According to the PMI only 64% of projects completed in 2014 successfully met their original goals and business intent, with 15% deemed to be total failures. Project success rate decreases with increasing size, oil and gas mega-projects are particularly unsuccessful with a 78% failure rate including:
- average cost overruns of 33%
- execution schedule slips of up to 30%
- 64% of projects have serious and enduring production attainment problems in the first 2 years after first oil or gas
Why do projects go wrong?
Research points to three common threads:
- Poor estimation of cost and time is the largest single contributor to project failure (PWC PPM Global Survey 2014). Over-optimism and over-confidence in capital investment decisions mean that most “P50” estimates of cost & schedule are actually P5 to P25 (Briel et al, 2013).
- Failure to recognise uncertainty and strategic risk. Project teams only tend to take account of the tactical risks that they can identify and control, “unknown unknowns” are missed and issues which may be uncomfortable are mutually ignored (Briel et al, 2013). This includes a failure to recognise and manage post-sanction risk exposure (Whitfield, 2014). Scope changes mid-project are identified as the second most common reason for project failure, avoidable through better and earlier stakeholder involvement.
- Aggressive Schedules: oil and gas projects are capital intensive and tend to be aggressive in a drive to recover return on investment. Projects on faster schedules tend to have poorer definition early on (Merrow, 2012) and lead to greater chances of lower than expected production (Whitfield, 2014). Seamless functional integration is essential for fast track projects to have any hope of meeting challenging schedules.
Why is this still happening?
The traditional approach to “good” project management is to assume that complex projects can be simplified into discrete tasks where uncertainty can be pinned down through a high degree of planning and control. This model relies on specific inputs being fed into defined tasks to give predictable outputs, which in turn serve as inputs to other tasks.
Most projects are more complex than this. Most people’s experience of projects, especially in the early stages, is that they are often complicated and sometimes conflicting places to be, with:
- uncertainty in requirements
- uncertainty in execution strategy
- uncertainties associated with people and team dynamics
Control mechanisms requiring high levels of definition do not work in this environment, and result in discrepancies, incompleteness and slippage. Traditional rigorous, detailed and well-presented plans often promote a mis-placed confidence in cost and schedule estimates, rooted in the fallacy that inputs and outputs can be or have been clearly defined for all tasks. In reality the only time both task and input can be specific enough for the output to be absolutely predictable and repeatable is during the execution (design and construction) phases.
Traditional approaches seem to be sowing the seeds for project failure at the earliest stages.
A different approach
Rather than focussing on developing the perfect project plan and implementing increasingly rigorous project controls, a better alternative is to expect the unexpected, and focus on how to deal with it. Project environments where tasks are complex, difficult to define, and unlikely to provide repeatable or predictable outcomes demand a mindset where planning of tasks allows for adjustment and adaptation to changing circumstances. Agile project management is an iterative, incremental approach to projects that aims to do exactly this.
Agile practices originated in the software industry in the 1990s as a reaction against traditional documentation driven, heavyweight development processes. Agile is not a specific methodology or workflow, but a set of values that define the way projects should be approached. It is an umbrella term for a range of “lightweight” development frameworks that share these “agile values”.
So here are 3 suggestions for agile approaches to improve oil and gas project outcomes:
- Integrate knowledge: An agile approach to issues and uncertainty identification enables rapid assimilation of disparate items of knowledge held by various team members to give more robust cost and schedule estimates. Agile workshop methods support collaboration, consensus building and alignment allowing clear identification of the critical factors that impact the project, helping to avoid over-optimism and over-confidence. Early stakeholder involvement brings an “outside view” that helps surface “unknown unknowns” and uncomfortable project truths. See our post on the Oil and Gas UK’s Rapid Efficiency Exchange
- Share knowledge: Agile management techniques, such as the use of a Kanban-style dashboard, allow management oversight of items across projects. So project risks, issues and value opportunities are no longer buried in spreadsheets, but can be viewed “at a glance” by the project team, with project management able to react early to emerging situations.
- Work iteratively: Agile approaches promote the high level of functional integration and excellent communication demanded for aggressive project schedules. Small multi-discipline teams work in short “sprints” towards specific goals agreed with all stakeholders. Work is delivered incrementally and prioritised according to business objectives. Feedback after each sprint enables scope to be adjusted and adapted based on the team’s improved understanding of the project.
Agile oil and gas – “Think big, start small, act fast.”
Agile practices have now been adopted across a variety of industries and are now viewed as mainstream. According to the APM agile management techniques are in use in 45% of organisations, and organisations need to embrace flexibility and adaptability in order to compete and survive.