By Christopher Jay
A new government initiative sets out to bring some order to the plethora of competing projects, writes Christopher Jay.
Australia is facing a serious shortage of people trained in project management and the related techniques of program management and portfolio project management, as a technique once confined to building becomes widely used in the private sector.
The techniques have even spread to the Department of Prime Minister and Cabinet where John Howard, in response to a series of difficulties in implementing major public projects, has set up a project management unit. The unit will bring some order into the plethora of different projects competing for funds, resources and public service executive time.
The blossoming of the project management arena reflects the changes in western economies, with the requirement for much greater flexibility in deployment of resources, and relentless competition creating the need for projects to create changes and kick-start initiatives.
This has reached the stage where one quarter of the entire world gross domestic product now consists of massive change projects or new initiatives, to the tune of about $US10 trillion ($13 billion) annually, according to Richard Faris, chief technology officer and co-founder, Primavera Systems US. Primavera is a supplier of project management software.
Faris was speaking in Canberra in April at the myPrimavera06 conference, which was focused on portfolio project management, the business of co-ordinating a considerable number of competing projects to obviate clashes over resources, funding and executive attention.
Project management specialists say that the work of specialist project managers will have to be supplemented by the work of general executives and professionals in other areas. Those professionals will have to be extensively trained in project management as part of overall management training.
One person to recognise this trend, particularly as it applies to the public service, is Prime Minister Howard. Late last year he remarked: "I think one of the things we lack in the public service, both at a commonwealth and a state level, is a consolidated focus on the efficient and timely and sympathetic delivery of services.
"We tend to look at service delivery as an afterthought rather than as a policy priority."
This approach has been echoed in speeches by the head of the Prime Minister and Cabinet's Department, Peter Shergold. He has attacked entrenched public service assumptions that "developing policy is a higher order function than delivering results".
"It is not necessary to concern ministers with the details of implementation. We don't need to worry about how we will implement policy until after we have decided what it is."
"I want a public service that is admired as much for its ability to deliver policy as for its capacity to develop it. We need public servants who have a passion for implementing policy. We need public servants with a fire in the belly for managing projects and delivering programs on budget, on time, to the highest standards."
One result is the project implementation unit in the Prime Minister's department, which will track performance on key projects and report directly to the Prime Minister. It liaises with public sector agencies to ensure implementation issues are raised upfront during policy development, not afterwards.
All cabinet policy submissions must now include an implementation plan.
Progress against milestones is reported to cabinet every quarter, including what is known as a traffic light report.
Projects that are progressing well get a green colour coding, ones with incipient problems attract amber, and projects running into serious difficulties are coded red.
Another innovation in the public services is a unit established by the Department of Finance and Administration to implement the British-developed Gateway process, which is considered to have greatly improved UK public sector performance on projects.
The Gateway process uses structured external reviews of projects at key points, by experienced project managers who have previously implemented similar projects. They periodically check strategy, the business case, scope, resources, actual progress against plans, funding and related issues.
A prime candidate for attention has been defence, given its huge acquisition programs, including $6 billion for three air warfare destroyers and $2 billion for two amphibious helicopter carriers, not to mention past debacles such as the Collins class submarine's $3 billion cost overrun and the latest problems with the $1 billion naval Seasprite helicopter program.
The Defence Materiel Organisation, formed to bring some order into defence acquisition, has established a program management office, reporting directly to the deputy chief executive, to provide functional leadership in project management, and to take responsibility as program managers for implementation of the DMO's reform agenda.
DMO has also set up a defence project management council, in association with the Australian Institute of Project Management, to foster orderly planning and acquisition approaches in the defence industry as well as by defence personnel.
In the private sector, the Australian Institute of Project Management plans a series of working groups in industries such as finance, telecommunications and utilities to develop project management standards for handling complex projects.
This stems from a growing realisation in business that standard project management techniques that are highly effective for construction of a 12-storey project block of holiday apartments are not enough when it comes to complex projects involving mergers, the introduction of large computer systems, new products or retooling existing operations while keeping them running.
Corporate projects globally have shown a very high failure rate, averaging 50 per cent. To address this, AIPM intends to promote high level competency-based standards of project management for complex projects specific to particular industries, for ratification by the AIPM national council.
First cab off the rank will be a banking and finance project management council, with a finance sector working group facilitated and chaired by AIPM councillor Bruce Ferguson, managing director of strategic change specialist Helmsman International. Senior executives from the major banks, regional banks and insurance companies and university experts will help assemble and define these new standards by October 2006.
A recent KPMG global report on project management concludes that governments are better at planning projects than private enterprise, but not as good on actual execution, with a 20 per cent higher failure rate than private enterprise.
When it came to planning, 13 per cent more public sector executives kept those above them informed on recent project activity, 17 per cent more insisted on formal business case policies and processes, 25 per cent more always performed risk assessments during initial planning, and 30 per cent more sought independent reviews of their business case assumptions.
However, despite this superiority in initial procedure, this effort did not carry through to final performance. A 20 per cent higher failure rate than industry average was linked with a 15 per cent higher occurrence of project managers who were inexperienced or without formal qualifications.
Staged funding with performance or milestone-based financing was used by 25 per cent fewer public sector managers, leading to 28 per cent more using lump sum funding, with correspondingly less incentive to watch the detailed funds flow.
When it came to making executives accountable for actual delivery, in accordance to the criteria outlined in the business case, the incidence was 13 per cent less in the public service than in private enterprise. Portfolio prioritisation, under project portfolio management, was 6 per cent less common in the public sector.
