writing
Fedorchuk  
Creating a project management office can successfully deliver large capital improvement programmes, write Darcy Fedorchuk and Simon Alder.
  Alder
Darcy Fedorchuk Simon Alder

The global power utility market is currently undergoing an increase in capital expenditures.

Increasing power demands, aging infrastructure, new energy sources and regulatory pressures are contributing to this growth in capital spending and projects.

Coupling these factors with the staffing constraints of many utilities often results in difficultly completing this increase in workload. However, with these challenges come opportunities to evaluate and create more efficient project delivery models.

In response, many utilities are creating a project management office (PMO) – a structure that defines delivery processes and procedures for an entire utility.

altalink

To establish the PMO, utilities are also calling on outside firms to help with the immediate workforce capacity boost and long-term knowledge transfer.

AltaLink, Canada’s only fully independent, investor-owned electricity transmission company that services 85 per cent of Alberta’s population, recently experienced these challenges and developed a PMO.

Currently, AltaLink is performing a multi-year, C$7 billion (US$6.3 billion) capital programme to expand its transmission network. In order to successfully deliver this, AltaLink recognised the need for a PMO and in 2011 brought in MWH Global to help establish this structure. AltaLink’s success serves as an example for other power utilities struggling to complete an influx of projects and manage energy demands.

Power utilities like AltaLink are increasingly facing large capital improvement programmes for various of reasons – from addressing challenges in new energy demands to compensating for years of under-investment. This at a time when capital budgets are significantly lower.

Altalink's initial approach focuses on six key practice areas
Altalink’s initial approach focuses on six key practice areas

Formed in 2002, AltaLink is a relatively young organization. For the first six years, it delivered a small number and value of capital projects carried out by a group of experienced engineers and project managers. Then everything changed in 2008. The publication of the Alberta Electric System Operator Long Term Plan – formulated as part of Alberta’s 2008 Provincial Energy Strategy – set forth the most significant electrical transmission capital investment plan in recent history.

Additionally, AltaLink faced growing electricity demand from industrial customers and oil sands producers, and generation growth requiring it to reinforce its existing transmission system to meet demands and supply. New energy sources, specifically wind generation located predominately in the southern part of Alberta, required increased capacity of the existing transmission network to provide electricity to populated areas.

As a result, AltaLink’s capital expenditures dramatically increased to address these challenges. In 2008, AltaLink’s capital spend topped out at just over CA$200 million. In 2014, the capital spend is expected to reach more than CA$1.67 billion.

Similar large shifts in capital spend are driving utilities across the industry to grow their understanding of the role a PMO can play in successful delivery of projects.

A PMO takes different forms depending on the needs of the organization, but its primary goal is to define and maintain project management standards.

PMOs are used as a source for guidance, documentation, metrics and standardization of various delivery functions, including governance, cost and schedule comtrols, engineering, risk management, reporting and communications. In addition, a PMO ensures delivery standards follow the same overall strategies, goals and objectives.

For utilities considering implementing this structure, the fundamental keys to a successful PMO are finding the right people, processes, tools and systems to deliver projects – small or large – consistently.

First, leaders must identify the right people to fill the positions that suit their expertise and experience. But more than simply filling the positions, leaders must provide the training and support required for each individual to be effective. Second, delivery processes are required – underpinned by a clearly defined project lifecycle and an associated approval framework. Third, and finally, implementing the right tools and systems provides the level of automation and efficiency needed to manage a large capital spend. By incorporating these fundamental areas and coupling them with an effective change management strategy, the creation of a PMO results in consistent project delivery practices and organizational change.

Due to the need to implement foundational delivery practices within a relatively short time period, AltaLink’s initial approach focused on six key practice areas that could be standardized for consistent performance, repetition and scalability.

These practice areas were risk, reporting, document management and collaboration, change control/contingency management and cost control. For each area, the team established a list of success criteria centred on people, process and tools, and prepared an implementation plan to achieve the success criteria within a 12-month period.

Key to a successful PMO is the right people, right processes and right systems
Key to a successful PMO is the right people, right processes and right systems

Structuring and staffing

As AltaLink prepared for the new influx of capital projects, the senior leadership undertook an assessment to determine the optimal structure for a new PMO and prepared a staffing plan to estimate the number and type of resources required. This assessment confirmed what was already known – AltaLink required an increase in both capacity and capability in order to meet the project delivery challenges.

While creating the PMO addressed one challenge, it presented AltaLink with another – staffing the PMO. AltaLink quickly concluded that to increase capacity and capability organically – through recruitment and training in a local market where resource demand from the oil and gas industry is at an all-time high – would be difficult to achieve in the required timeframe.

Consequently, it decided to look to an external consultant to provide an immediate uplift in capacity and capability. AltaLink selected MWH to provide these services as a result of its global success in establishing PMO organizations for water, wastewater and municipal organizations faced with similar large capital improvement programmes.

Immediately, 10 to 12 MWH staff integrated into the AltaLink PMO structure with the goal of transferring delivery knowledge within 18-24 months. MWH provided experts in project controls, reporting, governance and risk management as well as communications and collaboration expertise.

The development of a project delivery model (PDM) required every project to follow the same process. The PDM consisted of a standardized lifecycle of the critical decision stage gates, milestones and deliverables required for all teams and functional groups.

As an integrated team, the AltaLink PMO structure focused on the following components to enable project delivery across the organization:

Project controls, governance and reporting: Comprises analysts, planners, schedulers,estimators, cost engineers, budget analysts, stage gate governance and compliance leads;

Engineering: Consists of project engineering, conceptual engineering and engineering services groups to provide broad support to the entire project delivery organization;

Project Services: Responsible for commitment co-ordination, document control technical writing, and tools and systems administration, including supportfor various functions throughout the AltaLink

Projects Group such as SharePoint, documentation, process mapping and administration support.

These teams work with the vice presidents of project delivery to ensure projects of every size follow the consistent approach developed by the PMO team.

The PMO team also needed to establish processes and tools that allowed AltaLink to meet regulatory requirements for reporting, deliverables and overall compliance with standards, including to:

  • Build an organization that supports a superior method of project delivery;
  • Execute projects in a standard process;
  • Improve communication by easy access to key project documentation;
  • Be regarded by the regulators and general public as a cost-aware organization;
  • Utilize technology that both supports and adds value to the delivery process;
  • Make available a standard project manager’s tool kit;
  • Meet and exceed regulatory requirements;
  • Meet regulatory reporting needs in a consistent, accurate manner;
  • Comply with regulatory-defined project milestones and deliverables.

As part of establishing this structure, AltaLink focused on consistent and frequent communication. The PMO team implemented a cultural change management process, which assisted in gathering the support and ownership of the changes being implemented to the business processes.

The PMO team actively set up workshops to solicit input from the organization related to project collaboration and document management processes, systems, and cost control and scheduling procedures, to name a few. The conversations continued throughout the length of the programme to make decision-making a collaborative process led by the PMO.

AltaLink PMO structure focuses on three components to ensure project delivery
AltaLink PMO structure focuses on three components to ensure project delivery

Processes and systems

The PMO allowed AltaLink to actively address power utility industry challenges associated with increased energy demands, aging infrastructure, new energy sources and regulatory pressures.

In early 2012, one AltaLink executive equated the implementation of the project delivery processes and systems to “building a plane while in flight.” As AltaLink is now at the midpoint of its capital improvement programme, it is clear that the PMO is working according to plan. The accomplishments to date include:

  • Successful delivery of C$1.5 billion in capital projects (up from C$100 million two years earlier);
  • Successful executive-led reviews of 112 projects through the stage gate process totaling more than C$5 billion in capital value;
  • Preparation and maintenance of more than 100 project schedules for consistent control at a portfolio and project level;
  • Standard financial processes across all delivery teams to ensure consistent cost control;
  • Upload of more than 3500 final deliverables into a document management system for project learnings and auditability;
  • Integration of cost and schedule data into reporting and dashboard functions.

PMOs, such as that implemented at AltaLink, provide power utilities with the standard processes and systems needed to effectively manage large, complex capital improvement projects. As AltaLink starts 2014, the ‘plane’ is essentially built, but the focus is on making it more efficient. AltaLink continues its focus to improve its processes, implement lessons learned and develop a more predictable project delivery culture.

Darcy Fedorchuk, vice president, AltaLink Project Management Office and Simon Alder, vice president, MWH Global director of Americas program management. For more information, visit www.altalink.ca.

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