Strategic Role of Project Management in EPC Business

Contents
Executive Summary
A.
B.
C.
D.
E.
F.

Project, Programme and Porfolio Management

Strategic Role of Programme and Project Management
Role of Project Management Office
Project Management Processes
Conclusion
References

Appendix

Executive Summary

A. Project, Programme and Porfolio Management

Difference between operations and projects
Projects are a part of overall business strategies of an organization. Projects can
be taken by anyone in an organization. However the common objectives in all
projects undertaken across an enterprise are its alignment with the strategic
objectives of an enterprise. In order to manage projects we need to evolve
dynamic set of rules and regulations which is called Project Management.
Project is an endeavour in which human, financial and material resources are
organized in a novel way to undertake a unique scope of work of a given
specification, within constraints of cost and time, so as to achieve beneficial
change defined by quantitative and qualitative objectives.
A project is a temporary endeavor, having a defined beginning and end (usually
constrained by date, but can be by funding or deliverables), undertaken to meet
particular goals and objectives, usually to bring about beneficial change or added
value. The temporary nature of projects stands in contrast to business as usual
(or operations), which are repetitive, permanent or semi-permanent functional
work to produce products or services. In practice, the management of these two
systems is often found to be quite different, and as such requires the
development of distinct technical skills and the adoption of separate
management.
Project Life Cycle
Project management is the discipline of planning, organizing, and managing
resources to bring about the successful completion of specific project goals and
objectives. The primary challenge of project management is to achieve all of the
project goals and objectives while honoring the preconceived project constraints.
Typical constraints are scope, time, and budget. The secondaryand more
ambitiouschallenge is to optimize the allocation and integration of inputs
necessary to meet pre-defined objectives
Constraints:
Time, Cost, Quality,
Technical, Legal,
environment etc

Inputs- Business
need and
requirement

Management of
Projects

Mechanism
People,
techniques, tools,
equipment,
organisation

Output: Project
Deliverables,
Products and /or
services

Scope

Time

Organisation

Qualit
y

Cost
The above five functions form the basis of any project management activity. The
scope and the organization are the essential functions of project management. The
remaining three - time, quality and cost are the constraints under which the project is
to be executed and managed.
Project management provides the 'single point of integrative responsibility' needed to
ensure that everything on the project is managed effectively to ensure successful
project completion and delivery.
Program Management
A programme is a set of related projects and organisational changes put in place to
achieve a strategic goal. A programme is a series of specific, interrelated projects
and additional tasks which together achieve a number of objectives within overall
strategy or strategic goal. It articulates the organizations business strategy, which is
required to be implemented through projects.
Programme Management provides the framework for implementing strategies and
initiatives. It requires means and resources such as :

Central Programme Controller

Change Manager
Programme Director
Programme Management Methodology
Techniques, Tools and Procedures
Programme Manager
Programme office
Programme steering committee

Benefits of Program Management

- The elimination of risk arising from interfaces between the projects
- The successful completion of individual projects through coherent prioritization and
optimization of resources.
- A reduction in management effort

Portfolio Management:
A Portfolio is a set of projects and/or programmes which are not necessarily related
to each other, but are brought together for the sake of control, co ordination and
optimisation. Portfolio Management of projects and/or programmes cover the
prioritisation of projects and/or programmes within an organization.
B. Strategic Role of Programme and Project Management
The Evolution of Strategic Project Management
Project management began as a tactical tool to facilitate the execution of individual
projects and programs, such as building a new facility, installing new hardware or
implementing a new software initiative.
Organizations now use project management as a tactical tool to execute projects.
Projects are essential to the growth and survival of organizations today. They create
value in the form of improved business processes, are indispensable in the
development of new products and services and make it easier for companies to
respond to changes in the environment, competition and the marketplace. Often
changing business needs can be satisfied only through IT solutions, which require
projects to implement.
Strategic Role of Programme and Project Management
Project management has emerged as a strong discipline practiced by highly trained,
certified professionals as organizations have come to realize they cannot stay in
business if they cannot manage their projects. However, many companies even in
EPC are still limiting the application of project management to the tactical level. It is
vital to the very survival of the enterprise to ensure products are designed, created
and delivered to internal and external customers efficiently and effectively. In
addition, organizations recognize project management is a critical strategic tool. They
practice project portfolio management to select, manage and support a portfolio of
projects that have the best chance of moving the enterprise forward, keeping it
vibrant in the marketplace and returning maximum shareholder value. As
departments and divisions compete for scarce financial and human resources,
strategic project portfolio management provides the rational decision framework
necessary to make the right project investment decisions that enable organizations to
compete and win in the global economy.
This panoply of competitive advantage, strategic capabilities, and tacit knowledge
management constitute the new lens through which organization like L&T should
envisage Strategic Project Management. Many organizations that have transformed
their project management capability into a strategic asset. For those organizations
Project Management has become a source of superior performance, the knowledge
management process diverges from the
rule bound approach typical of much project management. In such organizations, two
features as key: the first is having senior project leaders who display a willingness to
bend the rules and on occasion take maverick action to get things done. They are
particularly good at managing relationships across organizational functions and
boundaries to break through organization inertia and bureaucracy.
Basics of Project Portfolio Management

Portfolio management is the centralized management of one or more portfolios, an

approach to achieving strategic goals by selecting, prioritizing, assessing, and
managing projects, programs, and other related work based upon their alignment and
contribution to the organizations strategies and objectives. Portfolio management
combines
(a) the organizations focus of ensuring that projects selected for investment meet the
portfolio strategy with
(b) the project management focus of delivering projects effectively and within their
planned contribution to the portfolio.
The steps of portfolio project management are applicable to any enterprise: Assess
the merits of the organizations various proposed projects, weigh them against each
other and select and support those projects whose execution will deliver the greatest
value to the bottom line. The drivers of a portfolio of projects are:
1. Where the company wants to go and what it needs to do to achieve the goal (e.g.,
improve its return on investment, increase shareholder value or gain market share).
2. Tactical concerns, such as improvement projects individual departments need to
undertake in order to become more efficient or effective; e.g., cost reduction, staff
reduction, getting to market faster.
3. Problems whose correction requires a project or program; e.g., lost data to support
decisions, poor customer service, slow time to market.
4. The need for organizational change management initiatives that prepare people to
move in the desired direction along with the organization.
The application of portfolio management permits the sharing of goals and the
allocation of resources among these drivers so that projects and programs can
achieve their strategic intent. PMIs Standard for Portfolio Management defines the
following flow of control:
1. Strategic intent and prioritization provide direction for determining the financial
resources that should be allocated to the portfolio.
2. The strategic intent is mapped onto a set of portfolio components (i.e., projects
and programs) including their resource allocations. These components are managed
according to the portfolio management principles outlined in this standard.
3. Each program corresponds to the delegated subset of the overall strategic intent,
which it will deliver by means of the allocated resources.
4. Each project is defined by its contribution to the portfolios strategic intent, and can
then be managed according to principles published by PMI.

Here is the basic process:

(a) Define the organizations overall strategic goals and objectives at the executive
level;
(b) pass these goals to the portfolio management function;
(c) the portfolio manager selects, prioritizes and approves proposed portfolio
components, ensuring that they are aligned to achieve the organizations goals; and
(d) the portfolio manager reviews the portfolio to ensure it is balanced (short-term
versus long-term return, risk to benefit) and negotiates the contributions of relevant
strategic stakeholders (e.g., executive management, operations, program
management).
Once the portfolio manager authorizes a component, program or project,
management takes control of the component and applies the correct management
processes to make certain the work is performed effectively and efficiently. The
responsible project or program managers monitor planned-to actual performance
relating to time, budget, resources, quality and scope, and communicate
consolidated information to portfolio management. To remain effective and aligned
with organizational goals, the portfolio management function depends on updates
from the strategic planning process regarding any strategic changes. This ensures
any components no longer related to current goals can be discontinued rather than
wasting resources. In return, the portfolio manager reports portfolio performance to
the strategic planning process as it relates to achieving the organizations planned
strategy.
Challenges and Solutions in Project Management
Economic pressures, such as cost-constraints or inability to raise prices without
losing customers, often force organizations to focus on the tactical and leave little

time to think strategically. Those new to the process of strategic project management
may encounter challenges in the following areas.
1) Executive championship. Without buy-in from high-level decision-makers and their
ability to give guidance and support to the portfolio manager, strategic project
management will fail. Even in a strategic environment, portfolio managers sometimes
succumb to the politics and temptations of selecting projects that are the pet projects
of mid-level and lower-level managers. Even organizations that have established a
formal Project Management Office need an executive champion, particularly when
the office is understaffed.
2) Business acumen. A portfolio manager needs much more business acumen than a
traditional project manager because he or she has to decide which projects are
necessary in order to meet the organizations strategic objectives.
3) A solid project management process. Leadership may do an excellent job of
creating a strategic portfolio of projects and setting goals and ground rules. But if the
actual practitioners the project managers and their teams are in a just-do-it
mode or are inefficient or ineffective in managing their projects, all the strategic work
is for naught. Thats why strategy at the highest levels has to be paired with a
consistent, repeatable process that ensures that practitioners at the project level are
consistent and efficient. A repeatable approach is the strong foundation that ensures
that each project is contributing to the value that was anticipated on time and on
budget within certain permissible variances. Training and certification of project
management staff may be a wise investment. A well-respected mid-tier consulting
company, for example, has not learned how to transfer its strategic focus into tactical
projects. As a result it is always in reactionary mode, changing direction and
reshuffling project teams. The organization is still operating in the old strategic
planning mode rather than using project management as a strategic tool.
4) Timeframes and budgets. Executing projects efficiently and effectively across the
board depends on honest and realistic timeframes and budgets, so that projects are
not set up for failure from the start.
5) Requirements analysis. Portfolio managers need skill in gathering accurate
requirements, analyzing them and managing them properly throughout a projects
implementation to ensure a value added outcome that improves an organizations
bottom line. As a project proceeds, someone must keep an eye on value and
scrutinize costs in comparison with benefits to ensure the project remains sound.
Again, training in business analysis for portfolio and project managers may be
necessary.
6) Stay the course. One of the most common mistakes leading to project failure is not
staying the course. Even organizations that get off to the right start by establishing a
strategic portfolio of projects and giving marching orders to management, often toss
the entire strategy out the window as soon as anything goes wrong. They simply
return to a reactive, just-do-it mode. It takes a great deal of business acumen and
persistence to stay the course. Set the vision and strategy, and then leave it up to the
portfolio manager to manage the projects for the best business value.
However, while being reactive can throw off the entire portfolio, the portfolio manager
and executive champion also need to be flexible to adjust the portfolio as project risk
becomes too high, new opportunities arise, change occurs in the marketplace or
when a serious problem arises whose correction
depends on a new project not previously represented in the portfolio. For example,
when two Midwest banks merged about four years ago, the strategic portfolio to

implement the merger consisted of 50 high profile projects. Not only were these
projects competing for resources, they had to be carefully prioritized to satisfy the
needs of stockholders, regulators and customers. Wall Street expected the merger to
produce financial gain, cost reduction and elimination of duplication and would have
downgraded the banks stock had the merger not gone smoothly. The process also
had to be seamless for the sake of the customers of 300 branches. As these projects
evolved and new issues arose, it became necessary to redesign the portfolio and
reprioritize it to keep projects aligned with the tactical and strategic needs of all the
stakeholders. A powerful tool to get started with project portfolio management is a
facilitated planning session. A trained external facilitator meets with key individuals to
facilitate and outline the process. They layout goals, risks and issues on the table,
assemble the portfolio and establish the strategic project management process. It is
best when the facilitator comes from outside the company in order to avoid bias and
politics in leading the team through the process.
C. Role of Project Management Office (PMO)
The Project Management Office in a business or professional enterprise is the
department or group that defines and maintains the standards of process, generally
related to project management, within the organization. The PMO strives to
standardize and introduce economies of repetition in the execution of projects. The
PMO is the source of documentation, guidance and metrics on the practice of project
management and execution.
A good PMO will base project management principles on accepted, industry standard
methodologies .Increasingly influential industry certification programs such as
ISO9000 and the Malcolm Baldrige National Quality Award (MBNQA) as well as
government regulatory requirements such as Sarbanes-Oxley have propelled
organizations to standardize processes. Organizations like L&T need to define,
borrow and collect best practices in process and project management and need to
increase assigning the PMO to exert overall influence and evolution of thought to
continual organizational improvement.
90% of projects do not meet time/cost/quality targets. Only 9% of large, 16% of
medium and 28% of small company projects were completed on time, within budget
and delivered measurable business and stakeholder benefits. [Standish Group
Chaos Report, 1995] There are many reasons for such failures. As per a KPMG
survey of 252 organizations, technology is not the most critical factor. Inadequate
project management implementation constitutes 32% of project failures, lack of
communication constitutes 20% and unfamiliarity with scope and complexity
constitutes 17%. Accordingly 69% of project failures are due to lack and/or improper
implementation of project management methodologies.

PMO can be one of three types from an organizational exposure perspective:

Enterprise PMO
Organizational (departmental) PMO
Specialpurpose PMO.
The renowned Project Management Institute (PMI) Program Management Office
Significant Interest Working Group (PMOSIG), views the PMO as a strategic driver
for organizational excellence and seeks to enhance the practices of execution
management, organizational governance, and strategic change leadership.
Key Functions of the PMO
Project Portfolio Management Support
Prioritization and operations planning/forecasting
Project Information Integrity
Project Management Training and Mentoring
Resource Management Gaps, Recruiting, & Skills Competency
Leadership - Key Projects
Project Management Processes & Methodology
PM Metrics/Reporting
Project Management Tools
PMI or Company Specific PM Certification
Just-in-time support to project needs
Project Startup Assistance
Proposal Support
Risk Assessments
Project Change Management Support
Project Recoveries/Rescues
Project Assessments

The Benefits of the PMO for the Organization

Providing the Management Team with current project information to measure to

strategic initiatives.

Identifying Bottlenecks for immediate corrective action.

Identifying excess project capital budget that can be reapplied to other critical
projects.

Enhancing confidence and skill level of among fellow project managers

throughout the organization.
D. Project Management Processes
For successful project management implementation, there are some key project
management processes.
Each project process describes the procedures one would apply as a Project
Manager, to manage key elements of the project, e.g. Risk Management Process
will tell you how to identify, review, mitigate and monitor project risks more
effectively. It also describes the roles and responsibilities of each team member,
when taking part in project risk management.
The project management processes interrelated with the Project Management
phases during the entire project management cycle. Processes can be divided
into two types :
1. Enabling processes
2. Facilitating Processes

Enabling processes are :

1. Scope Management
2. Schedule Management
3. Budget Management
4. Quality Management

Facilitating processes are :

1. Team Management
2. Stakeholder Management
3. Information Management
4. Risk management
5. Contract Management

Depending on the scope, large, complex projects will require a more rigorous
application of project management processes than small, noncomplex projects. The
Project Manager assesses the project characteristics to determine how to customize
the processes for a specific project and determine which project management
processes will be required. The effort to customize the project is reflected in the
Project Management Plan.
Project Management Processes are overlapping activities that occur at varying levels
of intensity throughout each phase of the project. A process is defined as a set of
activities that must be performed to achieve a goal, in this case the project goal
The detail description of Project Processes are as below:
1. Scope Management
Includes the processes involved in defining and controlling what is or is not included
in the project; required to complete the project successfully. Scope is the way to
describe the boundaries of the project. It defines what the project will deliver and
what it will not deliver. This process ensures that the project has identified the goals
and objectives and those have been documented and that each objective has a well
defined set of indicators to monitor their progress.
2. Schedule Management
This process includes the actions required to ensure the timely completion of the
project. Schedule management is the development of a project schedule that
contains all project activities, the project schedule is a communication tool that
informs project stakeholders the status of the project and gives project team
members information, in the form of graphs and charts, as to when each activity must
begin and end.

3. Budget Management
Budget management processes are required to ensure the project is completed
within the approved budget. This is the area that receives a lot of scrutiny during and
after the project is completed. The projects ability to manage the financial resources
obtained by the organization will be a measure of the organizations probity, not only
in compliance with donors requirements but also a measure of its efficiency. Risks in
this area have the highest impact to the project, the organization and to the
beneficiaries; inadequate budget management can lead to misappropriations of
funds, improper assignment of expenses and losses that the organization may have
to cover using its limited funds.
4. Quality management
Quality management is the process to ensure that the project will satisfy the needs of
the beneficiaries. Quality is defined as a commitment to deliver the project outputs

and meet the expectations of the beneficiaries, which means that quality is ultimately
defined by the beneficiary.
5. Team Management
During the definition of the project activities a list is created that identifies the skills
needed by the project. These range from highly technical to administrative and
support functions. The project team is after all the team responsible for the project
and the project needs to be clear in acquiring the skills it needs.
Team management includes the processes required to make the most effective use
of the people involved in the project. The first step is identifying the roles,
responsibilities and reporting relationships. The second step is getting the people that
will be assigned to the project. These can come from within the organization or hired
through the Human Resource function of the organizational. This is where the project
manager needs to be heavily involved and participate in all interviews with possible
candidates; the success of the project will depend on the quality and commitment of
the team.
6. Stakeholder Management
Stakeholder management is one of the areas that receive the least amount of
thought and planning in development projects, this is due to the limited
understanding and agreement on who are the stakeholders and their role in the
project.
Stakeholders are all the people who have an interest in the project and they are the
most critical element for the success of the project. They include donors,
beneficiaries, local government, partner organizations and anyone who will be
impacted by the project. Each project has a different list of stakeholders, a range that
can include the local press, local organizations, institutions and even watchdog
organizations
Managing stakeholders is not an easy task; the projects objective is to improve the
way the relationships between the project and the stakeholders are managed, this is
achieved by taking a proactive approach that builds trust.
7. Information Management
Includes the processes required to ensure timely and appropriate generation,
collection, dissemination, storage, and ultimate disposition of project information.
80% of a project managers time is spent communicating via reports, email,
telephone, meetings and presentations. The first step of the plan is to define the
informations needs of the stakeholders, determine when they need it, how the
information will be distributed and how to evaluate the relevance and effectiveness of
the information.
8. Risk Management
Risk Management includes the processes concerned with identifying, analyzing, and
responding to project risk. Risk in projects is defined as something that may happen
and if it does, will have an adverse impact on the project. There are four stages to
risk management planning, they are: risk identification, risk analysis and
quantification, risk response, risk monitoring and control.
Risk identification deals with finding all possible risks that may impact the project, it
involves identifying potential risks and documenting their characteristics. The project
team members identify the potential risks using their own knowledge of the project,
its environment, similar projects done in the past. Risk identification results in a
deliverable, the project risk list

9. Contract Management
Contract Management includes the processes required to acquire goods and
services needed by the project from third parties, for most projects the procurement
process is usually managed by a support or administrative function of the
organizations. The role of the project is to supply, as detailed as possible, all the
procurement requirements including all the technical specifications, quantity and the
date when they will be needed; this is created in a project procurement plan.
Contract management consists of four steps; develop the resource plan, implement
the plan, review and update the plan. The resource plan identifies the what, when
and how many of the goods and services needed within the budgeted limits. It also
identifies potential sources and the strategies that the project will use to procure; this
is done in conjunction with the organizations procurement function
Work Processes identified for the Project Management Processes to be
executed are:
a.
b.
c.
d.
e.
f.
g.
h.
i.
j.
k.
l.
m.
n.
o.
p.
q.
r.
s.
t.
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Role of Project and Program Management

Project Life Cycle
Project Organization
Project Initiation
Project Planning, Scheduling, Monitoring, Reporting and Control
Project Cost Monitoring and Control
Contract Management
Risk Management
Project Engineering Management
Supply Chain Management
Project Quality Management
Project Construction Management
Logistics and Transportation Management (LTM)
Human Resource Management
Project Communication
Project Financial Analysis
Taxation and Legal Aspects of Projects
Project Documentation
Project Close-out and Post-Project reviews
Project Learning and sharing
Managing Large Complex Projects

E. Conclusion
Project Management has experienced an extraordinary growth in the last decade.
The growth of the profession can be attributed to globalization and the
unprecedented rate of change making transition complex and non-linear.
Modern project management is emerging as a separate discipline and is crucial
today for enterprises to maintain a competitive edge specially in EPC business which
is very competitive.

Project Management standards, processes, training and software are

overwhelmingly rational and analytic. They seek to reduce uncertainty and risk and
diminish the importance of the human factor. They do this by subjecting people to
rules, procedures and systems which contain and stifle non-conformist, individualistic
tendencies and which encourage systematic, standardised, human behaviour in
pursuit of the execution of a common goal (project completion on time, within cost
and to the quality laid down in the initial specification). Painting by numbers does not
create great artists and when decisions can be based on a book of knowledge which
is essentially a toolkit of procedures and rules, then there is no need for high level
management, just a need for everyone to follow orders. Some organizations
however, are prepared or fortunate enough to go further. They do not merely see
project management as a tool or technique for executing pre-determined strategies
or aligning organizational processes to strategic objectives. They create sustainable
competitive advantage via project management through developing the scarce, firm
specific resource of star project leaders and the tacit knowledge they help to create.
These companies leverage their skills widely, and appreciate the value that these
people bring through their judgement, experience, political and diplomacy as much
as through their technical competence and assiduous following of procedures. They
value highly the tacit knowledge gained from the management of complexity, and
dealing with problems across functions and organization boundaries. Building a
factory, installing a new manufacturing process, launching a new product, entering a
new market, opening up an overseas site, implementing a joint venture, some of the
typical areas where project management excels, involve a myriad of tasks and the
coordination of a diverse range of activities, skills, people, organizations and
resources.
The two great functions of management, differentiation whereby tasks are divided
into bite sized chunks and integration whereby these tasks are then integrated is the very stuff of project management. It provides a systematic methodology for
differentiation and integration, ensuring that nothing is forgotten, that the whole
picture is considered and serves as a guide to action. It allows managers to manage
horizontally across the silos, thereby countering the negative impact of hierarchy and
vertical information flows. Effective management of differentiation and integration is
critical to trategic success because the core competence and competitive advantage
of the corporation reside not products or services but in the management of the
diverse technologies or knowledge and learning that underpin products and services.
And these diverse technology and knowledge streams are no respecter of
organizational boundaries. Where project management becomes strategic is in
recognizing that the capabilities required to manage the network, the virtual
organization and the frequently multi-functional, multi-locational, multi-cultural and
multi-organizational activities involved in executing projects, are dependent on the
personalcharacteristics and management experience of people, on the tacit
knowledge gained through managing diverse projects as much as on formal
structures, systems and procedures. SPM recognizes these general management
and leadership skills as scarce, firm specific, and highly valuable. Hence it promotes
them and the tacit knowledge which they engender and encapsulate as key drivers of
sustainable competitive advantage That, combined with a landscape which
privileges the potential competitive contribution of projects over the easier to
calculate financial ones, constitute the defining features of a truly, Strategic `Project
Management.

F. References