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BPM is a method for project clients and their project supply chains to stop fighting, and in doing so, for both of them to make much more money. Clients will get projects completed much faster, at lower costs, and with less risk…whilst at the same time the main project supply chain members have a more profitable contract. They get these benefits by simultaneously implementing two techniques. A contracting method called Project Alliancing is used to form a truly collaborative project team between client and the key project suppliers. This ensures that the commercial interests of the client and the main suppliers are fully alligned. A Project Alliance by itself can deliver improved project performance, but it is not sufficient to guarantee it. The project team then uses a method called CCPM to plan the project and manage its execution. CCPM is the key to delivering the project in much less time, and using much less resource, but it will only work in truly collaborative project teams.
But BPM approaches things differently, and the time and cost savings come from removing unnecessary waste from the whole process.
With the commercial framework that we use in BPM this isn’t the case. Once a supplier/contractor is engaged on the project, their contribution/margin can only increase if the overall project is more successful, against the client’s objectives. It doesn’t matter who does what, and individual contractors don’t need to fight over work. We call this payment method CFV, and you can read about it here.
The CFV payment scheme is one of the critical success factors to one of the two main pillars of BPM – selecting and contracting with the main supply project team members using a Project Alliance.
There is no substantive reason why Breakthrough Project Management cant be used at projects of all types and sizes.
CCPM has certainly been used for projects lasting a few days or even less, with the same benefits of reliable shorter deliver date, and lower resource usage.
There is a view that Project Alliances, and collaborative forms of contract in general, take more time and effort than more traditional approaches.
But we don’t agree! Yes, setting a project alliance can be more effort – especially the first one – but they don’t have to be. Maybe if you are in the public sector, then this might be an important consideration, but it shouldn’t be in the private sector, unless the work for an individual alliance supply member is relatively small for them, and so ‘not worth the hassle of learning something new’.
Important contracts should be negotiated and agreed in detail anyway, and the discussion over payment, price and responsibility is only one part of this discussion. Ian was involved in a project which was a series of 7 separate mini-projects, managed on an alliance basis in the early 2000’s. The whole programme was worth about £3 million over about 18 months, with each sub-project being less than £500K. This was certainly large enough to interest the selected supplier.
Since you will be selecting and negotiating with a company for whom your size of project is good for them, then this should fit naturally, though problems can arise if you involve a big firm in a relatively small job. The fundamental idea of the CFV payment method used in an Alliance, is that the variable fee (profit and maybe some overhead contribution), is important enough to motivate the right behaviours by the supply member. But isn’t this the case in more traditional forms of contract too?
- Why wouldn’t they want to, after all they have got more value? This is only an issue if they have set non-cost performance targets that are (i) not of any real value to them, and (ii) set too low, so they are paying more for “basic” performance.
- And since this is always a possibility, the client should have a contingency budget to cover it as part of their overall project value.
- Remember that a well designed Project Alliance – especially one following BPM ideas – will have a target cost significantly less than a traditionally managed project. And traditionally managed projects went over their “certain” budgets most of the time. A project that has a cost target 15% below the traditional value, that has to allow say 3% contingency to pay performance fees for excellent performance, will still cost at least 12% less than your traditional project.
- Clients who want to insist on budget certainty are kidding themselves. It is impossible, and also self-defeating to try and force something inherently uncertain, to become certain! All this will do is inflate the budget.
- On most projects, time and quality, have much greater ROI impact than the total cost.
- And finally you can put caps into the payment rules to ensure there is no mechanism exploit the variable payment scheme. An example Ian worked on ensured that the supply members couldnt simply ignore cost, and spend as thought they had an infinite budget to make sure they achieved the other performance measures. In this case, “bonus” payment on non-cost measures were used to contribute to any significant project overspend.
Almost all of the cases of success in using CCPM have been in non-capex projects. And if your project is one where most of the work is done by members of a single organisation, with only a small amount of external work contracting, then CCPM by itself will deliver the significant benefits we claim for BPM.
Project Alliancing is an example of collaborative contracting, an approach that can be applied to all kinds of business relationship. Payment techniques like the CFV method have been used in many non-project agreements, including long-term facilities management, key manufacturing supply partners, and service providers such as consultants and marketing agencies.
But CCPM by itself cant be made to work without a collaborative project team. And the way in which most capex projects select and contract with, the key contractors and suppliers makes it very difficult to implement. On the other hand, Project Alliancing by itself doesn’t automatically guarantee a better project. It is the combination of these two techniques, that we believe will…
- Deliver a step change in project performance
- On-time in much less time
- On-budget at lower cost
- Without compromising on scope, quality or risk
- Provide a truly collaborative project team
- that is then in a much better position to use and exploit a wide range of existing value-improvement and risk-reduction techniques in project management
Robert and Ian’s early careers were in capex and construction projects. They knew a lot about these sectors, and as they learned about these innovations, they looked back on early careers, and wondered why they were not being implemented. Add to this the significant number of reports highlighting the poor performance of this kind of project, the growing global demand for infrastructure, and the continuing squeeze on budgets, sharing what they knew, and to try and get the industry to change, seemed the right thing to do.
We are talking with partners interested in translating it into their language.