Infrastructure Projects in Russia

1
Infrastructure Projects in Russia

• Vladimir Liberzon, PMP
• Spider Project Team

2
Introduction

• In this presentation we will discuss proven tools
  and techniques that are applied to management of
  large-scale infrastructure projects and programs
  in Russia
• The questions during the presentation are
  welcomed!

3
Part 1

• Large-scale Infrastructure Programs in Russia
• Overview

4
Infrastructure Programs in Russia

• Russia launched many large-scale state
  infrastructure projects last years.
• They include
• Development of Sochi region as Recreation Area
  and preparation of Winter Olympic Games 2014,
• Construction of trans-Syberian highways,
• Construction of Dams and Power Plants around
  Russia,
• Development of Russian Pacific Area and
  preparation of Asia-Pacific Summit in 2012,
• Nuclear Power Plants Construction Program, etc.

5
Infrastructure Programs in Russia

• These programs have multi-billion budgets,
  involve many organizations and include many
  inter-related projects.
• Our company is involved in management of almost
  all of them. We participate as consultants,
  coaches and members of program management teams.
• Management of such programs is very complex and
  we will discuss its organization and management
  approaches that proved their efficiency.

6

• Sochi 2014

7
Winter Olympic Games 2014

• Preparation of Winter Olympic Games 2014 Program
  includes 213 construction projects.
• They include
• Construction of Olympic objects like stadiums,
  arenas, tramplines, ski areas, etc.
• Transportation infrastructure including roads,
  rail roads, airport
• Utility infrastructure,
• Energy infrastructure including Power Plants,
  electric lines, gas pipelines
• Hospitality infrastructure including Olympic
  villages, hotels, parks and recreation areas,

8
Winter Olympic Games 2014

• Sochi Olympic Games will be held at two major
  areas
• one of them is on-shore cluster with Stadiums for
  ice hockey, figure skating, curling, and similar
  sports,
• Mountain cluster will be host for slalom,
  downhill, biathlon
• These clusters will be connected by auto and rail
  roads through mountains. Construction of this
  roads includes six tunnels and eight bridges

9
Winter Olympic Games 2014

• Development of Sochi area will also include
• gas pipeline construction,
• creating of area transport infrastructure
  (widening of existing rail road,
• construction of roads on the shore and in the
  mountains)

10

• Trans-Syberian Highways

11
Trans-Syberian Highways

• Only the railway connects Russian Pacific Area
  with the rest of Russia.
• The program launched now will connect all parts
  of Russia by modern highways.
• Road construction projects are simultaneously
  launched in Russian Pacific Area and in Siberia.

12
Trans-Syberian Highways

• In the Pacific Area the program includes
  following highway construction projects

13
Trans-Syberian Highways

• There are several dozens construction companies
  that build these roads.
• The program is managed by specially created state
  owned management company.

14
Boguchansk Dam
15
Boguchansk Dam

• Boguchansk Dam in the middle of Siberia on Angara
  river is one of the largest.
• Planned capacity is 3000 Mv
• Length exceeds 2.5 km,
• Artificial lake will cover 2,326 km2

16
Development of Russian Pacific Area

• Russian Pacific Area Development Program has top
  priority.
• Russian Government invests huge money to develop
  this area that was always remote and unpopulated.
• This program will create a new face for
  Vladivostok, Russian Pacific Capital.
• Two huge bridges over the ocean will be built.

17
Development of Russian Pacific Area

• Bridge to Russkiy Island
• Total Length - 3100 m
• Central Part - 1104 m
• Width of the road - 23,8 m
• Pylon Height - 320 m
• Height over sea - 70 m

18
Other Programs

• Russia plans to invest more 60bln in the
  construction of new Nuclear Power Plants
• Russia plans to construct high speed railway
  between Moscow and St. Peterbourg
• Russia invests in the development of modern
  technologies (Nano technologies in particular)
• Economic crisis somewhat slowed the development
  but major programs did not stopped.

19
Program Management

• All large-scale programs are managed by specially
  created management companies
• Olimpstroy for Sochi 2014
• Far East Directorate for Pacific Development
  Program,
• Far East Road Construction Directorate,
• Atomenergoprom for Nuclear Power Plants Program,
• Etc.
• Management of Russian large-scale programs is
  based on similar approaches that we will discuss
  in this presentation.

20
Part 2

• Program, Portfolio Management System Organization

21
Program and Portfolio Management Requirements

• To make Programs and Portfolios manageable there
  are certain requirements to all Program/Portfolio
  participants and projects that include
• Common methodology shall be used for scheduling,
  budgeting, reporting and analyzing project data,
• The same or compatible PM software shall be used,
• The same WBS templates shall be applied to all
  projects in the program/portfolio,
• The same resource, cost, material dictionaries
  shall be used in all schedule models and reports,
• The same production norms and unit costs shall be
  used for contracting and estimating project
  performance

22
Program Management Office

• PMO is an organizational unit to centralize and
  coordinate the management of projects under its
  domain. This unit was created in every Program
  management organization.
• Main departments of PMO (by functions)
• Methodology
• Analysis
• Correspondence and Archives
• Program/Portfolio Management

23
PMO Methodology Department

• Main functions of Methodology department
• Development and actualization of the Project
  Management Guidelines and other Program
  management standards and requirements,
• Organization of Project staff training,
• Consulting, coaching, auditing Program
  participants
• Development and actualization of the organization
  knowledge base.

24
PMO Analysis Department

• PMO Analysis department
• Develops and implements Program dictionaries and
  reference-books for costs, resources, materials
• Develops project WBS and other templates
• Helps project planners with creating project
  computer model, project scheduling and budgeting,
  performance monitoring and reporting
  organization,
• Develops and applies standards for group work
  with the Program files and data.

25
PMO Analysis Department

• PMO Analysis department
• Develops and works with the Program computer
  model,
• Regularly collects and analyzes actual data,
• Manages Program computer models archives,
• Supplies project stakeholders with the
  performance reports and other necessary
  information,
• Maintains PMIS and data safety.

26
PMO Archive Department

• PMO Communication and Archive department
• Manages communications with program stakeholders,
• Manages program archives,
• Creates and maintains the library of past
  projects archives.

27
PMO Program Management Department

• PMO Program Management department functions
• Program Scheduling and Management,
• Management of project priorities,
• Management of Program Risks,
• Dealing with conflicting and competing project
  requirements,
• Analysis of change requests and Integrated Change
  Control

28
PM Information System

• Most large-scale programs in Russia are managed
  using Spider Project software that is considered
  as most functional, powerful and flexible system.
• Spider Project usage is required from all
  programs participants. It makes data
  consolidation and management easier and more
  reliable.

29
PM Information System

• One of the reasons for selecting Spider Project
  as the program management tool is based on its
  ability to work with physical quantities
  (volumes) of work to be done on project
  activities.
• It helps to implement corporate norms like unit
  (physical) costs, unit material requirements,
  resource productivities (units per hour), etc.
• Spider Project permits to create program
  (corporate) templates, dictionaries, and
  databases (reference-books) that are necessary
  for proper program management.

30
Part 3

• Program/Project Data

31
Data requirements

• The requirements to the data that are used for
  program planning and control may be divided into
  two main groups
• High level requirements based on
  program/portfolio management needs,
• Low level requirements that shall be applied to
  creating project computer models.
• High level requirements consider data
  organization,
• Low level requirements cover details and
  instructions on creating project computer models.

32
Organizing data

• The same Project, Phase, Activity, Resource,
  Material, and Department coding structures are
  used in all projects,
• Resources that are used in all projects belong to
  the program (corporate) resource pool,
• Resources of the same type share the same
  characteristics (like cost, production rates,
  material consumption per work hour),

33
Organizing data

• Program management systems have specific
  requirements that are vital for successful
  implementation.
• It is necessary to be sure that
• WBS structures that are used in different
  projects of the program are compatible,
• Project costs have the same structure in all
  projects (same cost components are used),
• Cost accounts are the same in all projects,

34
Organizing data

• Activities of the same type have the same
  characteristics in all projects (like unit cost,
  material requirements per work volume unit,
  etc.),
• Typical resource assignments have the same
  characteristics in all projects (like
  productivity, cost and material requirements),
• Typical (repeating) processes are modeled in the
  same way in all projects,
• Project archives are kept and stored as required.

35
Organizing data

• These requirements are set on the Program level
  and are mandatory for all program participants.
• Templates, reference-books, coding systems etc.
  are developed in the Program Management Office.

36
Program Databases (Reference-Books)

• Activities, resources and resource assignments
  belong to the same type if they share the same
  characteristics like unit costs, material
  consumptions per work volume unit, productivity,
  etc.
• Program Management office creates Databases or
  Reference-books that contain those parameters
  that shall be used for planning of all projects
  of the Program.

37
Program Databases (Reference-Books)

• Program Reference-books include at least
• Activity cost and material requirements per
  volume unit for all activity types,
• Resource assignment cost and material
  requirements per volume unit for all assignment
  types,
• Resource assignment productivities for all
  assignment types,
• Resource assignment work loads for all assignment
  types.

38
Typical Fragment Library

• Project fragments usually describe typical
  processes and technologies that are used more
  than once as small projects.
• Creating project computer models using the
  library of typical fragments helps to avoid
  inconsistencies and assures that the project
  model follows Program standards.
• A library of typical fragments is very important
  tool for the development of common culture and
  management standards.

39
Program Templates

• Program management has to be based on the program
  standards. These standards include not only
  estimates of the typical activity and assignment
  parameters process and but also project
  templates.
• Besides Program Management Guideline developed in
  the Program Management Office describes Program
  management routine (when and what reports shall
  be presented, performance review meetings
  schedule, etc.) and change management processes.

40
Organizing data

• This slide shows WBS template for construction
  projects required by Program Management Office of
  Olimpstroy.

41
Project Data Structure

• The main elements of any project computer model
  include
• project activities,
• activity dependencies,
• resources and their assignments,
• calendars,
• Costs,
• Project, Work, Resource and Cost Breakdown
  Structures.

42
Project Data Structure

• Now we will discuss special requirements to
  project data that are necessary for most
  infrastructure projects.
• Some of these requirements are used in the
  process of project schedules assessment.

43
Activity Data

• Usually project activities are characterized by
  their duration or effort. But in most cases and
  especially in construction projects it is
  necessary to set activitys physical volume (or
  quantity) of work.
• Activity volume can be measured in meters, tons,
  etc., planned work hours, percents or any other
  units.
• Unlike activity duration, activity volume does
  not depend on assigned resources.
• Project performance reports always include actual
  volumes that were done on project activities.

44
Activity Data

• By introducing activity volumes, we will be able
  to use Program/corporate databases that define
• cost and material requirements per activity
  volume unit for different activity types.
• Resource assignment productivity or production
  rate for different assignment types.
• Activity duration is calculated basing on
  activity volume and assigned resource
  productivities. PMBOK Guide call this method as
  Parametric Estimating of Activity Duration.

45
Dependency Data

• Many infrastructure projects include linear
  construction (roads, railroads, pipelines, etc.).
  In such projects many types of work can be done
  in parallel but on some distance between them.
  Such logical dependency may be described as Start
  to Start link with Volume Lag.
• But Start to Start link shall be supported by
  Finish to Finish link to prevent preceding
  activity catching succeeding activity. So it is
  necessary to set more than one link between
  activities and to check if Start to Start links
  are supported by Finish to Finish links.

46
Resource Data

• Resources are divided into two classes
• renewable (human resources and mechanisms) and
• consumable (materials).
• It makes possible to assign materials to
  resources defining their consumption per resource
  work hour or work volume unit.
• Example a car consumes gas.

47
Resource Data

• Besides the individual resources there is a need
  to set resource crews (we call them
  multi-resources) and resource skills (roles).
• Multi-resources are the settled groups of
  resources working together.
• Multi-resources can be assigned on activity
  execution.
• Assigning multi-resource project planner assigns
  all resources that belong to this multi-resource.

48
Resource Data

• If resources can do the same work then they
  belong to the same Skill set or Resource
  Assignment Pools.
• Resources with the same skills are
  interchangeable though they may have different
  productivities performing the same activities.
• One resource can belong to many Skill sets.
• Example excavators of different types that may
  be used on earth moving works.

49
Assignment Data

• Resource Assignments have their own
  characteristics including
• Resource productivity on assignment,
• Assignment cost (may be fixed, per unit of work
  volume, or per hour),
• Assignment material consumption (fixed, per unit
  of volume, or per hour),
• Resource workload ( or resource work time that
  is required on concrete assignment)

50
Assignment Data

• Assigning resources to activities implies the
  notion of a team - a group of resources working
  on an activity together. The team can include
  individual resources, multi-resources and skills.
• If resources belong to different teams then they
  can work independently of each other at different
  time. This is the way to simulate working in
  different shifts on the same activities.

51
Assignment Data

• Resources can consume materials in the process of
  their work. Besides, materials can be assigned to
  activities or resource assignments directly. In
  some projects it is necessary to simulate not
  only material consumption but also production or
  supply of resources and materials on activities
  and assignments.

52
Calendars

• Separate calendars can be set for all activities,
  resources and time lags.
• Availability of all these calendars is important
  for the proper project performance simulation.

53
Cost Data

• Usually it is not enough just to define activity
  and resource costs. It is necessary to know
  project expenses and revenues, what will be spent
  on wages, on machinery and equipment, on taxes,
  etc. Sometimes it is necessary to allow for
  multiple currencies. So there is a need to define
  and assign cost components.
• Cost Structure shall be the same in all projects
  belonging to the Program and is defined on the
  Program level.

54
Material, Resource and Cost Centers

• There is a need to get different reports on the
  groups of cost components, materials and
  resources. That is why it is necessary to define
  Cost, Material and Resource Centers
• Material center can include any group of
  materials.
• Resource center can include any group of
  resources.
• Cost center includes selected cost components.
• Using material, resource, cost centers permits to
  get group reports (all pipes, all workforce) and
  to manage parallel budgets (actual expenses,
  contract costs, etc.).

55
Multiple WBS

• It is also very useful to have an opportunity to
  get project reports that aggregate project data
  different ways. Usually we use at least three
  Work Breakdown Structures in our projects based
  on project deliverables, project processes and
  responsibilities.
• At least one WBS is mandatory and required by
  Program Management Office. Others may be selected
  by project management teams.

56
Contract Breakdown Structure

• Contract Breakdown Structure is the powerful tool
  for management of contract relationships. The
  same organizations are involved in multiple
  projects and in different programs.
• Contract Breakdown Structures are used to get
  reports on the contract performance and contract
  cash flows.

57
Cost Breakdown Structure

• Cost Breakdown Structure for contract costs is
  defined by Program Management Office.
• Contractors can add cost components and create
  Cost centers for planning and tracking real
  expenses.
• We manage not only expenses but also financing.
• Program managers control program, project and
  contract cash flows.

58
Project Archives

• The planners should be able to store project
  versions and to analyze the progress in project
  execution, comparing current project and
  portfolio schedules not only with the baseline
  but also with any previous version. It enables to
  assess the progress in project execution for the
  last week, last month, last year, compared to the
  baseline, etc.

59
Typical Fragment Library

• Project fragments usually describe typical
  processes and technologies that are used more
  than once as small projects.
• Creating project computer models using the
  library of typical fragments helps to avoid
  inconsistencies and assures that the project
  model follows corporate standards.
• A library of typical fragments is very important
  tool for the development of common culture and
  management standards.

60
Part 4

• Program/Project Scheduling

61
Scheduling Tasks

• Program/Project scheduling without the resource
  limitations taken into the consideration,
• Program/Project resource constrained scheduling
  (resource leveling),
• Determination of feasible time floats for
  Program/Project activities and those activities
  that are critical,
• Determination of the Program/Project cost,
  material and resource requirements for any time
  period,

62
Scheduling Tasks

• Determination of renewable resources utilization
  in time,
• Risk analysis and development of the
  Program/Project schedule and other parameters
  allowing for the risks,
• Program/Project performance measuring,
• Program/Project performance analysis and
  forecasting main project parameters.

63
Tasks to solve

• The problem of project schedule development
  without allowing for resource constraints has a
  correct mathematical solution (Critical Path
  Method), which would be the same for all PM
  packages, provided that initial data are
  identical. All other problems are solved using
  different approaches and yielding different
  results.

64
Resource constrained scheduling

• Resource constrained schedules produced by
  different PM software are different. The software
  that calculates shorter resource constrained
  schedules may save a fortune to its users.
• That is why we pay most attention to
  resource-constrained schedule optimization.

65
Resource constrained scheduling

• The schedule stability is no less important,
  especially at the project execution phase.
• That is why our project management software
  Spider Project features an additional option -
  the support of the earlier project version
  schedule (keeping the order of activity execution
  the same as in selected earlier project schedule).

66
Sample Project before leveling

• Traditional notion of Critical Path works only in
  case of unlimited resources availability.
• Let us consider a simple project consisting of
  five activities, presented at the next slide.
• Activities 2 and 5 are performed by the same
  resource.

67
Sample Project after leveling

• Please pay attention to activities that became
  critical. Now delaying each of the activities 1,
  2 and 5 will delay the project finish date. We
  call these activities Resource Critical and their
  sequence comprises Resource Critical Path.

68
Resource Critical Path

• In many projects it is necessary to simulate
  financing and production, and calculate project
  schedules taking into account all limitations
  (including availability of renewable resources,
  material supply and financing schedules). True
  critical path should account for all schedule
  constraints including resource and financial
  limitations.

69
Resource Critical Path

• We call it Resource Critical Path (RCP) to
  distinguish it from the traditional
  interpretation of the critical path definition.
• The calculation of RCP is similar to the
  calculation of the traditional critical path with
  the exception that both early and late dates (and
  corresponding activity floats) are calculated
  during forward and backward resource (and
  material, and cost) leveling.

70
Resource Constrained Floats

• This technique permits to obtain resource
  constrained floats.
• Activity resource constrained float shows the
  period for which activity execution may be
  postponed within the current schedule with the
  set of resources available in this project.

71
RCP and Critical Chain

• It appears that by adding financial and supply
  constraints to the Critical Chain definition as
  well as the way of the Critical Chain
  calculation, we will obtain something very
  similar to RCP.

72
Part 4

• Success Criteria

73
Project Success Criteria

• If project success criteria are set as finishing
  project in time and under budget then proper
  decision making will be complicated.
• Project managers will not be able to estimate the
  effect of their decisions to spend more money but
  to finish the project earlier.
• If some project is business oriented then this
  project has to have business criteria of its
  success or failure.

74
Project Success Criteria

• One of potential options to set the profit that
  should be achieved at some point in time basing
  on the forecast of the revenues that will be
  obtained after the project will deliver its
  results.
• Such success criterion will permit to weight time
  and money making managerial decisions.

75
Project Success Criteria

• At the next slide you may see the project
  schedule that is calculated without allowing for
  project financing and supply restrictions. There
  are periods when project has no money to proceed
  and necessary materials (wall frames) are absent.

76
Project Success Criteria

• But if project manager will find enough money and
  materials then project total profit to some
  imposed date will be close to 219,000.

77
Project Success Criteria

• If to calculate project resource, financing and
  supply constrained schedule than total profit
  will become more than 25,000 less.

78
Project Success Criteria

• Maybe it is reasonable to borrow money or to find
  some other solution?
• To be able to weight options and to choose the
  best it is necessary to simulate not only
  expenses. This approach is especially important
  for portfolio management.

79
Part 5

• Risk Analysis
• Success Driven
• Project Management

80
Why risk analysis

• Our experience of project planning shows that the
  probability of successful implementation of
  deterministic project schedules and budgets is
  very low. Therefore project and portfolio
  planning technology should always include risk
  simulation to produce reliable results.

81
Risk Simulation

• Risk simulation may be based on Monte Carlo
  simulation or use three scenarios approach that
  will be described further.

82
Risk Simulation three scenarios approach

• A project planner obtains three estimates
  (optimistic, most probable and pessimistic) for
  all initial project data (duration, volumes,
  productivity, calendars, costs, etc.).
• Risk events are selected and ranked using the
  usual approach to risk qualitative analysis.
  Usually we recommend to include risk events with
  the probability exceeding 90 in the optimistic
  scenario, exceeding 50 in the most probable
  scenario, and all selected risks in the
  pessimistic scenario.

83
Risk Simulation three scenarios approach

• The most probable and pessimistic project
  scenarios may contain additional activities and
  costs due to corresponding risk events and may
  employ additional resources and different
  calendars than the optimistic project scenario.
  As the result project planner obtains three
  expected finish dates, costs and material
  consumptions for all major milestones.

84
Desired Parameters

• They are used to rebuild probability curves for
  the dates, costs and material requirements.
• Defining desired probabilities of meeting project
  targets a project planner obtains desired finish
  dates, costs and material requirements for any
  project deliverable.

85
Success Probabilities

• If the targets were approved then it is necessary
  to calculate the probabilities of meeting
  required project targets. If they are reasonable
  then they may be accepted.
• Probabilities to meet approved project targets we
  call Success Probabilities. These targets may
  include all project parameters that will be
  controlled (profit, expenses, duration, material
  consumption).

86
Baseline

• Target dates do not belong to any schedule.
  Usually they are between most probable and
  pessimistic dates. A set of target dates and
  costs (analogue of milestone schedule) is the
  real project baseline.
• But baseline schedule does not exist!

87
Buffers

• We recommend to use optimistic schedule for
  setting tasks for project implementers and manage
  project reserves.
• Project planner obtains not only the set of
  target dates but also a critical schedule a
  project schedule calculated backward from target
  dates. The difference between current and
  critical dates shows current schedule contingency
  reserves (buffers).

88
Sample Critical Schedule

• There are time, cost and material buffers that
  show contingency reserves not only for a project
  as a whole (analogue of Critical Chain project
  buffer) but also for any activity in the
  optimistic project schedule.

89
Success Probability Trends

• The best way to measure project performance is to
  estimate what is going on with the project
  success probabilities. If they raise it means
  that contingency reserves are spent slower than
  expected, if they drop it means that project
  performance is not as good as it was planned and
  corrective actions are needed.

90
Success Probability Trends

• Success probabilities may change due to
• Performance results
• Scope changes
• Cost changes
• Risk changes
• Resource changes

91
Success Probability Trends

• Thus success probability trends reflect not only
  project performance results but also what is
  going on around the project.
• We consider success probability trends as the
  really integrated project performance measurement
  tool.

92
Success Probability Trends

• Success probability trends may be used as the
  only information about project performance at the
  top management level because this information is
  sufficient for performance estimation and
  decision making.

93
Success Driven Project Management

• We call the described methodology Success Driven
  Project Management.

94
Success Driven Project Management

• If project performance is estimated by success
  probability trends then project managers are
  encouraged to resolve uncertainties ASAP. This
  can increase success probabilities even with
  activity finish delays cost overruns.
• Postponing problem activities leads to negative
  trends in success probabilities.

95
Success Driven Project Management

• This attribute of success probability trends is
  especially useful in new product development
  project management.
• On the corporate level it is very useful to know
  trends and current probabilities of meeting
  targets for all portfolio projects.

96
Part 6

• Conclusions

97
Corporate PM Tools and Techniques

• Organizing data in a way that supports proper
  resource work simulation and application of
  corporate norms and standards.
• Creating a set of reference-books and the fragnet
  libraries that are obligatory for creating
  project computer models.

98
Corporate PM Tools and Techniques

• Calculating Resource Critical Path and resource
  constrained floats for every project and project
  portfolio.
• Risk assessment and simulation.
• Defining project success and failure criteria
  that reflect achieving project business goals.

99
Corporate PM Tools and Techniques

• Defining project targets (and corresponding
  contingency reserves) that may be achieved with
  reasonable probabilities.
• Regularly recalculating the current probabilities
  of meeting project targets during execution and
  analyzing success probability trends. Negative
  success probability trends require corrective
  actions.

100
Success Driven Project Management Flowchart
REFERENCE-BOOKS Resources Materials Cost
Components Cost Breakdown Structure Resource
Breakdown Structure Calendars Resource
Productivities Unit Costs Material Requirements
per Volume Unit Skills Multi-Resources
Code Structures
Typical Fragnet Library
Project Schedule
WBS Templates
Project Budget
Project Portfolio
Risk Analysis
Risk Register
Issue Register
Success and Failure Criteria
Performance Reports
Success and Failure Probabilities
Corrective Actions
-
Success Probability Trends
Work Authorization