Profitable Projects is about money and business. It is a route to lower costs and higher profits, for organisations at any stage in the project process.
- Clients and developers can get shorter timescales and higher completion date certainty, with reduced costs coming from the shorter duration. Time and cost work together to markedly improve return on investment
- One-Stop-Shop providers, such as main/prime contractors and project managers, can develop a methodology and supply-chain that delvers faster and less expensive projects. They can win on price against traditional competitors, safe in the knowledge that they can profitably deliver at a lower cost and with less risk. They can offer financial guarantees that their traditional competitors would never consider. In addition the shorter duration means that organisations can do more work with the same resource and overhead. These two effects can improve bottom-line profit by 200-800% in a typical contractor. It will also remove the constraint to growth in many companies – the limited number of reliable project/contract managers they have. The same people can do more projects without becoming overloaded. Profitable Projects also makes it easier to develop new staff, and so helping remove the main constraint to growth.
- Specialist sub-contractors can work together to form an Integrated Project Team, founded on the Profitable Projects methodology, and offer clients a viable and attractive alternative to the main contractors/project manager procurement model. There will be none of the costs for control, policing and man-marking usually necessary in major project supply chains, offering a route to lower price for the client and higher profit for the supply chain. As with the one-stop-shop companies they get the same benefits from being able to do more business with the same resource.
The two pillars of the methodology are well established independently – Critical Chain and Collaborative Procurement. However they are not easy bed-fellows in major projects. Not because they can’t work in construction, but that they represent major changes to the ways project team members have been trained and managed in the past.
CCPM – Critical Chain Project Management
has brought benefit to hundreds of project-based organisations around the world. Many keep their use of the method a secret, believing it is a core part of their competitive edge. Some of those which have publicised their use of CCPM include
- Boeing – the airframe design for the 777ER300 pulled back a 2 month delay, and reduced errors by 50%
- Harris Semiconductor built and commissioned a production factory in one-quarter of the industry norm (yes 75% faster)
- Tata Steel in India reduced blast furnace shutdown duration by 60%, start-up duration by 75%, whilst coming in 13% under budget
- Tata’s TFR business increased their throughput of design-and-build projects by 80% in 2 years with the same resources, reducing design duration by 62%
- Seagate Technologies, now a global leader in computer storage, was an “also-ran” until it introduced CCPM into its new product development process, halving their average project time. This allowed it to get new products to market before its competitors, making the most of what is a very short product lifetime.
- Several armed services use CCPM in their maintenance repair and overhaul departments (repairing a damaged plane is a heck of a “project”) – The US Marine Corps increased throughput in one facility by 3 times, from the same factory, same machines, same team size.
- Japan’s Ministry of Land Infrastructure & Transport spends over $ 16 billion pa on public works. Within 5 years of coming across CCPM, without mandating it, it is used on almost all of their projects, as a key part of their “Win:Win:Win Public Works” initiative.
- In the US, house builder Shea Homes saw build duration fall by 40% releasing almost $7 million of additional capital in a year
- Delta airlines used CCPM to improve their engine maintenance and overhaul facility, increasing capacity by 35% within 12 months, and reducing the time engines spent in overhaul by over 50%
Collaborative Selection & Contracting
is seen as a risk by many organisations, and it certainly represents a way of working that is a far cry from the methods of arms-length procurement which are common in the construction industries. The literature on this topic includes both successes and failures. Although many categories of expenditure are best managed using market competition, we believe that on complex one-off projects a more collaborative approach should yield significantly better results than arms-length competition.
There is significant evidence that shows collaborative teams perform better than those with internal tensions. In business, collaborative supply chains have been responsible for the vast majority of break-through improvements in performance and cost that we have been able to identify. For example:
- The University of Tennessee’s Vested Outsourcing research cites examples from Microsoft, Proctor and Gamble and McDonalds as companies that have claimed dramatic improvements from collaboration
- Also in the US, Arizona State University’s Performance Based Studies Research Group has shown on over 1500 construction projects of almost $6 billion in value, that buying on price leads to poorer project performance and higher project costs. Their process which efficiently assesses performance, capabilities and value on construction, encourages the early establishment of a collaborative project team that is incentivised to improve the achievement of the client’s project goals.
- In the 1990’s a project for the US chemical company Rohm & Haas delivered an $18M plant modification project that they believe would not have been achievable using traditional contracting approaches. The collaborative approach they took – which was part of the UK’s government-sponsored ACTIVE initiative – gave them a faster, high quality and lower cost project than they believed possible, and their main suppliers (Amec and Eutech) made higher profits than they would normally expect.
With major construction projects, there is a wide variation of how the idea of collaboration has been applied. From “Project Charters” added to a traditionally negotiated contract, through to longer-term multi-project agreements. From those attempts that didn’t work we found two main groups of problems
- They were not truly collaborative. They missed some key criteria for success
- They did not know what to do! The projects didn’t exploit the collaborative project environment by thoroughly applying value-improving practices
Our Profitable Projects methodology addresses both these issues – we ensure the project team is selected and contracted following collaborative best practice, and through the application of CCPM, we give the project a framework to both improve performance, and embed the collaboration into day-day activities.
What we don’t explicitly address as part of our methodology is the wide range of other value-enhancing techniques that can then be used within the collaborative project team. This is not because they are not useful and valuable, it is just that there is already a good awareness in industry, with a range of professional support available to projects – there is little value in us duplicating this existing know-how,