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Project governance


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My special study in masters on project governance

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Project governance

  2. 2. ContentsObjectives. Conclusions / Recommendations Introduction. Literature review Case study. Analysis of case study References 2
  3. 3. Objective of the study • To understand the concept of project governance. • To understand the implementation of the principles of project governance in construction organizations. • To analyze the principles by implementing them on case study. 3
  5. 5. What is project governance ? • Project governance is the management framework within which decisions of the project are made. Project governance Policies Regulations FunctionsProcedure Portfolios Confident and transparent 5
  6. 6. INTRODUCTION CORPORATE GOVERNANCE PROJECT MANAGEMENT PROJECT GOVERNANCE RELATION • Provides the structure through which the objectives of the company are set. • It is the system by which companies are directed and controlled. company’s management Its board Its shareholders Other stakeholders 6
  7. 7. Why project governance? Set out lines of responsibility and accountability within the Authority for the delivery of the project; Give the stakeholders the ability to manage their interest in the project; Provide a forum for issue resolution; Communicate information by reporting to stakeholders so that they can effectively fulfil their roles Provide a framework for project disclosures. 7
  8. 8. Literature review 8
  10. 10. Project owner/sponsor • The project sponsor usually chairs the project steering committee and is the link between the organization's senior executive body and the project. • Owner is ultimately accountable for the success of the project. Senior executive body Owner Project 10
  11. 11. Project sponsor Project leadership The sponsor provides: timely decisions, clarifies decision making framework, clarifies business priorities and strategy, communicates business issues, provides resources, engenders trust, manages relationships. Project management • The project sponsor engages stakeholders. • governs stakeholder communications, • Manages client relationships and governance of users and suppliers. • arbitrates between stakeholders. Stakeholder management The sponsor provides leadership on culture and values, owns the business case, working with the steering committee keeps the project aligned with the organization's strategy, governs project risk, focuses on benefits. 11
  12. 12. The responsibilities of the project sponsor are: • Securing budgets and ensuring appropriate financial controls are in place • Supporting the project manager to successfully deliver the project. • Prescribing the project both internally and externally. • Ensuring a project is undertaken according to the Project Management Framework. • Appointing the project management team including other members of the Project Board • Signing off project deliverables 12
  13. 13. Project Board • It provides direction and management for the project. • Final decision is made by the project owner. • Project board meeting is often organized for project board members for decision making on reports of the project director and project manager SENIOR SUPPLIERPROJECT OWNER PROJECT DIRECTOR SENIOR USER 13
  14. 14. Project Director • The project director acts as a representative of project owner and responsible for empowering project manager. • The project director is a core member of the project steering committee or project board. Skills project management . Risk management Relation management 14
  15. 15. Project manager • He ensures that the project outcomes are of required quality. • Develops and updates the project management plan. • Have to manage day-to-day aspects of project on behalf of project owner. • Project management also resolves planning, implementation issues and manage progress and budget of the project. 15
  16. 16. Responsibilities of project manager: Directing the project team Maintaining the risk register, issue. Managing the project plan. Reporting on progress to the project sponsor and other stakeholders Ensuring the project is managed in accordance with agreed processes and tolerances approving minor variations to budget, schedule or scope, within agreed tolerances 16
  17. 17. Investment Decision Group • This group provides platform to stakeholders to give any kind of input to the project. • No validity for life span of the group. (Entire life of the project) • Internal or external of organization. • Stakeholders may be invited to participate but often they will not report to the organization and cannot be forced to participate. • Called to support project board (Rarely) 17
  18. 18. 5 Questions for Governance team • (Includes both on and off project activities.) Are we on track – to plan/schedule? • (Includes required business decisions and escalation issues.) What decisions need to be made? • (Includes required inter-dependency issues, resource issues, proposed scope changes.) What issues are there – inside or outside the project? • (Includes expenditure, financial commitments, AND benefit value driver changes and benefits realized to date.) Are we on track – to budget and benefits plans? • (Includes project, benefits delivery and business impact risks and critical success factors status.) Has the objectives of the project changed? 18
  19. 19. 2.2 PRINCIPLES OF EFFECTIVE PROJECT GOVERNANCE: 1: Ensure a single point of accountability. 2: Service delivery ownership determines project ownership 3: Ensure separation of stakeholder management and project decision-making 4: Ensure separation of project governance and organizational governance structures 19
  20. 20. 1: Ensure a single point of accountability • Ensures clarity of decision making and empowers the accountable person within the organization. • Consistency of accountability throughout the project’s life ensures proper decision-making – the focus of the project, its objectives and the benefits it seeks remain consistent throughout its life, or at least are not changed without due process. • The project governance framework is a document prepared for each project outlining who has responsibility and authority to make decisions which ensures there is clearly defined accountability for all aspects of the project. 20
  21. 21. Effective accountability requires everyone within the project to know: Note: Care should be taken to ensure individuals who join the project receive sufficient introduction to this framework. What they are responsible for. The limits of their authority and tolerance levels. When tasks have to be achieved. Communication, reporting and monitoring lines. 21
  22. 22. 2: Service delivery ownership determines project ownership • Organizations have to be more competitive by continuously increasing their quality of service • Services can be delivered directly or indirectly by products. • For example, construction material producers provide services to a housing developer through construction materials they produce, and the way that they serve is considered on quality, schedule, cost, etc, • Changes on technology may support the service or the project which delivers the service. For example, precast concrete panel can shorten construction schedule of the project; 22
  23. 23. The project as a transition mechanism Equal importance to project ownership and (service and Asset delivery) 23
  24. 24. 3: Ensure separation of stakeholder management and project decision-making Increase in size of the committee. The detailed understanding of each attendee of the critical project issues reduces Many members within the assembly raise more opinions, Questions because they consider that being members of the assembly they are entitled to do so. They just use the meeting to get updated about the project issues stakeholder Management (Project board - decision making) 24
  25. 25. 4: Ensure separation of project governance and organizational governance structures • The project governance is ineffective if there are many layers in the project decision making process. • Organization structures generally do not provide the necessary framework to deliver a project. • Adoption of this principle will minimize multi layered decision making and the time delays. • Empower Project decision making body to make decisions in a timely manner. 25
  26. 26. What happens if governance is not good? Failure to communicate fully and appropriately on a timely basis. Failure to specify or accept decision making authority and responsibilities. Confusing contract management and decision making. Over emphasis on reporting that reduces meetings to status updates rather than interactive decision making. Non-alignment of key stakeholders. Confusion between the project and organizational decision-making structures. lack of project direction and control. 26
  27. 27. “STAR SERVICE CENTER” 27
  28. 28. Introduction • In 2009, the board of directors decided to invest in the project SSC. It is a five storey office building located on plot A-01, star road, in Star Commercial Complex (SCC), Dilshuknagar, Hyderabad city, Telangana, India with its main objective of initiating the master project SCC and of providing office services to tenants as well as for STAR itself. Total land area of the building is 6,634.03m2. • Total construction schedule of the project is 638 days starting from December 17, 2009 and completed on September 16, 2011, delayed 286 days as per the project plan. 28
  29. 29. SSC STRUCTURAL Main building ARCHITECTURAL ParkingInfrastructure M/E Fire prevention and fighting system Electrical works Plumbing/ Water supply Land Scaping WORK BREAK DOWN STRUCTURE • 2,787.5 m2 • Five floors • RCC • Internal traffic • RCC road • 280 bikes • 50 cars • RCC • Sump • Over head tank • Supply 560KVA • Generator • Installation of smoke detectors, sprinklers etc., • 20% 29
  30. 30. Project cost Total project cost is classified into eight packages: Original Cost:- 43615USD Liquidated Cost:- 53544USD Original Cost:- 113464USD Liquidated Cost:- 136157USD Original Cost:- 1076514USD Liquidated Cost:- 1076514USD Original Cost:- 44180USD Liquidated Cost:- 46899USD 4:Perfect construction work package 3. Package of transformer and underground water tank: 2. Construction supervision and construction management package: 1. Design package: 30
  31. 31. Original Cost:- 1123183USD Liquidated Cost:- 1104384USD 4:Perfect construction work package Original Cost:- 136969USD Liquidated Cost:- 151713USD 4:Perfect construction work package Original Cost:- 31490USD Liquidated Cost:- 22190USD Original Cost:- 3147USD Liquidated Cost:- 3219USD 5. M&E work: 6. Infrastructure and parking shed package: 8. Landscaping work: 7. Retaining wall package: 31
  32. 32. THE PROJECT GOVERNANCE FRAMEWORK The Project Director (Engineering Manager) The Project Owner (President) The Senior User (Department Managers) The senior Supplier (Designer and Interior Contractors) Project Board Investment Decision Group (Board of Directors) Project Manager appointed by Senior Supplier Project team (architect, civil engineer, M&E engineer and interior engineer) 32
  33. 33. PROJECT SPONSOR • The sponsor of SSC is STAR • The management assigned the president of organization as sponsor of the project. • He is the head of the project board responsible for project success. • He assigned project director and other staff of project board. • He involved in the project board and solved many issues within project board. • He reported the information directly to the investment decision group. 33
  34. 34. SENIOR USER • The first defined user of SSC is STAR itself using 900 m2 of building area. • The sponsor assigned manager of the site management department to act as the Senior user of the building after completion of construction. • Operation and maintenance. • Other users are customers having office demand. They are undefined users. • As this manager is not the member of project board. • There is no manual of users requirement from early stage of the project. 34
  35. 35. SENIOR SUPPLIER • The project sponsor decided to choose the senior suppliers from outside of the organization. • Company A was assigned as the designer of the project. • Company B was selected for main construction packages through bidding process. • Company C was nominated by owner for sub-construction works like transformer, underground water tank and retaining walls. • Company D was nominated for infrastructure and parking sheds by sponsor. • Company E was nominated by sponsor for landscaping. It is reminded that all of the senior suppliers nominated by owner are professional in the allotted works 35
  36. 36. PROJECT DIRECTOR • The project owner appointed the manger of the engineering department as the project director. • He is the member of the project board and reports the information directly to the project owner and also the project manager. • The project director nominated two engineers in the engineering department to act as project engineers for the SSC. • The project director presented daily in the project to keep the project supported. • The project director is expertise in construction management, so he could assist the project owner to drive the project successfully. 36
  37. 37. PROJECT BOARD • The project board was established as per the decision of the project owner. • Members of the project board are the project owner, the project director, and the senior supplier. • The project board was lack of senior user as discussed in the above article senior user. • The main objective of the project board is decision making. • Weekly meeting are held. (Project budget, project quality, project work scope, material changes, budget changes.) 37
  38. 38. PROJECT MANAGER • Project manager was assigned by senior supplier and approved by sponsor. • Position of project manager has changed based on the stages of the project. • The project manager is responsible to deliver the project within the time, cost and money mentioned in contract. • The project manager worked closely with the project director to make sure that the project delivery meets the project’s owner’s needs. • There was 5 main project managers represented by companies A,B,C,D and E. 38
  39. 39. INVESTMENT DECISION GROUP • The project owner with support from the project board submitted budget plan to the investment decision group (the board of directors) for approval. • In case of budget change, the project board was responsible to consider and give instruction whether it approves for the change. The investment • decision group in this case study includes a chairman, a vice chairman and six directors. 39
  40. 40. PROJECT TEAM • The project team comprised engineers assigned by senior suppliers • Members of the project team worked and reported directly with the project manager. Project team architects civil engg, M&E engg Responsible for Detail activities 40
  42. 42. PRINCIPLES OF EFFECTIVE PROJECT GOVERNANCE: 1: Ensure a single point of accountability for the success of the project. 2: Service delivery ownership determines project ownership 3: Ensure separation of stakeholder management and project decision-making 4: Ensure separation of project governance and organizational governance structures 42
  43. 43. CONSIDERATION ON THE PRINCIPLE 1 OF EFFECTIVE PROJECT GOVERNANCE “Ensure a single point of accountability” The management assigned the president of organization as sponsor of the project. He is the head of the project board responsible for project success. He assigned project director and other staff of project board. He involved in the project board and solved many issues within project board. He signed the liquidated damages. 43
  44. 44. CONSIDERATION OF THE PRINCIPLE 2 OF EFFECTIVE PROJECT GOVERNANCE “Service Delivery Ownership Determines Project Ownership” No senior user from the beginning of the project. User needs are not defined. No proper project targets was prepared by owner from early stage of the project. Problems in project investment related to ineffectiveness of parking and space for advertising demands was aroused. 44
  45. 45. CONSIDERATION OF THE PRINCIPLE 3 OF EFFECTIVE PROJECT GOVERNANCE “Ensure Separation Of Stakeholder Management And Project Decision Making Activities” • Project governance framework of this project met the requirement of the principle 3. Project board Project owner Project director Senior supplier Therefore, all of the project board meetings were aimed to project decision making. 45
  46. 46. CONSIDERATION OF THE PRINCIPLE 4 OF EFFECTIVE PROJECT GOVERNANCE Ensure separation of project governance and organizational governance structures Slow decision making Sponsor President/ Sponsor External issues Director Manager of engg dept/ Director Lot of work load DELAY 46
  47. 47. Conclusions/ Recommendations Every organization must follow the project governance framework independent of its size. All the projects should have the project governance framework and also satisfy all the 4 principles of the project governance. Ensure that the person who is selected for the sponsor of the project should have enough ability to manage the framework and project issues. Try to avoid playing multi roles at the same time. Due to which this project have been delayed. 47
  48. 48. REFERENCES • Alessia D’Amato and Nigel Roome (2009), Leadership of organizational change toward an integrated model of leadership for corporate responsibility and sustainable development: a process model of corporate responsibility beyond management innovation, Corporate Governance, Vol.9 No 4, pp. 421-434 • Karim S. Rebeiz and Zeina Salameh (2006), Relationship between Governance Structure andFinancial Performance in Construction, Journal of Management in Engineering, Vol. 22, No.1, pp. 20-26. • Charles Y.J. Cheah and Micharl J. Garvin (2004). An open framework for corporate strategy in construction, Engineering, Construction and Architectural Management Vol. 11 No. 3, pp.176-188 • Pearce, J. A., and Zaha, S. A. (1991). “The relative power of CEOs and boards of directors: Association with corporate performance.: Strategic Manage. J., 12, pp. 135-153 Pfeffer, J. (1972). “Size and composition of corporate boards of directors.” Adm. Sci. Q., 17, 218-228 48
  49. 49. “THANK YOU” 49