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DOE's Role As Owner INTRODUCTION As noted in the committee's 2001 assessment report, DOE needs to become more involved and focused on project management activities associated with its role as owner (NRC, 2001~. Because DOE relies extensively on contractors to carry out project management activities, the distinction between the roles of owners and contractors have become blurred. DOE has assumed some of its contractor' s management responsibilities by directing how activities are executed, while shifting some of its ownership responsibilities to contractors by allowing them to define mission needs and projects. GOVERNMENT/INDUSTRY FORUM ON THE OWNER'S ROLE On November 13, 2001, the committee convened a government/industry forum on the owner's role in project management and preproject planning. The forum included presentations in case study form of successful project manage- ment organizations in industry and the importance of project management and preproject planning from DOE's perspective. The forum proceedings were pub- lished by the NRC (NRC, 2002~. Through this forum, the committee sought to reinforce some of the general points made in its earlier reports: . Successful project management requires the institution of a project man- agement discipline that encompasses all projects. It is not sufficient to do some projects well; what is needed is consistency. All the firms represented in the 28

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DOE'S ROLE AS OWNER 29 forum have well-defined, disciplined project processes, with buy-in and active participation by senior management. There is an absolute requirement for emphasis on project justification and identification of business (or, in the case of DOE, mission) need early in every project, even before a project is formalized. Senior corporate (agency) manage- ment must be closely involved in this process, as it is their responsibility to identify and interpret business or mission needs. Decision points with options for project approval, go-ahead, change, rework, or termination must be clearly identified. These decisions must be made by appropriate senior managers. The view that the need for senior management decisions slows down good projects is explicitly rejected. A good decision process actually expedites projects in that it assures that they have the necessary resources, support, and direction to proceed to successful completion and opera- tion not merely to the next phase. Accountability and responsibility for project performance must be clear and well defined across the enterprise. For the enterprise to succeed, all elements must succeed. A corporate organizational structure for project management must be established and maintained. There must be continual, formal project reviews by responsible management. Expectations, products, and metrics must be clearly defined for the entire process. There is no substitute for thorough front-end planning. This is true even (better, especially) for first-of-a-kind and one-of-a-kind projects. A successful project-management improvement process requires a cultural change, and cultural change is driven from the top. Characteristics of Successful Owners The fact that the companies with consistently successful projects were not always successful in the past was noted to illustrate their common commitment to process improvement. They achieve this improvement by focusing on the project management process as a part of the core values of the company and assuring that the process is consistent throughout the organization. They develop a corporate language to define and control the project management process as well as perfor- mance measures that guide process improvement. The case studies emphasized the importance of the owner's role in front-end planning and senior management involvement in assuring that projects are aligned with corporate missions. The planning process emphasizes identifying possible risks and being prepared to address them and manage the changes that may be required during the project. It was noted that the greater the technical complexity of the project the greater the involvement of the owner in its planning and execution.

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30 PROGRESS IN IMPROVING PROJECT MANAGEMENT AT THE DOE The clear message presented at the forum is imbedded in O 413.3 as well as the draft PPM. Of particular note is the similarity of DOE and industry project review and approval processes and that in both kinds of organizations senior managers and directors are intimately involved. At ChevronTexaco, which has a $5 billion annual capital budget, the corporation's executive committee reviews and approves projects at the $25 million level. Senior management involvement in the process is crucial. FEDERAL PROJECT MANAGERS' FUNCTIONS An NRC report, Outsourcing Management Functions for the Acquisition of Federal Facilities, states that "ownership and management functions in the facil- ity acquisition process differ. An owner's role is to establish objectives and make decisions." The report indicates that a smart owner should be capable of per- forming four interdependent functions: (1) establishing a clear project definition, (2) establishing performance metrics, (3) monitoring overall project performance, and (4) providing commitment and stability to the project definition and its achievement (NRC, 2000~. The committee discusses the project management functions of the owner in this report and in its 2001 assessment report (NRC, 2001~. The functions are basic and fairly well understood by DOE and DOE contractor project managers. The problem is that while they are inherently the owner's responsibility, DOE relies on M&I and M&O contractors for many of these functions. The committee believes that DOE needs to consider whether outsourcing certain management functions is restricting its ability to manage projects. These functions primarily relate to strategy determining the mission, scope, priority, and budget of projects. The following questions should be answered when determining whether a function should be outsourced and the level of involvement of the federal project manager and the level of control that should be retained by the DOE: Are decisions related to the function critical to the success of the project? Is the management function one that requires significant responsibility and that can have an impact on the progress of the project if it is not carried out properly? Does the management function bind the agency to either a monetary commitment or a contract? . Does the management function have effects beyond the scope of the project (e.g., environmental, public safety, or national security effects)? Does the management function infringe on mandates by government or requirements by law? Does the management function place unjustified and uncontrollable author- ity in the hands of a private provider?

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DOE'S ROLE AS OWNER 31 Does the management function encourage the contractor organization to make the service delivery sufficiently proprietary to the point that the agency would be committed solely to that organization for future services (NRC, 2000~? The committee has observed a lack of understanding of the project manager's roles and responsibilities. The draft PPM lists the functions in section 2.8.1 with little elaboration. A detailed definition of the roles and responsibilities of federal project managers and contractor project managers who perform the functions of an owner' s representative should be prepared by each program secretarial office (PSO). The department should then assure that the managers who are assigned these roles and responsibilities have the appropriate training, expertise, and expe- rience. (The committee outlines the characteristics of effective owner's represen- tatives in Appendix D.) FINDINGS AND RECOMMENDATIONS Findings: The forum held in November 2001 provided examples of the points made in the committee's previous reports about how industry fulfills its role as owner in planning and managing projects. In subsequent meetings with DOE and DOE contractor personnel the committee saw evidence of increased emphasis on front-end planning and a clearer understanding of DOE's role as owner. Recent policy memoranda that emphasize acquisition planning are encouraging. Recommendation: The committee believes that in order for DOE to be an effective owner of capital acquisition projects it should: Consider capital projects critical to organizational success. Require senior management involvement in project decision making, usually at the $5 million dollar and higher level. strategic plan. Have a detailed and well-recognized internal front-end planning process. Capture metrics on planning effort and project performance. Require owner involvement and leadership in front-end planning. Ensure that projects support DOE's mission and are consistent with DOE's Recommendation: DOE should periodically benchmark its performance in project planning and control processes and compare it with the performance of industry leaders to ensure that it is consistently utilizing the best practices. Recommendation: Senior managers in each program secretarial organization (PSO) in DOE should develop a complete definition of the roles and responsibili- ties of project managers.

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32 PROGRESS IN IMPROVING PROJECT MANAGEMENT AT THE DOE Recommendation: Senior managers should continue to emphasize the impor- tance of improving the project management processes and procedures to assure long-term improvement throughout the organization. REFERENCES NRC (National Research Council). 2000. Outsourcing Management Functions for the Acquisition of Federal Facilities. 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. 2002. Proceedings of the Government/Industry Forum: The Owner's Role in Project Manage- ment and Preproject Planning. Washington, D.C.: National Academy Press.