Capital Project Solutions – May 2011
Conducting a Project Evaluation to Improve the Delivery of Your Capital Facility Scott Nolin Principal Consultant According to McGraw-Hill Construction, in 2011 healthcare projects will get a boost of 3.9% over 2010. While markets seem to be shifting toward the positive and financing is more available, this imposes an additional burden on owners regarding their capital facility projects – intense scrutinization of budgets and schedules. Sure, finances have always been carefully managed, but now more than ever, executives are being held accountable for justifying every dollar spent on a project. In addition, project restarts may have the same scope as in the past, yet their budgets have been significantly reduced. Throw in escalated schedules to make up for lost time and you have a recipe for stress! If you are a healthcare executive in the midst of tackling your first major capital facility, be warned! Major healthcare facility projects can be difficult even when they are running smoothly. The size and complexity of these projects almost make it a foregone conclusion that there will be issues or challenges along the way. Owner’s must understand and differentiate between normal difficulties and systemic issues. One way to make this determination is through a Rapid Response process called Project Evaluation. Project Evaluation - The “Big 3” Every project team deals with the fundamental issues of scope, schedule and budget, or what we refer to as the “Big 3”. This is not surprising given that one common definition of a “project” is that it is an endeavor that includes an established series of tasks (scope) conducted within a specific timeline (schedule) and a specific cost (budget). The “Big 3” are an integral part of every project and must be closely monitored and managed by the project team. There are a myriad of ways to track and manage these elements and, in some respects, how it is managed is less important than the fact that it is actually done. Projects that are consistently over budget, missing schedule dates or overrun by scope creep are candidates for a project 1
Capital Project Solutions – May 2011
evaluation. If your project is experiencing any of these issues, it will be very apparent. Problems tend to jump up and almost smack you in the face due to their severity and the impact that they have on the project as a whole. The key, of course, is to try to identify issues before they become major problems. Better yet, take the time to proactively develop a well-defined project scope, budget, and schedule. Common characteristics of a well-defined “Big 3” are as follows: They are properly documented. They are comprehensive and address all aspects of the project. They are detailed such that they can be effectively managed. They are the product of a collaborative process whereby multiple groups of people with specific areas of expertise have an opportunity to bring their skills to bear on the owner’s behalf. If your “Big 3” share these common characteristics, you are likely in good shape. It is worth noting that there is no perfect project and that even the best run projects will have issues associated with them. However, if you are concerned about any of these elements it may be worth your while to have someone evaluate your project. Beyond the Obvious While the “Big 3” may be viewed as obvious components of any project that must be monitored, there are additional areas that should be evaluated to avoid potential difficulties – Project Team, Owner Involvement and Establishing Priorities. Project Team Every capital project is the byproduct of the efforts of multiple people and typically multiple firms. Major healthcare projects, in particular, require the involvement of many groups of diverse people, typically spanning a large number of companies. Dysfunctional teams can sabotage any projects. Collaboration is the key for all exceptional teams. The primary focus of the group must be to work collaboratively to resolve issues and bring value to the owner. Team members must trust each other and know that problems, once uncovered, will be discussed and resolved in 2
Capital Project Solutions – May 2011
a collective and professional manner. Teams that quickly retreat into their own company shelters, content to protect their own interests and let others fend for themselves, are not serving the owner’s best interests. If you frequently find yourself in the position of “tie-breaker”, more than likely, your team has become dysfunctional and is not performing in a cohesive manner. Often, the easiest way to determine how teams are interacting with each other is simply to ask them. Team members who do not trust or believe in one another will quickly let you know what they think. Involvement of the Owner Active engagement on behalf of the owner throughout the life of the project is a major contributor to projects success. Conversely, lack of involvement or ineffective decision-making can lead to major trouble for a project. Some owners believe that since they have hired many talented expensive people, they can provide only cursory oversight. This approach can work, but only if the owner has delegated decision making to an individual who is involved in the project on a day-today basis. In addition, the owner must be willing to live with the decisions made by their delegate. Short of those two caveats, the owner’s involvement in decision-making should be 24/7 for the life of the project. Once a major healthcare program is launched, it continually gathers momentum and nothing short of stopping the project will slow it down. It is imperative that owners develop and adhere to a decision making process that fits the project rhythm and schedule. Owners always have the prerogative to make or not make decisions; however, the project waits for no one. Late decisions carry consequence and may cause schedule delays that increase the budget. If you are routinely having trouble getting the executive team to review key issues or make key decisions, your project almost assuredly is not running as effectively as it otherwise could. Establishing Priorities To paraphrase the old saying, if you don’t know where you’re going, you will never know when you get there. This holds true for capital facility projects. Key parameters and priorities are a major asset to your team as they endeavor to deliver your project. 3
Capital Project Solutions – May 2011
While the project budget may be derived from an estimate of what things cost, the more important aspect of budget is determining what you can afford. It cannot be stressed enough that the earlier you set this parameter, the less budget trouble you will face down the road. This continues to be among the most common project trouble spots that we encounter at KLMK – and with good reason, it is hard! Hard as it may be, however, the sooner that you can set the financial parameters of the project the better off you will be. Beyond the key financial parameters, projects that have clearly defined expectations stand a better chance of meeting those expectations. Ask your team to build you a hospital and you will likely get a functional facility. However, if Emergency Preparedness is of importance yet it is not clearly defined – your project will fail to meet your expectations. Similarly, if your interiors are intended to reflect and celebrate your region or local community, your team must be informed or they will most certainly not achieve your vision. The bottom line - if you have not documented specific success factors for your project you, will more than likely be disappointed with the outcome. Conclusion Healthcare capital projects are major undertakings that require attention and focus throughout your organization. If you project is running smoothly, congratulations! However, if you are experiencing issues similar to those noted above you should consider our Rapid Response Process - Project Evaluation. A professionally completed assessment will diagnose the status of your project and provide recommendations for getting back on track. No process can eliminate all challenges but seeking help to proactively address issues will aid in managing the “Big 3” and ensure the successful delivery of your project.
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