CII’s Core Competency Toolkit

Helping to Cope with the

Core Competency Crisis

Ed MerrowIPA

What Is A Project Core Competency?

A set of project functions or skills that are a source of competitive advantage and

cannot be effectively and reliably sourced from the market.

Project Management Resource Crisis

• Core project competencies in manufacturing and extraction industries have been on a long-term secular decline in U.S. and Europe.

Project Management Resource Crisis

•The confluence of a number of factors has generated this situation: Owner outsourcing has created fewer stable

owner positions. Long-term decline of U.S. manufacturing plus

sharp oil industry cycles have led to engineers exiting the industry.

In U.S. and Europe, number of graduating engineers has fallen more than 25 percent in U.S. since 1985.

Rapid growth of IT positions in 1990s made computer engineering appear much more desirable.

Demographic realities face owners and contractors equally.

Rise of two-career households has decreased mobility.

Owner Competencies with Median Age over 45 Years

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

ContinuousImprovement

Project Controls

Project Management

Environmental/Permitting

Conceptual Design

ConceptualEstimating

Convert Research toProject

Percentage of Companies

-20% -15% -10% -5% 0%

Detailed Engg

Construction Mgmt

Permitting

Project Controls

Cost Estimating

Conceptual Design

Research to Scope

Effect of Owner Competencies on Project Cost

Cost Effect of Maintaining Competence in Owner Organization

-35% -25% -15% -5% 5% 15%

Construction Mgmt

Permitting

Cost Estimating

Procurement

Conceptual Design

Research to Scope

Effect of Owner Competencies on Project Schedules

Schedule Effect of Maintaining Competence in Owner Organization

Zero-Sum Game Myth• Owner out-sourcing was driven more by head-

count than value calculations.

• Excessive outsourcing has damaged both owners’ projects and contractor organizations.

• Better staffed owner engineering organizations provide more stable interface with contractors.

• Owner business, legal, and purchasing people are often not equipped to make right match of contractor and contract type to project situation.

• Result has been problematic projects and a much more contentious atmosphere.

• Loss of owner competence a gain for contractors.

The Perfect Project Storm

• Large increase in capital spending.• Rapidly increasing difficulty of projects.• Rapid run-ups in material costs.• Very difficult contracting environment.• Years of neglect in core competencies:

loss of engineering talent available to industry. out-sourcing to contractors who have not been

able to hold competencies.• Very unfavorable demographics.• Increasing immobility of U.S. and European

project management resources.

Now Is the Time to UseCII’s Core Competency Toolkit

• A surge of work, domestically and internationally.

• Projects are bigger and much more difficult.• Owner and contractor resources: never been

thinner.• We have to “Do more with less.”• Improve integrating owner/contractor

competencies.• The Owner/Contractor Work Structure

(OCWS) process can be especially helpful for alliances.

CII’s Core Competency Toolkit OCWS Process

• Basic decision process/framework to assist in defining and communicating sourcing strategy for capital project competencies.

• Involves several steps and corresponding worksheets to document decisions.

• Documents roles and responsibilities for competence development and maintenance.

• Provides a framework for managing and benchmarking project competencies:

– A key element of organizational effectiveness.– Used by IPA to help owner companies benchmark

and design effective in-house engineering organizations.

Owner Core CompetenciesImplementation Sessions

Location: Dallas 5-7

Times: 3:15 - 4:15 pm

and

4:30 - 5:30 pm