PROJECT MANAGEMENT

Success Story

PROJECT MANAGEMENT

A large integrated Oil and Gas firm had started the construction of an LNG mega-project that carried a cost of about $50 billion. Mid-way through construction, the company found that it was consistently missing cost and schedule estimates. Initially, they felt that the delays and overruns were due to uncontrollable weather events and other unique one-time hazards.

However, it soon became evident that something else was the true culprit.

Decision Strategies, a business consulting firm with Oil and Gas expertise, was contracted to identify the cause of the excessive overruns and delays and to help the client institute a better risk identification and mitigation system.

What We Did

  • Assessed the cost and schedule risk process
  • Identified cost and schedule overrun causes
  • Improved forecasts
  • Provided guidance and decision support on logistics and forecast methods
  • Provided a valid estimate, with full uncertainty range, for the remainder of the project

How We Did It

  • Conducted expert interviews across the project organization
  • Developed a valid cost and schedule model
  • Introduced dependency considerations into the forecast method
  • Provided team-level support to implement sound decision support for logistics and marine fleet management
  • Ensured appropriate cost and schedule risk methodology was in place within the organization

The Challenge

The company had been taking disparate input in the form of budget requests, and they assumed that the budget requests were unbiased and valid for the construction of the facility. The individual section/responsibility managers on the project had no formal way to align their cost and schedule estimates with the precursor activities or communicate with dependent event managers. As such, inter-activity dependencies and delay effects were not taken into appropriate consideration. Individual managers were using deterministic budget numbers, which were objective-based and supposedly representative of the P50 (median) case as forecasted for both cost and schedule, but they neglected the effects of existing and potential delays.

Company management had to be convinced that the overrun crisis was due to a forecasting issue, as opposed to an execution issue.

The Solution

Our initial effort was to assure the functional teams that the exercise was not recrimination, nor was it intended to be a policing effort of their activities. After a thorough review of the risk register, we met with all the functional management leaders to get feedback on what they felt the issues were.

We then concentrated on executing an expert interview process that reduced the budget number bias within the cost and schedule forecast effort. We interviewed all functional groups across the project and obtained range-based estimates, as well as the pathways that led to the various results. This allowed us to better link dependent and correlated events with critical path assessment and cost estimation. The work not only provided better forecasting, it also provided indications of high-influence events within the critical path due to the collection of range-based inputs and relationship information.

Company personnel were then trained in the expert interview technique and continued the process after our departure.

The project was eventually completed within 2% of the forecast amount (both cost and schedule) determined by our work.

Following this project, the client called upon Decision Strategies twice to return; on one occasion, to carry out decision support within the logistics effort for marine fleet management, and on the other, for emergency preparedness for facility evacuation and remediation priority planning.

 

TESTIMONIAL

Decision Strategies has helped us save millions of dollars by improving our decision-making process.

VP of Drilling and Completions Oil and Gas Company