As major projects continue to grow in size and value, so too does the pressure to deliver them on time, within budget, and to a high standard of quality.
However, even where project teams achieve these critical goals, owners are often left with assets that cannot be operated as envisaged in the project brief.
While it’s vital to ensure projects are on time, on budget, and on quality, these goals are often not enough to ensure that an asset will be operational at completion. The missing fourth dimension is that the project must also be "on competence," meaning the right people and processes are in place to run the asset from the day the project is finished.
The cost of delays
According to the US National Institute of Standards, only 30 percent of major projects are delivered on time and within budget, let alone being fully ready to operate. This leads to significant waste from delays, rework and non-productive activities. The impact of this lost time is captured in the figure below and can often be directly attributed to the fact that teams have overlooked operational readiness in the early stages of a project’s life cycle.
The result is millions or even billions of dollars’ worth of lost potential earnings and loss of production value as teams scramble to bring the new asset on line, rather than being able to enjoy a seamless transition from operating a construction site to a fully productive and functioning asset.
For example, we know of one project where the cost attributed to maintenance activities in the first year of a new asset’s operation was about 35 percent higher than budgeted. This additional and unplanned maintenance, together with incomplete project delivery, led to the full-facility startup being delayed by nine months and about 50 percent in nameplate capacity production losses. None of this was planned.
Building competence into projects
Obviously no project team or asset owner wants to incur delays in finalizing projects or bringing new assets into operation. However, this is often hard to avoid because projects are broken into parts run by separate teams which are primarily focused on completing the physical asset rather than ensuring the organization will be competent to operate it once it has been completed.
We believe that focusing on operational readiness throughout the project can have two benefits. Not only is the organization more likely to be ready to operate the plant from day one, having the right people and processes in place early will help ensure that the various project tasks and deliverables involved remain aligned to the original business case.
At the moment, project decision making that determines operational readiness often lacks definition, has no set boundaries and is often made according to engineering judgements. In many instances, decisions are copied from similar projects. This needs to be addressed if asset owners are to achieve their targeted "value return" on projects.
Given the complicated ecosystems that make up major projects, companies need to build more robust internal systems and processes, preferably defined around asset management principles and competency. In particular, fine-tuning the way operations and maintenance teams work with project teams will lead to improved project delivery with a greater likelihood of return on the investment.
Making operational readiness a risk issue
One step owners can take to embed operational readiness into the project delivery process is to make it part of risk management activities. This will help focus on the competency of the project team as well as the operations team.
An operational readiness team could initiate mitigation measures for the specific risks that might prevent a project being ready to operate at completion. This is likely to include hiring the right personnel early and would give the asset owner extra assurances that the organization, support processes and people were in place to receive and operate the facility.
Implementing policies and approaches that support good governance across all parts of the project will be a step to clearly define the project and its business goals to partners, suppliers and collaborators. This will engender better decision making throughout the project, better risk assessment and mitigation and, ultimately, a seamless and timely handover of a fully functioning asset to its owner. The result for projects managed in such a way will be a reversal of the often-experienced value erosion to value creation.