Prevention is better than a cure

Utilities, other power generators and plant operators are re-examining the way they manage, report and analyze project data, and investigating more robust methods of doing these activities. One of the current buzzwords with project-focused teams is ‘Earned Value Management’.

Malcolm Emmerson, Deltek, UK

Many projects in the power industry carry far too much risk to be allowed to drift off course à‚— either because they involve large sums of money or for health and safety reasons. In most cases, the size and profile of these projects dictate that they are managed with the utmost integrity, transparency and control.

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Consequently, utilities, other power generators and plant operators, are re-examining the way they manage, report and analyze project data, and investigating more robust methods of doing these. In particular, the more forward-looking operations are taking a sideways glance at how other industries, such as defence and the public sector in general, control some of their high-level projects.

In these areas, one of the current buzzwords with project-focused teams is ‘Earned Value Management’ or EVM. This method of working is not entirely new; in fact, it has been used for government projects in the USA as far back as the 1960s. However, its take-up has gathered great momentum over the past few years, expecially with the introduction of legislation such as the Sarbanes-Oxley Act and the greater emphasis on corporate governance.

This year, both the UK and United States governments mandated the use of EVM on all government contracts over à‚£20 million ($39 million) and $20 million, respectively. EVM has also being used for nuclear decommissioning in the UK since 2004. In other words, it is generally accepted that the time for EVM has arrived.

Milestones and measurement

An EVM culture means putting clear parameters or milestones at the outset of a project to objectively measure results as it progresses . The process can be broken into several components that together produce a snapshot of the project as it stands at any given moment. A monetary value is put on project status to enable companies to measure its health throughout its lifecycle.

Essentially, EVM allows project leaders to manage the future. It enables them to identify and catch situations that could become serious problems at a later date. For a plant operator, for example, who may have many concurrent but different activities to manage, this type of ‘one look’ report can be an invaluable tool that prevents work deadlines slipping or unintentional oversights à‚— and in doing so, keeps all interested parties comfortable and well-informed.

One factor that can really help project leaders is the way EVM can enable resources to be evenly spread over a project’s lifetime. It can eliminate the panic that emanates from having to do half the work in the last 10 per cent of budget. The need to squeeze all the outstanding tasks out of the remaining money can prove to be a nightmare. However, when EVM is used the problems can be identified and acted upon before they reach this stage. In fact, the moment something begins to go wrong indicators can forecast potential problems in the future, all helping to ensure that the last half of the work fits neatly into the last half of the budget.

Software will help

When it comes down to it, for project-focused organizations to accurately forecast costs and revenues based on current project progress, budgets and schedules, is basic common sense. But obstacles arise when schedules and plans are managed in one system and cost and receivables data in another. Forecasts have to be done manually, often using spreadsheets with information re-keyed from each system. The resulting reports are time-consuming to produce and often contain out-of-date or inaccurate data which can be seriously detrimental to key strategic decisions.

However, there are software solutions on the market that facilitate and, to some extent, automate EVM, bringing together disparate data from individual systems and fully integrating this information to give a total project view. These applications put systems in place to check project performance at set points. For example, Deltek COBRA is an integrated software system that automatically brings together schedule, budget, plan and resource data with accounting information to help organizations overcome these challenges. By integrating seamlessly with most accounting and estimating systems it helps analyze true project performance and predict trends.

However, it must be remembered that EVM is not a technology in itself, but a method, i.e. users also need to act on this information. You can have as many graphs and charts in place as possible, but EVM is not going to work unless you do something with the information you have at your fingertips.

After this, EVM can be tailored to the needs of each individual project, although as a rule, the more detailed a project manager can be, the easier it is to see and avoid potential problems. However, it is all a matter of scale. Even a small amount of reporting can result in a significant improvement in project control.

No strategy, methodology, process or technology can turn projects around and make them profitable overnight, but EVM can identify risk and problems early enough to give teams the chance to change the outcome.

The need to do this is not confined to one industry or to a particular size of company. The need to be more transparent and accountable on the one hand, and more competitive on the other, could drive the use of EVM across a complete range of different applications. It is not a magic cure à‚— but it is an eminently sensible, practical and logical way of working.

EVM and the NDA

One such project is the decommissioning and clean-up of the UK’s 20 civil nuclear sites. This critical task is being carried out by the Nuclear Decommissioning Authority (NDA), a non-departmental public body set up under the 2004 Energy Act.

To ensure the stringent control and measurement of this major operation the NDA has specified that all contractors working on the project use EVM. To do this the NDA and main contractor the UK Atomic Energy Authority (UKAEA) use Deltek’s cost and EVM system, called COBRA.

According to the UKAEA programme control and systems analyst Adam Ellwood, the result gives project managers far more accurate and faster reporting capabilities plus round-the-clock access to current project data and status. “The main benefit of EVM is that it enables project leaders to foresee and catch situations that could become serious problems at a later time and take remedial action before they do,” he explains.

The UKAEA, a world leader in nuclear clean-up and fusion research, manages the decommissioning of sites at Harwell, Culham, Dounreay, Windscale and Winfrith. As Ellwood points out, although it has always advocated tight project management and control, it has not always used an EVM software system. “EVM is a culture rather than a type of technology,” he says. “It means putting clear parameters at the outset of a project to objectively measure results as it progresses.”

However, on such a complex project as this, it was clear that a software EVM and cost management system would take away much of the routine processes, plethora of Excel spreadsheets and endless time needed to research and collate information usually held in numerous, disparate systems. Consequently, around 2003, the UKAEA began to survey the market for a flexible and comprehensive solution to support the requirements set out by the NDA

“EVM is mandatory on this project but the NDA had not specified a particular system. We undertook a detailed cost benefit analysis against the available products in the market and after due consideration COBRA was chosen as the software tool of choice for UKAEA based on its flexibility, ease of use and compatibility with client systems,” says Ellwood. “We worked with Deltek to implement the system but it was all fairly straightforward,” he continues.

The COBRA solution spans all UKAEA sites providing centralised cost management reporting and analysis by interfacing with UKAEA’s ERP and scheduling, accounting and cost estimating systems. It pulls out information from these three core platforms into the central COBRA reporting system. ERP activities are imported via an electronic link to the COBRA cost system for cost analysis. The approved unit rates for labour and so on are applied to time-phased budget amounts and then act as a basis for all cost information, both summary and detailed. “The ease of integration between COBRA and these other proprietary systems was essential to enable us to share and monitor information,” says Ellwood.

UK Atomic Energy Agency’s JET magnetic confinement fusion research reactor at the Culham centre, Oxfordshire
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As a result, project managers need no longer extract information from each system, manually recreate data and put together their own reports. Instead they can go to the centralized system at any time of night or day to access reliable, accurate and current information on the status of the project. “The quality of the data has improved significantly,” says Ellwood. “There is no longer so much room for human error. And because the data can be trusted, it is far more valuable to the entire operation. “But above all it acts as an early warning system if a particular section of the project is veering off course à‚— and as it manages the entire portfolio we can for example re-route funds or resources to a struggling sector to help turn it round, if necessary.”

The UKAEA is required to send an electronic data submisison on performance to the NDA each month and is able to load it directly into the NDA’s COBRA system. “By providing a centralized, integrated and holistic view across our entire portfolio, COBRA gives us a real-time snap-shot of the current project situation,” says Ellwood. “It is difficult to know how we could keep such rigorous control à‚— and complete transparency between ourselves and the NDA à‚— without it.”

We asked Jim Malkin, a member of the Association for Project Management (APM) Earned Value Specific Interest Group, whether he thought that, as EVM is at last being recognized as simply best practice for project management, the current MoD mandate would spread to other sectors and companies. “Firms who ignore EVM are putting their heads in the sand,” he says. However, he adds a warning: “We tend to be adaptable in the UK, but not necessarily totally open. “EVM requires transparent operations between the client and contractor and from a technological point of view, making sure that all the various IT systems talk to one another.”

EVM grows in impoRtance

It seems that project-focused organizations within the power industry should take note. EVM has been described by one advocate as, “basic, common-sense project management”, but perhaps a more accurate description would be best practice for project management. The pressure to deliver projects on time and within budget has never been greater. This is an opportunity to turn a challenge into a competitive advantage.

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