described by some as a bland term, in reality, it is a dynamic, creative process. Project management controls the flow of work by guarding against problems, organizing groups to work toward a common goal, and helps make and enforce decisions that enable the groups to reach their goal on time and within budget.

The spirit of project management calls upon managers to do their jobs proactively: to seize initiative, identify potential problems and strategies to avoid them, and plan out the work flow without spending more money than has been allocated.

Successful project management involves these and other considerations. Two issues in particular require a firm hand: risk management and schedule management. That’s because they interact. A poorly managed risk can cause a project to fall behind schedule, and a poorly managed schedule can create a risk.

In general, a number of risks threaten every project’s success. A project manager’s first and last task is to identify those risks, then marshal the resources and people necessary to prevent them from materializing – or to overcome them if they do. Sometimes managing a risk in just the right way gives rise to opportunities. A good project manager may even be able to profit from risk.

Besides risks, it’s important to manage schedules, which change often. Whether someone misses a deadline or completes a task ahead of time, the project management team adjusts the schedule -- accommodating the need for more time to complete a task, or massaging schedule elements to fill gaps.

The recent construction of a large food industry processing facility on a 300-acre Brownfield campus with 18 existing buildings illustrates how risk and scheduling management interact to benefit a project.

The need for the new facility was twofold. On the one hand, recent sales growth required additional production. At the same time, certain federal regulatory requirements slated to take effect at the beginning of 2012 would require upgrading existing processing plants. So the new plant would not only add production lines, it would replace existing production lines that would soon fall out of compliance. The regulatory schedule, then, forced the design and construction schedule onto a fast track.

To meet the demanding schedule, the processing company’s consulting Project Manager divided the project into three phases: (1) receipt of raw materials, (2) processing of raw materials, and (3) relocating and upgrading manufacturing processes.

Completed ahead of schedule, calendar-based phase one is now in production. Phase two, currently under construction, must come on line by the end of next year. Phase three is planned to be on line by the winter of 2012.

The Project Manager started the planning process by identifying risks and scheduling priorities that could affect the project, then developing countermeasures to limit negative consequences and promote adherence to the schedule.

The consultant assembled a risk management group with members representing the owner, construction manager and engineer. The members’ expertise encompassed a host of relevant disciplines, from construction to engineering to production operations and finance.

The group held monthly meetings, which began during planning and continued through design, construction and commissioning. The meetings enabled the group to identify three major risks, each with significant schedule implications which loomed over the project.

First came the recessionary construction market, which afforded a buying opportunity for contractors and labor as well as to acquire construction materials. The second risk involved power needs for the site. Third, the risks associated with re-developing a brownfield site.

Recessionary construction markets

During a recession, the production of construction resource material slows and many contract laborers are furloughed.  Absent strict project management, these recessionary cutbacks pose enormous risks. On the other hand, intelligent management can turn such risks into opportunities.

By accelerating the engineering and design work, lead time for acquiring materials is shortened, at perhaps significantly lower prices. Risk management tasks should include tight monitoring of delivery schedules, acting quickly when deliveries can be expedited or re-sequencing schedules should a vendor lag.

When contractors scale back on management and labor personnel during a recession, an excessively available labor pool is created. If other large-scale construction projects are ramping up in the same area at the same time, that pool can quickly dwindle.  Because intelligent project management applies early engineering and design as part of the process, the Project Manager can issue bid packages earlier.

The project’s overall schedule benefits from the accelerated material acquisitions and contract awards. These elements happen in enough time for the team to deal with other risks that could not be turned into opportunities.

Power problems

A 300-acre manufacturing campus uses quite a bit of electricity. Development of the manufacturing process made it difficult to estimate how much electricity the facility would need.

This raised two questions: what level of electrical power would the service agreement with the local electrical utility specify? And, what were the specifications for the transformer that had to be ordered to step down power from electrical transmission lines?

A low service specification would handicap plant operations, but a high specification would raise long-term operating costs.

The risk management committee built the power problem into the schedule by calling for power needs and transformer specifications by a certain date. The committee understood that missing the date would cause construction delays and thus, significant schedule damage.

As it turned out, hesitating to specify the electrical service number led to a delay in ordering the transformer, and the schedule had to be re-sequenced in an unorthodox way. Contractors carried out all of the secondary site work and then back-fed temporary power to test systems. Ordinarily, the power goes in first.

In short, the risk management committee dealt with the risk by ensuring that a series of rational business decisions, not a hastily prepared emergency management program, would solve the power problem.

Brownfield risks

As an abandoned rust-belt type manufacturing site, the aging plant’s infrastructure including fire protection, natural gas, compressed air and other systems had fallen into disrepair. Without an inspected and certified fire protection system, the plant could not be occupied.

The risk management committee recognized this and put countermeasures in place during the project’s planning and design stages. By making it a priority from the outset, all of the existing systems were tested and inspected, resulting in a new fire system that was installed and certified.  Air, gas and water systems were evaluated in the same manner. The potential impacts were recognized early in the project process and steps were taken to eliminate any threat they had on operational startup of the manufacturing facility.

With phase two construction nearing completion and phase three about to begin, the project is only about three quarters complete. Nevertheless, it is moving forward, well within the timeline required by the current schedule. This is thanks in large part to the project committee’s aggressive risk management. At this point, the committee continues to monitor these risks’ status, and tamp down their ability to harm the project.

By and large, at the halfway point, the major risks had been addressed and resolved. Not only do they no longer raise concerns, they also presented opportunities, which the risk management team would never have seen without a well-managed schedule.

Dan Vining, PMP, is General Manager at SSOE Group, an international engineering, procurement, and construction management firm. With 21 years of experience, Dan specializes in industrial and manufacturing projects. He can be reached in SSOE’s Toledo, Ohio office at 419.255.3830 or Dan.Vining(at)ssoe.com.



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