Organizing for Excellence in Project Management
The challenges facing DOE are extreme in many ways. DOE spends billions of dollars annually on projects. It has plans to construct more than $20 billion worth of defense, energy research, environmental management, fissile materials disposition, and other projects in the next five years. DOE estimates that cleanup of existing wastes from the weapons program alone will cost $147 billion (in constant 1998 dollars) and take more than 70 years (DOE, 1998); others estimate these costs to be more than $200 billion (Probst and McGovern, 1998). These projects themselves are large and complex. The sites are often incompletely characterized, the necessary technologies are not always fully tested; and the political pressures for results are great.
DOE's portfolio of projects demands a sophisticated and adaptive project management system that can manage project risks systematically; control cost, schedule, and scope baselines; develop personnel and other resources; and transfer new technologies and practices efficiently from one project to another, even across program lines. Given DOE's critical missions, its portfolio of current and future projects, and its scientific and technological resources, DOE should be an example of excellent project management for the federal government. Unfortunately, it is not. As a result, both projects and the agency have suffered. DOE is seriously handicapped by its reliance on a project management organization that is less a system than a collection of approaches that DOE adopted from its predecessor agencies. By operating as an aggregate of independent agencies composed of the various program offices and field offices, DOE cannot take
advantage of the economies of scale inherent in its vast capital development program. At the highest levels, DOE has often recognized the need for change, but reforms have not been effective.
In fact, DOE's project performance, as this committee and many other observers have documented (see Chapters 1-4 and Appendix A), shows it to be one of the most inefficient organizations in the federal government. DOE appears to have wasted billions of dollars in the past decade, and it continues to waste millions each year. If present practices continue and estimates that DOE projects cost 50 percent more than necessary continue to hold, then DOE will spend more than $50 billion unnecessarily on waste cleanup projects alone. DOE's many attempts to improve performance, reduce costs, and implement contract reform have been ineffective, as has been shown at length in previous chapters. Field offices and program offices continue to operate virtually autonomously with respect to project management. DOE's Good Practice Guides are purely advisory and have little applicability to actual projects, and general guidelines cannot compensate for DOE's lack of project management skills and leadership. In short, there is widespread confusion over roles, authority, and responsibilities and a lack of accountability and effective oversight.
DOE has too few personnel with the appropriate experience, training, and education to meet the agency's current project management responsibilities. Considering the scale and number of DOE projects, it should be a leader in both formal and on-the-job training of project managers. Instead, it has no credible project manager training program, a certification program that has been years in the making but has not yielded significant results, and no identifiable career paths for project managers. Program offices devote significant effort and resources trying to manage projects with well intentioned personnel who do not have the requisite education and experience in project management and are not committed to project management as a career.
Other agencies and the private sector realized long ago that project management is a professional discipline that must be learned and practiced. The best public agencies and private firms engaged in capital project development maintain central organizations with core competencies in project management, project planning, coordination, and human resources development. These organizations provide structure, continuity, and leadership that foster cooperation both internally and externally.
The committee recognizes the unique problems DOE often faces because many DOE projects are highly complex and dependent on new technology. However, the committee has found that even conventional infrastructure projects done "inside the DOE fence" are prone to overruns. The root problem with these projects is not just complexity, but changes caused by those outside the line of responsibility having the power to influence project performance and outcomes. This report stresses the need for change control systems and change management, as well as giving project managers the capability and the authority to control the
budget, but DOE project managers have little ability to control changes that come from outside the project. Even with substantial improvements in project management, it will be difficult to complete projects on time and on budget if changes continue to proliferate.
Changes disrupt projects, and frequent changes disrupt projects disastrously. The impacts of changes go far beyond the costs of the changes themselves. Changes to DOE projects have increased as a growing number of stakeholders have influence over projects but no responsibility for them (i.e., DOE senior management and the Congress). Congress has passed legislation requiring public input and has been directly involved in some projects through the incremental budgeting process. DOE secretaries have contributed to the problem by continually altering the department's organizational structure and policies and by failing to back up project management against pressures for project changes. Most major projects, particularly those in the public sector, are under continual pressure for changes, but these pressures must be resisted if a project is to be completed even approximately on time and on budget. Many managers inside DOE noted that DOE fails to "push back" against the pressures for change originating from within the agency or from without. The concept that all changes should be accommodated because it is more important to satisfy all critics than to stay on budget or on schedule seems to be an unfortunate part of DOE' s culture. Yielding to pressures for change may be politically expedient, but it does not get projects built on time or on budget. Projects that go over budget prevent other essential projects from being completed. Projects that are delayed to accommodate changes are projects that are not performing their functions. If a project is necessary, then it is necessary to finish it on time. If it is not necessary to finish a project on time, then it is not necessary to do it at all.
If changes are a major part of DOE's problems, and if the changes cannot be stopped or at least resisted, then budget and schedule overruns will continue. DOE must find the political strength to resist pressures for project changes, or cost and schedule overruns will continue even as DOE continues to be blamed for them and new committees are commissioned to determine why DOE can not execute projects on time and on budget. The committee finds that DOE needs an internal advocate for projects who can resist such pressures and recommends that DOE establish a project champion whose primary goal is on-time, on-budget performance.
The evidence presented to the committee regarding DOE's project management has demonstrated numerous deficiencies and shortcomings. In the opinion of the committee, DOE will continue to experience significant project cost and schedule overruns unless the present organizational structure is changed. For DOE to improve its project performance and to gain the trust of Congress and the public, DOE must establish a project management organization that can meet the challenges of its missions and programs.
Changing DOE's Project Management Culture
DOE's culture is not conducive to effective project management and execution. The committee's review and assessment of DOE's organization and culture revealed that little emphasis has been placed on project management, responsibility, and accountability. The committee recognizes that the delivery of projects effectively and efficiently requires a culture of professionalism that is project-driven and committed to deliver projects on time and on budget. Project professionals are judged, and judge themselves, by their ability to meet budgets and schedules, to overcome all physical and organizational obstacles, by whatever (legal and ethical) means, in order to achieve the objective. Project professionals are unashamed champions and proponents of their projects and may even consider it appropriate to defy organizational authority and break organizational rules when they think it necessary to get the job done. They accept responsibility for their actions and take risks when they feel confident that they can control these risks. This culture is found in the engineering-construction industry, as well as in some government agencies (e.g., the U.S. Army Corps of Engineers and the Naval Facilities Engineering Command).
From the evidence of project performance and the observations of the committee, it appears that the DOE culture is not matched to the requirements of successful project delivery. In fact, many in DOE would agree. The comment that "the DOE must become results-oriented rather than process oriented" or "compliance-driven" or some equivalent, was made by a number of DOE personnel at various sites and is officially promulgated in the DOE Strategic Plan (DOE, 1997). Can the present dominant culture of DOE which is "dysfunctional" (as many DOE personnel stated) with respect to successful project execution, be changed?
The stronger the culture—that is, the more pervasive it is in the organization—the more inertia it generates. Strong cultures are more resistant to managerial intervention than weak ones. The levers creating strong cultures therefore lead to both effectiveness and ineffectiveness in organizations. Strong cultures, on one hand, can lead an organization to the "success breeds failure" syndrome in which organizations refuse, or are unable, to adapt to changing environmental demands. (Druckman et al., 1997, p. 87-88)
The committee concludes that substantial cultural changes are needed in DOE and that many DOE personnel who have expressed their frustration with the current culture and their inability to change it would welcome leadership in this area. Changing the culture within the context of an existing organization is admittedly difficult, but the committee believes it is possible, given strong leadership and support from the secretary's office.
The committee believes that DOE is urgently in need of leadership to change the project management structure. The following section of this chapter discusses
the committee's recommendation for the creation of a project management office that would provide a framework for significantly changing organizational behavior. Long-term systematic change to DOE project management will occur with behavior changes that are adopted along with the various recommendations on improving DOE's project management system and structure. Rather than simply calling for DOE to change its culture, the committee believes that DOE's culture can be changed most effectively by changing DOE processes, changing expectations, and positively reinforcing excellence in results rather than compliance with processes. The cultural change "levers" available to the secretary are the recommendations throughout this report, including the following:
- Create a culture of excellence in project management and execution.
- Establish the goal of becoming a leader in project management skills, methodology, technology, systems, and performance.
- Promulgate clear directions on project management policy, stressing that completion of projects to scope, on time, and on budget is of the highest priority.
- Provide clear definitions of responsibility, authority, and accountability for all personnel involved in projects. Prohibit interference from outside the chain of responsibility. Clarify DOE field office and contractor roles, responsibilities, authorities, and relationships.
- Enhance preconstruction planning, so that scope definition, baselines, budgets, contingencies, and schedules are realistic, and everyone involved understands what will be done, and when. After budgets are fixed, design and construct the project to meet the budget.
- Engage user managers early and require that users be committed to project scope, requirements, budget, and schedule.
- Ensure that user/client decisions are made in a timely manner to avoid project delays.
- Provide objective, standard methods for assessing project risks and uncertainties, and assign realistic budgets, schedules, and contingencies.
- Give the assigned project manager authority to control the project budget and schedule (including contingencies).
- Institute contracting methods that select contractors who are committed to the goals of the project and the organization. Develop contract management procedures that hold contractors accountable for performance without creating a counterproductive adversarial atmosphere.
- Institute rigorous identification and control of changes, especially changes in scope. Make it clear that scope, budget, and schedule are inextricably linked and prohibit changes in scope that cannot be accommodated in the assigned budget.
- Provide consistent, uniform methods for tracking projects (e.g., earned value analysis) and disseminate this information so that all parties
- understand the status of every project with respect to its established scope, budget, and schedule.
- Provide a uniform financial accounting system for all projects.
- Train and qualify project managers in the classroom and on sites.
- Provide visible, recognized career paths for professional project managers.
- Assign increasing responsibilities to successful project managers.
- Create a climate of learning and openness to outside ideas, criticism, and standards through external project reviews, ISO 9000 certification, and participation in professional project and construction management organizations.
- Measure performance by results and provide positive incentives for the successful completion of projects on time and on budget.
- Provide a highly visible core competency in project management, an agent for cultural change, a role model, and a champion for project managers by establishing and supporting an office of project management that reports directly to the secretary.
Office of Project Management for the Department of Energy
The committee recommends that DOE establish and staff a new office of project management to manage projects and to serve as a champion and source of expertise for project management in DOE. The office should be on a level equal to or higher than that of the assistant secretaries. The director should be a career professional project manager who has successfully managed a progression of projects in the public or private sector.
The project management office would provide professional project management, project managers, owners' representatives, and project management standards, procedures, and support services to the program offices. The project management executive would relieve assistant secretaries and program office directors of the need to maintain their own project management capabilities thereby allowing them to focus on their central responsibilities.
The project management executive would provide consistent project management systems for all programs and DOE projects as well as the following functions:
- standardized reporting and a centralized database on projects to support the secretary, deputy secretary, and program offices
- project trend forecasting and early warning of potential problems
- management of an independent review process
- recommendations for proactive corrective actions
- a focal point for responsibility and accountability for projects within DOE and an interface to external organizations on project management issues
- a champion for excellence in project management in DOE
The proposed project management office would provide functional management but not line management; it would manage the project managers, not the projects. The office of project management would develop and maintain a cadre of professional certified project managers who would be assigned to manage DOE projects for all program offices. Program and field offices could identify their requirements and preferences, and the designated manager would be seconded to the field for the duration of the project.
A cadre maintained by a central organization would have many advantages. First, it would be a reliable source of project management expertise with personnel trained and coordinated by the central office and would transfer lessons learned from project to project. Second, this arrangement would enable DOE to attract, motivate, and retain highly skilled and dedicated professional project managers critical to project management success. Third, each program office would choose qualified personnel from the project management pool, and the program office would maintain direct control over the project. Fourth, program assistant secretaries would continue to be responsible for the funding and successful performance of projects. And fifth, program offices would continue to be responsible for project staffing and support. All program offices that are responsible for projects would be included in this initiative.
To be effective, the proposed project management office must have sufficient staff, including assistant project managers, procurement personnel, contract specialists, cost engineers, planners, schedulers, cost accountants, controllers, systems analysts, and others. The project management office would provide consistent methods and systems to be used for cost estimation, risk analysis, contracting, incentives, change control, progress reports, and earned value management. The committee expects that the designated project management executive would immediately prepare an organizational plan for staffing procurement, project controls, finance and administration, contracts, and other support functions to support project managers. The support personnel, like the project managers, would rely on the project management executive for management doctrine, training, accountability, promotions, and rewards but would be administratively assigned to projects in the field, where they would be responsible to the project manager. The support staff would not require that new positions be created but could be filled by existing personnel in FM, the program offices, and the field operations offices. By incorporating the support staff within the proposed project management office, these functions would be performed more consistently and efficiently than they are now.
The committee believes that DOE must take decisive action now to correct its documented performance deficiencies. If it does not do so, Congress could very well take further control of DOE projects as it has done through previous legislation. The committee believes, however, that DOE can and should change its project management culture and solve its project management problems internally. By creating the proposed project management executive, DOE could improve its performance in all of its mission areas (and save taxpayers billions of
dollars). This major organizational and management initiative would demonstrate that DOE is addressing one of its most difficult challenges. It would free the secretary, deputy secretary, and under secretary to focus on policy issues and other national and international concerns, rather than having to defend project budgets and explain project deficiencies.
As a result, more projects would be completed, more sites would be cleaned up, and fewer problems would have to be explained to DOE headquarters, the media, and Congress. An agency-wide project management executive could bring to bear lessons learned nationwide to ensure that DOE projects fulfill their objectives, meet the needs of stakeholders and the government, and are completed on time and on budget. It would clarify lines of responsibility and improve accountability. The proposed office of project management would be a professional response to an urgent problem. All of DOE's stakeholders would benefit from greater certainty and consistency in DOE's management of projects.
Functions and Responsibilities
The main functions and responsibilities of the office of project management would include the project management oversight functions that are currently assigned to FM, as well as the following functions:
- Develop and maintain a corps of professional, trained, and certified project managers.
- Train and certify project managers and manage the career path for project managers.
- Select project managers for specific projects in consultation with program assistant secretaries.
- Develop department-wide policies, procedures, and reporting systems for the management of projects.
- Develop and deploy standard project management systems and contractor reporting requirements for progress reports, financial reports, and other reports to determine the viability of each project consistently throughout DOE.
- Set standards and monitor the execution of project management plans.
- Mandate and assess compliance with required policies and procedures using a graded approach based on the size, complexity, and sensitivity of projects.
- Compile lessons learned and best practices, and disseminate this information to all projects throughout DOE.
- Manage the processes for independent cost estimates and independent project reviews.
- Ensure that the appropriate level and types of risk assessments are performed using consistent risk assessment methodology.
- Conduct quarterly or annual reviews, depending on the type of project.
- Develop and maintain a database of DOE-wide project information for current and historical purposes.
- Make recommendations to the program assistant secretaries with regard to project status and corrective actions.
- Ensure the use of project management tools, such as systems engineering, value engineering, and earned value monitoring.
- Benchmark proposed project costs and schedules annually against projects of other federal agencies and the private sector, throughout the life of the project.
- Prepare and issue annual forecasts of project cash flow, cost to complete, and time to complete, as well as assessments of the likelihood of achieving approved baselines for strategic and major systems and line-item projects.
- Obtain and maintain ISO 9000 certification.
In the committee's judgment, the alternative to the establishment of the proposed office of project management is to continue DOE's poor project performance with a steady loss of credibility with Congress, regulators, other stakeholders, and the American public. That path—and almost all evidence indicates that DOE is on that path—leads in the direction of reduced budgets, increased pressure from outside influences, and much more micromanagement than DOE has experienced to date.
According to the provisions of the 1993 Government Performance and Results Act, in addition to other financial and management legislation, DOE is required to meet mission and project challenges. To meet these challenges and those that will arise from the current and future portfolio of DOE projects, DOE must move beyond the legislatively mandated minimum performance. Accepting and implementing the recommendations of this committee for improved project management could result in a process in which projects receive strong support and stable funding and would be managed by professionals whose focus would be cost, schedule, and performance.
The committee realizes that following their recommendations would require cultural as well as organizational changes for DOE. As the Phase I report of this study concluded, success is affected more by culture, attitude, and organizational commitment to quality and service than by procedures (NRC, 1998). Consequently, to be successful, the proposed office of project management must have the full and continuing support of the secretary, the under secretary, the deputy secretary, and all of the program offices and field offices as a top-down management initiative.
DOE (U.S. Department of Energy). 1997. U.S. Department of Energy Strategic Plan. Washington, D.C.: U.S. Department of Energy.
DOE. 1998. Accelerating Cleanup: Paths to Closure. DOE/EM-0342. Washington, D.C.: U.S. Department of Energy, Office of Environmental Management.
Druckman, D., J.E. Singer, and H. Van Cott. 1997. Enhancing Organizational Performance. Division on Education, Labor and Human Performance, National Research Council. Washington, D.C.: National Academy Press.
NRC (National Research Council). 1998. Assessing the Need for Independent Project Reviews in the Department of Energy. Board on Infrastructure and the Constructed Environment. Washington, D.C.: National Academy Press.
Probst, K.N., and M.H. McGovern. 1998. Long-Term Stewardship and the Nuclear Weapons Complex: The Challenge Ahead. Washington, D.C.: Resources for the Future, Center for Risk Management.