By: W. Scott Cameron, PRG Advisor
I’ve been involved in a variety of project critiques/peer reviews throughout my 40+ year career in the construction industry and have asked the teams involved to articulate their “lessons learned” on their projects. During these reviews, my blood pressure would invariably increase because I heard the same lessons learned over and over again in each review.
Why do we continue to learn the same lessons over and over again?” I reminded myself the individuals are probably experiencing these lessons for the first time, so, it is a new lesson for them. I’ve also come to realize just about all the lessons learned have a primary root cause – project scope drives project cost and schedule. However, most of a Project Manager’s (PM) interactions with Management tend to focus on the project’s cost and not its scope.
I LOVE THE SCOPE BUT HATE THE COST
I was the PM on a project and was called into a Friday afternoon meeting to review the project cost, scope and schedule with Management. During the scope review, I discussed the project’s base scope (i.e., scope required to meet the business need) and its value-added scope (i.e., savings justified scope which is discretionary but improves the economics of the overall project). The scope review went extremely well until the cost of the scope was reviewed. The Management’s direction was “I love the scope but hate the cost.” My response was, “if you like the scope, then this is the cost.” We went back and forth on this point for the next 20 minutes and at the conclusion of the discussion, we agreed to the proposed scope but disagreed on the cost to be presented to top management the following Monday. We did agree to review our positions over the weekend and reconvene on Monday morning at 7 AM to finalize the cost figure to be quoted. On Monday morning, we agreed to use my cost figure in the subsequent meetings with top management. The project was successfully completed slightly below this stated cost.
This experience reaffirmed my belief that, if you get the scope correct, the cost will usually be correct as well. As I sit through other project reviews, I ask the team “how does your original scope basis compare to their current scope?” Without exception, the scope changes generated by the team, or their hierarchy, directly impact the cost pressures they are experiencing.
I WANT THIS COST BUT NEED THIS SCOPE
On another project, we were designing and constructing a multi-million-dollar, grassroots manufacturing facility with plans to have it on-line several years later. Unfortunately, just how many millions of dollars the plant was going to cost became a troublesome discussion point throughout the life of the project.
Early in the project, Management believed the project should cost X based on their collective experience and not the scope required to deliver the business need. Agreement was to proceed with the project based on their X dollar cost figure. However, a subsequent study indicated the project’s cost would be X + 40% based on the actual defined scope.
Management declared this estimate unacceptable. They questioned the cost estimate’s credibility even though it was prepared by experienced cost engineers using proven estimating methods. Accusations stating the “scope” was “gold-plated” ran rampant. After much discussion, Management agreed to eliminate parts of the project scope to arrive at a compromise cost of X + 20%.
However, after receiving project funding, the eliminated scope was restored because the scope elimination decisions had been taken with little consideration of the actual project needs to meet the defined business goals. Despite valid scope additions, Management refused to approve project changes. They said the project already had 20% more funding than it needed.
Since Management refused to listen to the team’s concerns and requirements to meet the business needs, cost control became ineffective. When the project team completed design definition, a cost trend was published at X +25%. During construction, the cost trend increased to X + 40%, which was the team’s original cost estimate.
At project close, the only criteria the project failed to meet was the initial Management cost target. The job was completed for slightly less than the project team’s cost estimate of X +40% and contained the same scope the team had originally defined to meet the business need. Once again, project scope drove project cost and schedule.
The Premier Resources Group (PRG) Advisors can help your company avoid this type of cost/scope problem on your projects by helping to identify a misalignment between Management and the project teams’ project estimates, expectations, and business needs. Whether PRG Advisors are brought in during the initial conceptual or definition phases, or are asked to provide peer review feedback later in the project lifecycle, our PRG Advisory Services Teams’ vast industry experience can help identify project quagmires and promote successful, and timely, project completion.