Mitigating risk within strategic project management

by FM Media
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Murray Slatter from ISS Australia explains why the best technical know-how will never be enough for risk mitigation.

Project management (PM) is complex and can involve highly technical know-how, but at its very heart, it is a service delivered to the customer. Thus, the service level delivered – encompassing customer happiness, risk management and cost management – is a key performance indicator for successfully managed projects.

Using a specific asset as an example, an HVAC (heating, ventilation and air-conditioning) system in a commercial property at the end of its life will require action on part of the property owner/customer. He has two options: approach an HVAC specialist who possesses the technical skills of ‘what’ is needed and ‘how’ to install it, or work with a project management provider who will evaluate his needs, taking into account the ‘softer’ aspects of asset replacement and the impact it will have on business operations.

Navigating risk
Facility management processes influence company figures and are formidably significant within the framework of risk management. Additionally, facility service providers have a high impact on a company’s supply chain risk. The supplier relationship is likely to involve a combination of some of the following aspects: global sourcing, single sourcing, a partnership approach and just-in-time operations. Decisions regarding these are being taken against a background of increased market shortages and complexities within supply chains. Paradoxically, the actions taken to decrease costs are likely to increase risk within the supply chain.

Particularly in the case of facility management, large companies are faced with the strategic decision of whether to ‘make or buy’ – this refers to whether they should carry out the implementation themselves or subcontract it to a professional provider of facility services and hence transfer risk. Many users also assess the area of legal compliance – meaning compliance with legal requirements – as a risk. This mainly involves the areas of industrial safety and fire protection, but also covers environmental protection. For service providers, this entails competitive pressure, price wars and maintaining/optimising quality.

The PM/FM paradigm
Most projects encountered present us with assets that have been managed as ‘best as it could have been’. This happens because most assets installed or operated in the last few decades are on their last legs and have been installed and/or operated without clarity of documentation or action plans. Without preventive maintenance strategies or sub-documentation critical to asset optimisation, assets can only be managed as best they could be by an individual (usually the site manager or facility manager). Best practice PM processes involve a project specialist and a team value-engineering a better solution to perform the same outcome, but in a more cost-effective way, and in its final stage, handing the refreshed or replaced asset to the facility manager in an optimised form. ‘Optimisation’ here does not mean performing to specification, but packaging all the knowledge and documentation required for an asset optimised throughout its life cycle.

This transition from FM to PM (pre-project) and from PM to FM (post-project) is crucial for risk mitigation and a best practice PM model shows how risk mitigation and management are achieved. The result of risk management is that risk owners carry out and evaluate actions and manage risk within defined tolerance limits.

An example of a good project management plan would include essential processes and is outlined below:

  • Needs analysis – clearly understanding what the client needs.
  • Project execution plan (PEP) preparation, questions to ask include:
    • What is the scope?
    • What are the milestones?
    • Any foreseeable constraints?
    • What do stakeholders want?
    • How does everything interface?
  • PEP sign-off baseline
    • schedule
    • cost, and
    • procurement strategy.
  • Execution and control – aligned with detailed ISO processes.
  • Verification, closeout and handover – aligned with detailed ISO processes.

A thorough needs analysis will unravel not only the technical demands, but also the commercial and logistical demands; i.e. how best to minimise cost/risk by working out what are the specific property needs in order to keep operations going with minimal disruption during the project. ‘Soft’ risks that often cause headaches for customers are also accounted for; e.g. availability of resources to supervise work out of hours.

By frontloading conversations in the early stages of the project, customer confidence is built. Understanding the holistic paradigm of ‘the what’ and ‘the how’ from both hard and soft perspectives encourages early customer buy-in. To put into context, a site manager, for example, will know the site’s operations thoroughly. They may have some insight into running a one-off project such as replacing a worn asset, but it would be challenging for them to understand the layers of complexity to mitigate and manage risk. Project specialists lack the knowledge of the site, but are well-equipped with the nuances of running complex projects. Together, early conversations between the two allow the formulation of action plans for optimised outcomes. By garnering buy-in from the customer (this includes the property owner and site manager and/or FM), when the project is completed, the customer is equipped with not only an optimised asset, but also information that will mitigate lifelong risk.

The importance of including the site manager or FM in early conversations is crucial. While property owners often have ‘head’ knowledge of a building they own, on-the-ground personnel such as a facility manager have the ‘heart’ knowledge of every quirk within the facility. Key to best practice process is drawing in key stakeholders into conversations and looking to the needs of the customer, asking how best can value be further added right at the beginning of a project.

The price conundrum
Price is always a driving factor for any project sponsor. Larger businesses, especially, have to demonstrate a case with sound return on investments (ROI) and internal rate of returns (IRR) fundamentals, whereas with smaller businesses, the overarching concern is more focused on capital allocation; i.e. if capital is allocated here, would that mean there wouldn’t be any for elsewhere?

Best practice project managers will always provide ‘solutions-led’ conversations. The goal is not to sell a product, but to be a problem solver. The customer’s complex set of issues and paradigms unique to their portfolio, and the individual needs of stakeholders must be taken into account to establish an efficient risk-managed strategic plan in order to execute a methodical and clearly communicated project from start to finish.

Core to a sound strategic methodology is the stakeholder engagement process at that tactical level. Driving a common understanding between the customer and the project management provider at the identification stage will tease out the necessary questions for a thorough needs analysis. Common questions to ask are:

  • What are the issues you’re trying to resolve?
  • What are the complicating factors that may affect implementing the solution?
  • What local issues do you need to be aware of to mitigate technical and implementation risks?

The triangle of constraints – scope, cost and time – will always exist, but a strategic project execution methodology and a purpose-specific project execution plan can truly integrate the technical, logistical, commercial and operational requirements of the project with thorough identification of risks within the project.

The author, Murray Slatter, has 22 years’ experience in directing and managing complex, multidisciplinary projects for a broad range of properties both locally and internationally. He holds a bachelor of engineering and a masters of project and program management, Murray is a certified practising project director, recognised both locally and internationally by the Project Management Institute and the Australian Institute of Project Management. This article also contains excerpts from an ISS white paper titled ‘Managing and Mitigating Risk within Strategic Facility Management’.

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