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Efficient capital investment - experience from the Concept Research Programme Knut Samset Professor, NTNU, Director , the Concept Research Programme. EUREGIO III Project 3rd Master Class Programme 22 March 2011. 1. Projects – success and failure.
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Efficient capital investment - experience from the Concept Research ProgrammeKnut SamsetProfessor, NTNU, Director, theConcept Research Programme EUREGIO III Project 3rd Master Class Programme 22 March 2011
1.Projects – successand failure There is no shortcut to a successful project
Governance versus management Governance processes that define expectations, grant power, and verify performance. Enabling measures – to help realize expectations Regulatory measures – to avoid adverse effects Project Governance processes that need to exist for a successful project Project Management processes to organize and manage resources required to complete a project within defined scope, quality, time and cost constraints.
Successfulprojects: somestrategic and tacticalissues Effect Society Strategic performance Sustain- ability Rele- vance Success Tactical performance Cost Quality Project Time
High Tactics Low High Low Strategy Tactics vs. strategy and project success Wrong type of project Highly successful Complete failure Inefficient/ ecpensive
Four controversial projects: • Oslo Opera House [no strategic perspective] • Oslo airport high-speed shuttle train[not financiallyviable] • Regional aviationcontrolcenter[redundant] • Northern onshore torpedo battery[useless]
Hydro power plants + 2. Opera 4. Aviation control center Tactics (management > delivery) 5. Torpedo battery - 3. Airport Shuttle train - + Strategy (design > utility) Test: Strategic and tacticalperformance Wrong type ofproject Highlysuccessfulproject Complete failure Inefficient/expensive
Relevance Sustainability + Tactical performance - Effective- ness Impact + - Strategic performance Efficiency
Four hospital projects: • National University Hospital, [(in)significantcostoverrun] • Regional University Hospital [oversized, huge cost overrun] • Retro type hospital [inefficient] • Future type hospital [Relevant, efficient, effective, sustainable] • Organisationalstructure • Integration public/private services • Health promotion vs. curativetreatment • Degreeofspecialisation • Etc.
2. Quality Assurance and decision making Facts do not cease to exist because they are ignored. (Aldous Huxley)
Societal process Purpose (long- term effect) Goal (effect) Process Outputs Inputs Project Front-end phase Implementation Phase Operational- phase The project in context
Project Managing uncertainty Information Uncertainty Time Front-end phase Implementation phase
Front-end: Escalationofcostestimates Cost overun As it should have been Cost savings Strategic underestimation As it was Front-end implementation Initial estimate Final budget Final cost
Oslo Operahouse Regional University Hospital 400 1200 1000 300 800 200 600 400 100 200 0 0 1 2 3 5 7 9 11 10 1 3 5 6 9 12 14 17 Year National University Hospital Estimation and cost management Shipping tunnel Cost estimate Torpedo Battery Airport shuttle train
Someobservations • There is a strong tendency to choose the initial concept and stick to it • Incremental improvements of an inferior solution - rather than fundamental change • There is an overwhelming inertia: once set in motion - always impossible to stop • The window of opportunities is usually larger than envisioned - and largely unexplored
Decision process Needs Effect The project process Analytic process Project start D1 D2 D3 D4 A1 A2 A3 Analysis and Decision making: Technocracy Planning and implementation
Decision process Cabinet approval Needs Effect The project process QA1 QA2 Analytic process Project start D3 D4 D1 A1 A2 A3 D2 Analysis and Decision making: Anarchy Parliament approval
Needs analysis • Strategy document • Requirement spec. • Alternatives analysis • (min. 3 alternatives) • Overall strategy • document • Budget Cabinet decision Parliament decision Needs Effect Pre-project Project QA 1: Review : documents Analyze: economic analysis uncertainty Assess: relevance feasibility sustainability timing Recomm: ranking management strategy QA 2: Review: documents Analyze: management strategy success factors and uncertainty Recomm.: budget, contract and management strategy QA regime: scope and procedure Decision documents produced by responsible ministry/agency Scope of external quality assurance
Effect of QA scheme on cost estimation QA-advisors’ estimate as comparedwithAgencyestimate - percentages
Effect of QA scheme on budgetary compliance Average 5 % • 23 projects, total investments EUR 4 Billion • All projectswithinbudget (P85), but one • Final cost 5 per cent belowbudget on average • Half theprojectsbelowexpectancycost (P50) and half ofthemabove
Featuresofthe QA scheme • The most criticaldecisionsareanchored at thehighestlevel (Cabinet) • The qualityassurance is done by externalconsultants • The regime does not requirechanges in existingprocedures for analysis and decision making • It merelyaims to raisetheprofessional standard of underlying documents • The scheme is supportedwith a highlevel forum for exchangeofexperiencebetween all involvedparties
Somelessonsregardinganalysis and decision making • Analysis is oftenweak and thepotential for improvement is huge • Better analysis is not enough to improvedecision making • Most decisionsare de facto made at theexecutivelevel (agency) and centralgovernment’sinfluence is limited • Coalitionsof stakeholders tend to have an adverseeffect on decisions • High levelanchoring and transparencyseems to work by providing a feedback to theexecutivelevel
+ Tactics (management > delivery) - - + Strategy (design > utility) Test: Strategic and tacticalperformance Wrong type of project Highlysuccessfulproject Failure Inefficient/expensive
+ Tactics (management > delivery) - - + Strategy (design > utility) Test: Strategic and tacticalperformance Wrong type of project Highlysuccessfulproject ? Failure Inefficient/expensive
Idea Phase Concept Phase Pre-Project Phase B1 B2 B3 B4 Model for Front-end Planning and Decision making in Hospital Projects