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4 Human Capital INTRODUCTION Many factors contribute to successful project management, but the essential component of a successful capital acquisition program is a corps of competent, experienced project managers with the requisite skills and dedication to execut- ing their responsibilities in a professional and accountable manner. This resource had been markedly eroded in DOE (NRC, 1999~; however, serious efforts have since been made to define a career development plan for DOE project manage- ment personnel. The roles of the federal project manager and the knowledge, skills, and abilities needed to be a successful owner's representative were dis- cussed in previous reports (NRC, 1999, 2001, 2002a, 2002b) and in Chapter 5 and Appendix D in this report. Still, DOE suffers from a lack of professional training opportunities and, especially, a departmental vision for the future direc- tion of its program and project management capabilities. Training of project management staff has been seriously underfunded at DOE. DOE management should note that a properly conducted training program is not only a means for enhancing fundamental project management skills but also a primary means for communicating management approaches and expecta- tions for how project management will be conducted in DOE. KNOWLEDGE, SKILLS, AND ABILITIES Project management is an endeavor that requires judgment, management skills, technical knowledge, and experience. It also relies heavily on relation- 19

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20 PROGRESS IN IMPROVING PROJECT MANAGEMENT AT THE DOE ships between federal managers, contractors, vendors, and other key stakeholders. Although an organization can (and should) leverage its capabilities by contract- ing outside resources to plan, design, construct capital facilities, or remediate hazardous conditions, some functions should not be outsourced. (See Chapter 5 of this report for a discussion of the owner's role in project management.) Gen- erally, owners are the critical decision makers on projects because they (1) are ultimately the beneficiaries of the facility, (2) are in a better position than con- tractors to make risk trade-off decisions, (3) understand their strategic interests better than any contractor, and (4) have to live with the consequences of these decisions. When outsourcing project management responsibilities, DOE should ensure that contractors have the requisite project management capabilities for the size and complexity of the project. To be effective as a project manager representing the owner, personnel need to possess the appropriate technical knowledge and experience to understand the owner's perspective. For example, technical issues in DOE projects often require project managers to have educational backgrounds and project experience in civil engineering, architecture, mechanical engineering, chemical engineering, envi- ronmental engineering, or other disciplines. Experience working on projects of similar size, complexity, and risk is also important. As noted in the 1999 report, a single program office may not provide sufficient opportunities for professional growth, so that reassignment of project management personnel across program offices may be desirable to achieve the necessary experience and efficient utiliza- tion of personnel resources (NRC, 1999~. There is no evidence that DOE intends to assign project management personnel across program office lines. The Center for Construction Industry Studies (CCIS) conducted a study in the late 1990s that examined requirements for owners to develop successful collaborative relationships with contractors. The study team interacted with approximately 50 owner and contractor organizations, conducted 7 site visits, performed more than 70 interviews, and captured more than 100 surveys. It found that project managers acting as the owner's representative need certain skills to function in collaborative relationships with outside contractors (Davis- Blake et al., 1999, 2001~. The relational skills summarized in Table 4.1 are said to contribute favorably to successful collaborative execution of projects. If an organization changes its culture to move in the direction of greater collaboration on projects, many of these skills may be lacking and project managers may have to be retrained to use them. A project manager acting as the owner's representative needs the skills required to work with outside contractors. A DOE owner's representative should be able to work closely with contractors without losing sight of who the owner is and who the contractor is. (See Appendix D of this report for characteristics of owners' representatives.)

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HUMAN CAPITAL TABLE 4.1 Skills for Functioning in Collaborative Relationships 21 Category of Skill Examples of Skills Business Writing and managing contracts Negotiation Managing budgets and schedules Communication Coordination and liaison Conflict management Cultivating a broad network of relationships Influence Mentoring Motivating Managing change Managerial Team building Delegating Being politically aware and seeing the big picture Problem solving Continually analyzing options and innovating Planning Considering both sides of issues, managing risk FEDERAL WORKFORCE TRENDS Staffing to ensure a strong and continuous stream of good project managers is a challenge to any organization that constructs capital facilities. This chal- lenge may become more critical in light of projections that many government agencies will lose experienced personnel (GAO, 2000, 2001~. However, because DOE projects (especially environmental remediation projects) tend to have long durations, DOE has the opportunity to establish a long-term career development program that will ensure a more than adequate supply of managers specifically trained to manage DOE projects. Adequacy of Resources In past reports, the committee expressed concern for the apparent shortage of personnel functioning as line managers and support staff for programs and projects (NRC, 2001, 2002a). In a self-evaluation inventory conducted by OECM in 2001, only 115 DOE employees classified themselves as functioning project managers. Based on the committee's experience, this figure is surprisingly low given the magnitude of the capital acquisition and environmental remediation programs at DOE, even taking into account the possibility of inconsistent language in position descriptions and misunderstanding on the part of the individuals who do not classify themselves as project managers. Many DOE personnel have not seen themselves as project managers, nor have they been seen as such by past

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22 PROGRESS IN IMPROVING PROJECT MANAGEMENT AT THE DOE DOE executives, because they perceive that contractors (particularly manage- ment and operations (M&O) and management and integration (M&I) contractors) are hired to function as project managers. If there is underreporting of project managers in DOE, it may reflect a self-image problem. The open question is, If DOE personnel do not see themselves as project managers, are they truly func- tioning as effective DOE owner representatives? Establishing the appropriate size of the project management workforce for a particular project or combination of projects is an important and difficult task. Many variables come into play, such as complexity, scope, schedule, organizational capability (contractor and government), contractual arrangement, and the technology incorporated in the projects. Staffing requirements are dependent on the amount of work to be processed over a particular time, as well as the specialties that may be required. The committee made several attempts to analyze the adequacy of project management personnel on the contractor and DOE staff but found it very difficult to gain a clear picture of the number of personnel engaged in project management compared with the dollar value of work under way. This situation emanates largely from the absence of resource-loaded contractor schedules and from the fact that DOE personnel are charged to a central account rather than being project funded. NNSA developed the most comprehensive accounting of DOE project management loading, which indicated that on average each project manager was responsible for the oversight of roughly $20 million of work. A simplified accounting by the Office of Science yielded roughly $25 million of work per project manager. Assuming a $200,000 loaded cost per individual, the project management oversight cost would amount to between 0.8 and 1.0 percent of the value of the work. The Spallation Neutron Source (SNS) project at Oak Ridge National Laboratory (ORNL), a $1.4 billion project with a FY 2002 funding profile of about $280 million, is managed by approximately 55 ORNL contractor personnel and 5 federal personnel. This suggests that one DOE project manager oversees $56 million in annual expenditures, with a total expenditure for project manage- ment of less than 5 percent and a ratio of 1 DOE person to 11 contractor personnel in management, which may be low for that type of project The committee does not have sufficient data to evaluate what these DOE project managers are doing or not doing, or what the appropriate number of federal project managers should be on a project, but it is concerned about the apparent high value of the work being overseen by each project manager. The committee also perceives that the number of DOE personnel (115) assigned to project management is low for the scope and complexity of work DOE is charged with executing. The committee is concerned that there appears to be neither staffing policy nor standards, nor is there a consistent approach to staffing for either the contractor or the federal project managers. This can lead to inappropriate coverage (either over- or understaffing) for assuring a contractor's effective execution and for DOE properly discharging its ownership role.

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HUMAN CAPITAL 23 Given this perceived shortage of project management personnel in DOE for the volume of project work being done, it would appear that the M&O and M&I contractors may be performing some of the functions that otherwise would be the responsibility of the federal project manager as the owner's representative. If by design or by default the M&O and M&I contractors are performing some of the functions of the owner that should not be outsourced, this could create a conflict of interest for the contractors. (See Chapter 5 for a description of these functions.) The committee believes strongly that this issue should be assessed by DOE to ensure that DOE projects are adequately, as well as competently, staffed with appropriate project management personnel. DOE should also analyze the project management staffing of its contractors. Sustainability of the Workforce General Accounting Office (GAO) testimony before Congress indicated what was already common knowledge that the federal government faces challenges in retention of personnel (GAO, 2001~. Successful public and private organiza- tions recognize the need to sustain management capabilities through succession planning and professional development. GAO also noted that stove-piped orga- nizations will need to be better integrated organizationally if they are to make the most of the knowledge, skills, and abilities of their staff as well as establish performance-oriented management and a focus on continuous improvement. As noted above, deficiencies in human capital in the DOE may be affecting the department' s ability to manage large projects. This problem is made more acute insofar as experienced project managers are underutilized that is, they are assigned to a single program office rather than being assigned wherever they are needed by the agency as a whole. If DOE is understaffed in the project management area, then it has both a challenge and an opportunity to rectify this situation by hiring qualified engineers at entry and midlevel positions and by training them to perform DOE-specific project management and to serve as owner's representatives. The development of mentoring programs and career paths should provide a continuous stream of project managers experienced in the way DOE performs (or intends to perform) projects. Project managers should be recognized as a DOE-wide asset. This would facilitate their movement between projects and would allow NNSA, EM, and SC to share resources in the best interests of DOE at large (NRC, 1999~. TRAINING AND CAREER DEVELOPMENT Project managers need ongoing training and professional development to perform proficiently and to become capable of discharging increasing responsi- bilities. In addition to training for the presently designated project managers, there should be training for aspiring individuals who demonstrate potential to

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24 PROGRESS IN IMPROVING PROJECT MANAGEMENT AT THE DOE become project managers as well as for other support personnel on the project team. DOE has an opportunity to go beyond traditional project management education, which aims at training individuals, to the training of project manage- ment teams. However, to do this, DOE would have to take control of its own . . training program. In January 2001, DOE began to formulate a program to address the training and development of project managers. This effort, known as the Project Manage- ment Career Development Program (PMCDP), met its original completion date of December 2002. Once PMCDP is implemented, it is essential that supervisors provide the opportunity for individuals to attend appropriate training courses. Training, however, is not enough supervisors should provide developmental assignments to ensure that individuals have the opportunities to maintain and enhance their skills. The committee is deeply interested in this effort and has followed it very closely. The 2001 assessment report addressed the topic in detail (NRC, 2001~. Although the committee would have preferred that the program be implemented in far less than 2 years, the committee recognizes the effort devoted to the project. Upon reviewing the draft PMCDP, the committee believes that the depth and extent of the program are appropriate for the intended purpose. Placing the PMCDP module as a subset of the Acquisition Career Development Program covered by DOE Order O 361.1 is also considered appropriate. The proposed draft attachment to O 361.1 covering project management policies, procedures, and qualification and training requirements is quite clear and complete and should serve well as the base for the program (DOE, 1999~. The committee was particularly impressed with the draft qualification stan- dards for each project manager level. It is centered around 10 basic management competencies: project management in general, leadership and team building, scope, communication, quality and safety, cost, time, risk, contracts, and integra- tion. The committee endorses the selected competencies. In addition to qualification standards, a functional requirements document has been drafted that covers the training and development requirements for eligi- bility to each of the four project manager levels contemplated and that tracks individual compliance with the requirements. This document will serve to advise existing and aspiring managers of their training and development needs as well as to produce an inventory of project manager competencies at DOE. Such a data- base would have made it simpler to develop the PMCDP. To aid in implementing the training, the task force for the PMCDP devel- oped 10 courses to be taught by in-house personnel with appropriate experience and 18 courses by outside contractors. These courses cover the full gamut of project management as well as some support activities. An anticipated annual schedule of courses to be offered and the weeks of training needed has also been developed. The committee previously expressed concern about the efficacy of

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HUMAN CAPITAL 25 the extant contract for training development. This contract has not proven to be a satisfactory vehicle for accelerating project management training. The com- mittee believes that OECM should explore obtaining needed training by other means and that educational contracts should be awarded based on the knowledge, competence, and practical experience of the proposed instructors. The estimated annual cost of tuition for the training program to satisfy imme- diate needs is approximately $1.5 million (covering about 200 people for several courses each). DOE reported to the committee that its records support an esti- mated cost of $2,500 per course per student. The committee has also heard of difficulties in securing adequate funds for training from within the various organizational appropriations. It would appear that an alternative approach a centralized budget for training might be preferable for attaining the prescribed goals. The PMCDP appears to effectively address the program manager aspect of the human capital equation but may not adequately address the needs of the concomitant support staff. FINDINGS AND RECOMMENDATIONS Finding: There is reason to believe, based on the reported numbers of DOE project management personnel and the volume of DOE projects, that DOE is understaffed in the area of project managers and essential project management support staff. The committee concludes that there may not be enough DOE project management personnel to discharge their responsibilities as the owner's representatives. This apparent deficiency may lead to a situation in which M&O and M&I contractors, by design or default, are performing the roles and functions that should be the prerogative of owners' representatives. This inappropriate devolution of some of the department's project management responsibilities to contractors may be creating a conflict of interest. Recommendation: DOE project management should be staffed to the level needed to ensure that the government's interests are protected. DOE should assess whether it has enough project management personnel to properly dis- charge its ownership role or whether DOE understaffing in project management is permitting contractors to take on responsibilities and functions that should be reserved for the government's representatives. To do this, DOE will have to define the roles and responsibilities of federal project managers and then assess the number of project managers needed to carry out these responsibilities. The roles and responsibilities of the contractors' project managers vis-a-vis the fed- eral project managers should also be clarified.

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26 PROGRESS IN IMPROVING PROJECT MANAGEMENT AT THE DOE Recommendation: DOE should develop a vision for what project management in the department should become, and then hire, train, and promote personnel specifically to staff and fulfill this vision. Recommendation: Concurrent with the DOE staffing assessment, DOE should also assess the project management staffing of its (M&O and M&I) contractors in terms of both quantity and quality (knowledge, background, and experience). It would be desirable to know if contractors, perhaps because of the declining competition for DOE projects, are not assigning their best managers to DOE projects. Recommendation: DOE should estimate its future requirements for project management and other project support personnel and develop a plan to address recruitment, turnover, and retention in the future. Hiring personnel with experi- ence in preproject planning, cost estimating, risk management, EVMS, team facilitation, and other critical skills can be a means of meeting some of those needs in the near term. Finding: The committee perceives a need for improved utilization of existing and incoming project management personnel. This need can be fulfilled through training and career development and by facilitating the movement of personnel across organizational lines. Executing the PMCDP as a DOE-wide program will go a long way toward overcoming present training deficiencies. However, a long-term commitment to funding implementation of the PMCDP is critical. Recommendation: The projected annual tuition expenditure for training and development of $1.5 million is considered adequate for the immediate concen- trated need. Every effort should be made to allocate this amount centrally based on a DOE-wide decision, especially in the first few years, to assure implementa- tion of the PMCDP throughout the organization. In the interim, the DOE field and project offices should continue to meet immediate needs with their own training programs. Recommendation. In a previous report, an NRC committee recommended that DOE should "develop and maintain a cadre of professional certified project managers who would be assigned to manage DOE projects for all program offices" (NRC, 1999, p. 77~. Since it is clear that DOE does not intend to implement this recommendation, the committee recommends that DOE treat qualified project management personnel as a shared resource and facilitate their movement to assignments across the organization as the needs arise. OECM, in conjunction with the operation of the PMCDP, should maintain an inventory of all project managers throughout the DOE complex, along with their experience

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HUMAN CAPITAL 27 and capabilities, and make this inventory available to all DOE programs as they staff their projects. REFERENCES Davis-Blake, A., K.E. Dickson, J.P. Broschak, G.E. Gibson, F.J. Rodriguez, and T.A. Graham. 1999. Owner/Contractor Organizational Changes Phase II Report, Report #2. Sloan Program for the Construction Industry, University of Texas at Austin, 49 pp., April. Davis-Blake, A., K.E. Dickson, G.E. Gibson, and B. Mentel. 2001. Workforce Demographics Among Engineering Professionals, A Crisis Ahead, Report #21. Center for Construction Industry Studies, University of Texas at Austin, October. DOE (Department of Energy). 1999. Acquisition Career Development Program (O 361.1). Washing- ton, D.C.: Department of Energy. GAO (General Accounting Office). 2000. Human Capital: Key Principles from Nine Private Sector Organizations, Report GAO/GGD-00-28. Washington, D.C.: General Accounting Office. GAO. 2001. Human Capital: Meeting the Government-wide High-Risk Challenge, Report GAO-01- 357T. Washington, D.C.: General Accounting Office. NRC (National Research Council). 1999. Improving Project Management in the Department of Energy. Washington, D.C.: National Academy Press. NRC. 2001. Progress in Improving Project Management at the Department of Energy, 2001 Assess- ment. Washington, D.C.: National Academy Press. NRC. 2002a. Progress in Improving Project Management at the Department of Energy, 2002 Interim Assessment. Letter report, May. Washington, D.C.: National Academy Press. NRC.2002b. Proceedings of the Government/Industry Forum: The Owner's Role in Project Manage- ment and Preproject Planning. Washington, D.C.: National Academy Press.