Project+Management+UG

Technology base project organization and project

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Unformatted text preview: ompany Company Function Function Function Bespoke Input Bespoke Product Bespoke Intermediates Novel Process Novel Process Novel Process Project Organization and Contracts Project transaction cost Total Cost TC1 (k) TC2 (k) TC3 (k) Markets(1) Networks(2) Integration(3) Degree of asset Specificity (k) Project Organization and Project Contracts Contracts „ Evolutions of Organizations People and hierarchy Low Goals and Control Value and sustainablity Integration High Time now Time System hierarchy ? Project Organization and Project Contracts Contracts Evolutions of Organizations People and hierarchy Goals and Control Integration Time Time now ? New Ways of working Value and sustainability The Knowledgeable Owner’s Representative Ensure appropriate Governance in place and monitors the performance The Capital investment Project and the Social and Institutional Environment Building Governance Into Projects Execute project Start up Operate The Knowledgeable owner monitors the development and take action. Abandon e nt The Knowledgeable Owner’s Planning of Governance. Dyna m Posit ic io n in g Sust ainab l e De velop m Building Governance into major Capital investments Market, political, financial and legal aspects of the Owner’s Project Organization and Project Contracts Contracts Evolutions of Organizations • New strategic systems perspective • Viewing project organizations as holistic and highly networked systems • Integrating management processes, lifecycle processes and enabling infrastructure systems • Balancing needs of multiple stakeholders working across boundaries Project Organization and Project Contracts Contracts „ Questions 1. What are the main drivers in the process of selecting a type of project organization? 2. What are the main success criteria for contract execution models? 3. What typical conflicts can develop in,: matrix org, integrated org., and alliances? 4. What do you consider being critical success factors in order to achieve an effective integrated/alliance project organization? Project Organization and Project Contracts Contracts „Contracts, „goals and incentives (traditional setting) Client „NPV „Profit during operation „Optimize operation Contractor Profit during execution . „ Contractor does not participate during operation „ Optimize within the framework of the contract scope „ Contractual arrangements and principles founded on the assumption that the parties “objectives” are fully coherent may be counterproductive and create conflicts during execution. Project Organization and Project Contracts Contracts „ „ Contract, goals and incentives Lessons learned • Establish individual objectives and goals in order to agree a realistic setting of common goals for the contract. • Agree on behavior and actions. • How to manage conflicts. • Communicate both common and conflicting goals to the team. • Establish and implement change control systems. • Know the rights and obligations of both parties. Project Organization and Project Contracts Contracts Lessons Learned (Statcon report) Summary •More attention to formal business principles, commercial aspects. •Common goals should be reconsidered. •Contractor maximizes profit, and client NPV. •Contractor profit is Client expenses. In EPCI Contracts •Lack of strategic balance. •The Contract terms do not reflect the EPCI Concept. •The compensation format does not reflect the technical definition at contract award. •Client influence (integration). •Contractor risk is not fully reflected in the pricing format. •Imbalance between project execution model and scope of work. Project Organization and Project Contracts Contracts „ Contract, goals and incentives „ “Trust” • • One can not commit oneself to “trust” Trust can only be earned. „ Act in a trustworthy way Project Organization and Contracts Contract and Risk Definition and management of risk Definition (important part of the Contract) Contract) Need Objectives Requirements Ambitions Objectives Customer Requirements Ambitions Supplier Offer Clear picture of risk and sharing of risk between supplier & customer before entering into a Contract Estimating and Control of Risk Project Organization and Project Contracts Contracts Selection of Compensation format (simplified) Selection Criteria Level of technical definition High High Medium Low Low Low The Client’s involvement None Low None High High High Market capability High High High Medium Low Low Compensation format Lump sum 50/50 Target Sum Unit Rate Neutral DayWork Reimbursable Project Organization and Project Contracts Contracts „Estimating Identification Parametric ⎛ Q1 ⎞ ⎛ C1 ⎞ ⎜ ⎟ =⎜ ⎟ ⎝ Q2 ⎠ ⎝ C2 ⎠ +/- 40% n Definition •Factoring •Analogous system •Vendor quotes •Engineering build up +/- (30 to 10) % Execution Unit rates x Quantities +/-5% MIT OpenCourseWare http://ocw.mit.edu 1.040 Project Management Spring 2009 For information about citing...
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This note was uploaded on 07/25/2012 for the course ECON 111 taught by Professor King during the Spring '12 term at CSU Bakersfield.

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