Taming the Complexities of the Capital Planning Process Launch Gap Analysis
February 23, 2011 0
Agenda • • • • •
Introduction and Objectives Preamble: Prioritize What is Project Launch? What is LGA? Wrap Up: Lessons Learned and Q&A
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Objectives • Understand how assessing launch readiness positively impacts capital projects • Address the importance of defining and aligning project expectations • Define elements to fully understand and address prior to launch • Understand how LGA will ensure strategic, financial, and capital priorities are met • Use healthcare as a context, but can be applied to any industry
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Preamble
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It’s Scary Out There
The Scream – Edvard Munch (1893)
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Preamble: Capital Markets Loosening Up? • “Weathering the storm” continues to be a mantra, but the clouds are parting • Age of plant continues to rise • Access to capital is still tight and rates are rising • Profitability is at risk • Develop a strategically & fiscally responsible plan • It’s a buyer’s market…if you have the money • There are alternative sources of capital 5
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Preamble: Prioritize and Plan • In today’s environment, projects must be prioritized and well planned. Capital should be invested when the project: – Furthers the strategic goals of the organization, – Generates a positive ROI, and / or – Involves critical infrastructure upgrades. • Define what you want and what you need…spend based on what you need…while keeping an eye on the future
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Preamble: Avoid Paralysis • • • • • •
Continue to plan Plan smart and be efficient Prioritize Be creative Assess the situation from all angles Don’t rest…your competition isn’t “In business, the competition will bite you if you keep running; if you stand still, they will swallow you”. William Knudson, Jr. – Former Ford Motor Company Chairman
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What is Project Launch & LGA
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Project Approach - Importance of Project Launch • Increases the likelihood of project success if completed before design begins • Aligns expectations • Promotes ease of changes & less impact on cost early rather than later • Creates a collaborative environment of “dynamic tension” • Not executing launch properly results in confusion, delay, increased costs, and dissatisfaction
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Make Changes Early to Avoid Costly Impacts Later Early Decisions = Less Cost Impact
Highest 100
Degree of Impact on Cost (%)
75
Ability to Make Changes
Cost of Making Changes
50
Cost of Construction ($)
25
Lowest 0
Project Launch
Design
Construction
Project Delivery Process 10
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The End Depends on the Beginning… • • • • • • •
Begin with the end in mind Define strategic intent Define financial goals and limitations Define facility opportunities Be realistic on timing End with design and construction Bridge the gap with LGA
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Objectives of LGA • • • • • •
Discuss main elements necessary for project launch Assess what is known and what is not known Begin defining gaps in launch elements and process to date Begin defining implementation plan and critical elements Align assumptions of project stakeholders Catalogues all known project information
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You Don’t Know What you Don’t Know Consider each “spoke” on the LGA wheel Assess what is currently known and unknown Identify gaps in expectations versus realities Identify priorities and develop a roadmap to follow when bridging gaps • Assess your organization’s level of readiness to get a project off the ground • • • •
LGA is the number one thing the Organization can do to ensure project goals are met and vision becomes reality. 13
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Project Approach - Are You Ready to Launch? LGA • Data collection and interviews follow by worksessions • Include key hospital leaders • Address and provide working direction on major items impacting scope, schedule, & budget • Key benefits: aligns expectations with objectives and validates plan of action moving forward – get everyone moving in the same direction
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Major Phases of an LGA: The Doctor is In Discovery (History & Physical): • What information is currently available? Gap Analysis (Diagnosis): • What is known and unknown? What is done? What needs to be completed or contemplated? Implementation Plan (Treatment Plan): • Observations and recommendations on how to bridge the gaps in order to ensure everyone’s expectations are aligned.
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Address “The Big Three”… • Scope - Guides detailed programming and design & confirms budget with available funds • Schedule - Sets expectations and deliverables parameters • Budget - Drives project scope to budget limit
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…and Develop an Implementation Plan to Get There Get organized Identify next steps Critical gaps to bridge Get key team members on board at the right time • Controls are set • • • •
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Elements of LGA
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Strategic Master Facilities Planning • The project should be a tactical element of a strategic plan. • What strategies and goals are the hospital trying to achieve? • What is the scope of the envisioned project and how was it defined?
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Capital Projects Must Have a Strategic Context The “project” should be a tactical element of a strategic plan Capital projects are identified here
Action Items/ Projects
Tactics
Overall Game Plan
Strategies
Measurable Objectives Statements
Internal Directive(s) Public / “Customer” Perception
Goals Vision Mission 20
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Facility Master Planning – Philosophy & Approach Strategy, services and space needs based on market, workload and capacity analyses
CON, zoning and other controls and their impact on the plan and scope, budget, and schedule
Patient encounter, patient access, supply chain, physician alignment, service lines & System Synergies
Financial sustainability, project Cost, method of financing
Facility and site assessment and physical facility response.
The “strategic� preface to the facility master planning process is intentional. Significant facility investments need to be enablers of strategy, operations, finance and clinical services in order to optimize their value.
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Guiding Principles • Have you considered LEED Certification / Sustainable Design concepts? • Have you measured the impact these concepts may have on your project? • How do you define “flexibility”? • Have you discussed the design key elements? • How do you want to “operationalize” your project?
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“Anytown Medical Center” Guiding Principles / Goals Service
Environment of Care
• Performance Excellence
• PatientCentered
• State-of-theScience
• Safe building, safe campus
• Technologically advanced
• Infection prevention
• High quality
• Medical Error reduction
• High value
• Sustainable design • Evidence Based Design concepts • Enhancement to the Community
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Employer of Choice
Customer Needs • Appropriate scope of services
• High associate, physician, and volunteer satisfaction
• Select Centers of Excellence
• Learning / continuous improvement environment
• Functional and efficient • Integrated LifeSciences Campus
• Safe working environment
• Research and clinical trials Emphasis • Emergency and disaster preparedness
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Constituent Input • Community involvement • Staff, physician, and volunteer involvement • Economic benefit to the community
Sustainable Business Model • Integrated health care system • Medical staff development plan • Financial stewardship • Sustainable business model
Site Analysis and Land Acquisition • Looking for a “green field” site or redevelopment of a “brown field” site? • Selecting the right site is a crucial early step. • Location, location, location is vitally important, but not the only issue to consider. • Has adequate “due diligence” been completed before purchase / development?
Photo Courtesy of Skanska
DO NOT LET LAND DRIVE FACILITY DESIGN 24
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Project Delivery Team Organization • Is your internal team invested, educated, organized and ready to get busy? • Do you have a structured and logical approach to external team member selection? • Are you willing to create “dynamic tension”?
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Contracting Approach • What are the different contracting approaches available? • What are the pros and cons of each? • Which is right for this project and your goals?
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Approaches • • • • • •
Most Common Approaches Design – Bid - Award Design Build Agency Construction Manager Construction Manager At Risk Integrated Project Delivery (IPD)
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Integrated Process Planning
Value Stream Mapping Workshop @ St. Agnes Hospital
• Form Follows Function – the 3F theory. • Have you clearly defined how clinical care should be delivered in the future? • Have you defined non-clinical processes as well (e.g. supply chain, information flow, etc.). • Have you considered how the facility form will enable these functions? 28
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Summing It Up
“I just wish I could get my hands on the pieces and move them around – then I could go through the process in my head and move things to fit it …” ~ Owner Team Participant Blue Cottage Consulting
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Planning Foundation: The Team Forming the Integrated Process Planning Team Project Management Program Manager Construction Manager 3rd Party Estimator
Cost
Owner
Design
Design Team
Administration Facilities Management Plant Engineering
Owner
Operations & Lean Consultant Healthcare Planner Design Architect Transition Planning
Clinical Leadership Core Groups Multi-Disciplinary User Groups
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Master Program Schedule • • • •
Projects are complex and take time. What are your schedule goals and deadlines? Is your schedule realistic? How do you know? Are all schedule elements included and not just construction?
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Master Program Budget • Do you know how much money you can spend on the project? • Have you built a comprehensive budget? • Is it realistic given the project scope? • Do you know from what sources the money is coming? Seek alternative funding sources. • Has a rigorous financial analysis (ROI) been conducted? • These are basic questions, but getting them answered is critical.
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Master Program Budget Breakdown
1.5% 0.5% 8.0%
Site Assessment
30.0%
Design & Consultants Construction Technology, Medical Equipment, FF&E Fees/Inspect/Admin
60.0%
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Transition and Occupancy • • • • •
More than just the move Facility readiness Operational readiness Functional readiness Start early
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Wrap Up
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Lessons Learned Collect as much information as possible Talk with the “C” suite & listen Rigorously analyze & prioritize Focus on the “Big 3” Identify gaps & develop an implementation plan • Implement selectively when ready & appropriate • “Get going” - keep moving methodically and logically • Trust your team and “SMEs” • • • • •
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Questions & Contact
KLMK Group, Inc. 100 West Franklin Street, Suite 200 Richmond, Virginia 23220 804-343-0161 solutions@klmkgroup.com www.klmkgroup.com
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