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Embedding Earned Value Management inGood Contracts for Good Governance
Breda Ryan, BAA Project Controls Leader12 th May 2010
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Heathrow Airport
68 million passengers per year (185,000 a day) 90 airlines flying to 180 destinations
Nearly 70% of the UKs longhaul flights go from Heathrow More than half of all UK air freight Heathrow employs 70,000 people and supports 100,000indirect jobs
1950s Today
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Objectives
Continually improve the passenger experience
Making every journey better
Heathrow: Europes hub airport of choice Reduce operating and airline costs Increase airport resilience and capacity
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Terminal 5
4.3 billion project Opened on time and on budget in March 2008 Capacity for 30 million additional passengers annually
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The new Terminal 2
1 billion replacement for Terminal 2 20 million passenger capacity terminal The Star Alliance will operate from under one roof Environmentally friendly design
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Airline Relocations
S t a r
Star
Star
T5 T3
T1
T2A
T4
T2
T2
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Terminal 1
60 million investment More spacious, brighter check-in which is easier to navigate Baggage Reclaim, Immigration, Security and Arrivalsmodernised
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Terminal 3
130 million ongoing spend Modernised check-in completed 90 million landscaped forecourt
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Terminal 4
100 million modernisation of check-in A 6,000m2 extension into the forecourt
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Heathrow in 2013
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How do we achieve success?
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Intelligent Client
Define the brief and the requirements clearly Remove obstacles and deliver on commitments Enforce the contract both ways Evaluate contractor performance and project effectiveness Accept that the luxury of flexibility has gone
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IntelligentContractCompliance
IntelligentConscience
IntelligentInformation
IntelligentCustomer
ProgrammeDeliveryManager
ProgrammeControl
Manager
ContractingOfficer
CommercialManager
Programme Leadership Team
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P r o g r a m m e
C o n
t r o
l M a n a g e r
Cost Schedule Earned Value Reporting Risk Opportunity Budgeting Forecasting Data Integrity Owner of one
version of thetruth
IntelligentInformation
P r o
g r a m m e
D e l
i v e r y
M a n a g e r
Defines Standardsand Requirements
Selects Source Controls Budget Manages Change Expedites Approves overall
Delivery strategy Intelligent
Customer
C o m m e
r c i a l M a n a g e r Programme
Director advisor onCommercialmatters
AcquisitionStrategy
Quality andDefinition of theStatement of Works
Source Evaluation Supplier Evaluation Supply Chain
Manager Intelligent
Conscience
C o n
t r a c
t i n g
O f f i c e r
Competition Source Selection Elevated
Negotiator Dispute Resolution Enforcer Official Signatory
for all contractmatters
Approve Changes Intelligent Contract
Compliance
Programme Director
Programme Control and Acting Acquisition Director
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Intelligent Contractor
Know the contract Work to contract and stay aligned
Cooperate Innovate
Staff with the right quality of talent Produce quality products
BE ABSOLUTELY SAFE:
No harm to operatives, staff or passengers
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Set the Plan Define; Purpose & strategy
Scope of Work Plan of work includingmilestones and deliverables
Define; SMART Objectives Define Key Metrics Define Targets and Goals
Measure
Performance
Observation & Involvement Questioning & Discussion Statistics/Actual data Reports; regular reporting exception reporting
Monitor & ComparePerformance against Plan
To Assess; if everything is going according to plan the need for corrective action Opportunities for performance improvement Comparative Reporting Variance Reporting Performance Analysis Benchmark Reporting
Key Milestone Reports Resource Utilisation Target Performance etc.
Management Action Proactive Devices;
Action to ensure standards are met includeincentives, motivators, training, coaching,persuasion and discipline
Do nothing Change the standards Implement corrective action Implement improvement action
Proactive Responses;
THE CONTROL
LOOP
Feedback andCorrective Action Set the Plan
Define; Purpose & strategy
Scope of Work Plan of work includingmilestones and deliverables
Define; SMART Objectives Define Key Metrics Define Targets and Goals
Set the Plan Define; Purpose & strategy
Scope of Work Plan of work includingmilestones and deliverables
Define; SMART Objectives Define Key Metrics Define Targets and Goals
Measure
Performance
Observation & Involvement Questioning & Discussion Statistics/Actual data Reports; regular reporting exception reporting
Measure
Performance
Observation & Involvement Questioning & Discussion Statistics/Actual data Reports; regular reporting exception reporting
Monitor & ComparePerformance against Plan
To Assess; if everything is going according to plan the need for corrective action Opportunities for performance improvement Comparative Reporting Variance Reporting Performance Analysis Benchmark Reporting
Key Milestone Reports Resource Utilisation Target Performance etc.
Monitor & ComparePerformance against Plan
To Assess; if everything is going according to plan the need for corrective action Opportunities for performance improvement Comparative Reporting Variance Reporting Performance Analysis Benchmark Reporting
Key Milestone Reports Resource Utilisation Target Performance etc.
Comparative Reporting Variance Reporting Performance Analysis Benchmark Reporting
Key Milestone Reports Resource Utilisation Target Performance etc.
Management Action Proactive Devices;
Action to ensure standards are met includeincentives, motivators, training, coaching,persuasion and discipline
Do nothing Change the standards Implement corrective action Implement improvement action
Proactive Responses;
Management Action Proactive Devices;
Action to ensure standards are met includeincentives, motivators, training, coaching,persuasion and discipline
Do nothing Change the standards Implement corrective action Implement improvement action
Proactive Responses; Do nothing Change the standards Implement corrective action Implement improvement action
Proactive Responses;
THE CONTROL
LOOP
Feedback andCorrective Action
Incorporate signedoff change
Support Risk/Opps Management
Apply The Control Loop
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Where does EVM fit in?
Programme Controls Mandate EVM applicable on all contracts
PER Project Controls & Time (schedule)
Management
Supplier Obligations
EVM Z Clause WPEP Contract for each stage of the
Gateway Process
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project specific requirementsstandard requirements
DGS-IGS ProcessProject Management Processes
Design Performance Standards
ProjectExecution
Requirements(PERs)
BAA Works Terms BAA ProfessionalServices Terms
BAA Service Terms(commodity & LPI only)
Programme Execution Plan (PgEP)
Project Execution Plan (PEP)
Work PackageExecution Plan
(WPEP)
BAA documentfor project (single
/multi suppliers)
BAA/Supplierdocument
BAA documentfor multi-projects
Value in PartnershipFramework
Agreement
Contract Environment VIP Framework Suppliers
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Project Execution
Implemented inconjunction with...
ManagementPolicies
BAA OperatingRequirements
TechnicalStandards
13 Project Execution Requirements
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Principal Benefits of the NEC Form
Flexibility Multi disciplinary Flexible Design Allocation Choice of pricing options lump sum, target cost, cost plus
Clarity and Simplicity
Written in ordinary language Simple clause structure; avoids legal terms Subjective decisions minimised Provision of guidance notes and flow charts
Stimulus to good project management
The ECC is a management tool as well as a set of legal terms Requires timely and clear decision making process Clear allocation of responsibility Proactive risk management procedures Encourages collaborative working
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Main Option(A)
SecondaryOption
(X1)
SecondaryOption
(X2)
SecondaryOption
(X3)
SecondaryOption(X15)
SecondaryOption(X18)
SecondaryOption
(Y(UK)2)
Contract Data Parts 1 & 2
Main Option(B)
Main Option(C)
Main Option(E)
Main Option(F)
Works Terms Contract
SecondaryOption
(Z)
Core Clauses Mandatory
Must select
one mainoption
All secondaryoptions areoptional (W2Incorporatedin Core Clause
10 )
Incorporatedin WPEP
Works Terms Structure
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E m p
l o y e r
R i s k / R e w a r d
Contractor Risk / Reward
F
C
D
B
A
E
Financial Risk / Reward
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Governance
WPEP Contract for each stage of the Gateway Process preliminary work
options
scheme design
production design
construction WPEP Annex
Annex contains all documents referenced in the WPEP
WPEP must be kept up to date by amendments introduced as necessary in accordance with the BAA Work Terms
Drafted for Heathrow can be amended to apply to all other BAA airports
Signatories Project Manager = BAA Contracting Officer
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Any questions?
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