Fix it or Forget it? Dealing with Troubled Projects

1. Fix it or Forget it? Dealing with Troubled Projects Scott Hine, Director Project Management Coordination Office, U.S. Department of Energy (DOE) Office of Energy Efficiency and Renewable Energy (EERE)

2. Learning objectives • Analyze innovative tools that can provide the data needed for a full understanding of project health. • Utilize project data to identify key criteria determining whether to rescue or cancel a troubled project.

3. Presentation outline • Overview of troubled projects • Portfolio overview • DIY: Establish an early warning system to identify, evaluate, and respond to troubled projects • Best practices

4. By a show of hands… There is $122M wasted for every $1B invested due to poor project management. (PMI) • How many of you have had experience with troubled projects or project failure? • How many of you have fixed a failing project that was close to being cancelled? • How many of you have had to terminate a project? • Did it go smoothly? Success in 68% of IT projects is “improbable.” (IAG Consulting) Projects are 2.5 times more successful when proven project management practices are used. (PMI)

5. Overview of troubled projects Only about half of all projects were completed within budget, on time, and meeting scope last year. (PMI) • Project “failures” influenced by project factors, external market conditions, and regulations • Troubled projects often go unnoticed until it is too late • Project teams reluctant to identify underperforming projects • Ensure effective communication of the consequences of “failure” and response to risk • Response is often to “fix it,” but “forgetting it” is sometimes the more appropriate choice High-performing organizations complete 89% of their projects, while low performers complete 36%. (PMI)

6. Portfolio overview National Laboratory • ~2,800 projects related to renewable energy and energy efficiency technology and innovation • $1.2B in laboratory projects for 17 national labs • $4B in financial assistance projects for 12 technology areas • Regular monitoring and reporting requirements • 3 to 3.5 year project length with annual budget periods • Average project size $3M to $4M Projects by State 1 - 10 11 - 20 21 - 30 31 - 40 41 - 50 >50

7. Technology and Innovation Successes

8. Portfolio challenges • Large, technically and geographically diverse funding recipients • Internal and external risks influence project performance • High profile projects • Unique mission • Project goals are advancing technology, not maximizing profit • Stewards of taxpayer money to obtain the greatest impact • Prioritize proactive communication of risks and working with performers to resolve issues • Financial assistance projects cannot be terminated for convenience Technology Areas

9. How do we address troubled projects? • “No surprises” culture • Proactive communication of risk (“See something, say something”) • Use multiple data streams to establish an early warning system • Incorporate enterprise risk management activities into everyday business operations • Continuously train project managers on warning signs

10. DIY: Establish a project evaluation process Get buy-in from stakeholders and senior leadership Identify evaluation criteria Develop tools to analyze project performance Identify timeline for evaluation Conduct analysis and reporting Establish policies to carry out decisions and support decision-makers Communicate policies and train staff These steps can be adapted to all organizations, regardless of your priorities or constraints.

11. DIY: Get buy-in from stakeholders and senior leadership • Communicate goals to senior leadership • Proactively communicate risk • Establish communication pathways • Remind them that risk is expected • Set expectations • Review what project “failure” might look like • Prepare for potential consequences • Identify how the organization will respond and move forward • Get input from staff that will be asked to carry out proposed policies

12. DIY: Identify evaluation criteria of troubled projects • Identify risks and develop thresholds for deviation from acceptable limits • Use historical performance to identify warning signs • Revise as necessary • Work within the constraints of your organization

13. Example evaluation criteria of troubled projects • 20+ indicators of significant events • Layoffs or high turnover • Major audit findings • Changes in market conditions • Leadership changes • Failure to comply with corrective actions • Chronic failure to meet performance, schedule, or cost goals • Policy changes that may have market, financial or technical impacts • Significant weather events

14. DIY: Develop tools to analyze project performance • Informed by evaluation criteria and data availability • Can be as simple or complex as you want, as long as it meets your needs • Ensure that your outputs are useful and deliberative • Validate data once there is an “event”

15. Financial health analysis for select performers • Submit report on findings and provide recommendations to project management staff • Input data into algorithm • Schedule performance • Cost performance • Project size • Number of projects with a specific vendor • Invoicing history • Reported project health • Third party financial metrics • Monitor significant events • Cash flow and liquidity issues • Changes in market conditions • Supply chain concerns • Leadership change or layoffs • Changes in partnerships

16. Monitoring activities for all projects • Project management staff provide ongoing monitoring • Review of quarterly progress and financial reports • Annual site visits take a closer look at progress, capabilities, and processes • Independent reviews evaluate how projects are being executed and if they are meeting milestones • Regular communication with performers to help address issues as they arise • Significant events are reported immediately • PMO maintains a list of projects under increased monitoring and oversight to brief senior leadership • Monitoring still needed for some “completed” and “closed” projects

17. DIY: Identify timeline for evaluation • Consider: • Frequency of data availability and analysis • Project lifetime • Project size • Time required to detect changes • Don’t overburden your project teams, but ensure you are reviewing information with enough frequency to allow for response

18. Example evaluation timeline • Annual reviews to make decisions regarding continuation of funding • Redirection • Down-scope • Revise budget • Decide to not continue funding • Ongoing monitoring and communication with performers • Increased oversight • Possible termination of funding

19. DIY: Conduct analysis and reporting • Analyze available data using the tools that you have developed • Establish a system and schedule for reporting results to decision makers and senior leadership • Ensure decision makers have the results in hand when they need to make decisions, or have access to the information as often as possible

20. DIY: Establish policies to carry out decisions • Who needs to be involved in the decision making? • How will the decisions be carried out and by whom? • Provide decision-makers with the information they need to know, what can/should be addressed with corrective action, and when project termination might be appropriate • Obtain all required approvals • Ensure proper documentation of all actions

21. Example steps for addressing troubled projects 3 Resolve issues directly Terminate Project 2 1 Increase Oversight Performer does not comply with corrective actions Project issues detected through monitoring – PM staff briefs senior leadership and attempts to assist performer Performer responds to assistance, project on track Performer non-responsive to assistance, receives corrective actions Office decides to terminate project Project continues as planned Performer complies with corrective actions Legislative Affairs approves termination and de-obligation of funds, recipient notified Project may continue under increased oversight PMO updates records and briefing materials Note: Actions listed here are a simplified example, and are not meant to depict an actual policy.

22. DIY: Communicate policies and train staff • Brief all necessary staff on policies • Provide trainings • Recognizing warning signs • Data analysis • Decision-making • Carrying out policies • Hold exercises/drills with staff to evaluate case studies

23. Best Practices • Monitoring troubled projects is the right thing to do • It will take time to gain traction with new policies • Work with the project teams to show value – it isn’t just for senior leadership • Continuously remind project teams that all projects will not be on track all of the time • Communicate to project teams that it is always better to report an issue than to not report it

24. Policy benefits • Address project issues and decide to “fix it” or “forget it” as early as possible • Open lines of communication with senior leadership and other decision makers to manage risks • Stewards of taxpayer funds • Recovered funds made available for other projects • Congressional reporting

25. Contact information Scott Hine, Director Project Management Coordination Office, U.S. Department of Energy Office of Energy Efficiency and Renewable Energy scott.hine@ee.doe.gov 202-586-9744 Executive Sponsor of FedPM COP Get involved at https://go.max.gov/fedpmcop