Back to Volume 1 | Winter 2016

New Era of Project Delivery – Project as Production System

Executive Summary

Capital project delivery outcomes continue to be poor, despite a proliferation of newer project management tools and methods intended to improve the situation. Examining the history of conventional project management reveals that the many substantial efforts undertaken to improve project management practices fail to address two fundamental gaps. These gaps are addressed by Project Production Management, the technical framework which the Institute argues is the NEXT practice in project execution and delivery.

The evolution of project management can be divided into 3 distinct Eras. Era 1 from 1900 – 1950 focused on maximizing the productivity of workers. Era 2 from 1950 until the present day focuses on improving the predictability of project outcomes. Conventional project management can be considered to have developed over Era 1 and Era 2, Era 3, which we argue is the new Era of project delivery, emphasizes profitability – achieving business objectives with the optimum consumption of resources. To understand the difference between Era 3 and Era 1+Era 2, one must first understand the focus of Era 1 and Era 2, and what they do not address.

Era 1 saw the advent of Frederick Taylor’s “Scientific Management”, which was preoccupied efficiency and productivity. It was concerned with organizing and managing to get more out of workers, sequencing simplified tasks and separating planning the work from doing the work. By the end of Era 1, it was clear that the focus on efficiency and productivity measures did nothing to assure the predictiability of budget and schedule outcomes. The projects of the time were increasing in size and complexity, and cost and schedule overruns were becoming increasing unpredictable.

This led to Era 2 which focused on “how to get more predictable outcomes through measurement, compliance and controls”. Both the U.S. Department of Defense and the Navy’s Program Review and Evaluation Technique were the fundamental tools for planning and scheduling modern day projects. Era 2 led to today’s conventional project management focus on planning to outline schedules of activities, the allocation of resources to execute those activities and reporting of costs incurred and milestones reached from the execution of those activities.

“Conventional project management” has two fundamental gaps. The first gap is that it does not account for the impact of the variability that affects all aspects of operations during project execution. One symptom of variability is the build-up of work-in-process at different points in a project, which can have unanticipated consequences for project execution both in cost and schedule. The second gap is that conventional project management does not give project teams a means to control the execution of detailed project work activities in response to the day-to-day variability affecting project execution.

The emerging Era 3 views Projects as a Production System and it addresses the gaps of conventional project management. Variability can be managed strategic sizing and placement of buffers at different points in project execution. Project Production Management shows that there are only 3 types of buffers – capacity, inventory or time – and gives a systematic framework for working out what combinations are most effective at managing variability. Conventional project management views projects as a tradeoff between cost, time and scope, with project teams having the levers of process design and resource allocation to manage the tradeoff. Project Production Management (PPM) highlights additional levers available to project teams – it seeks to optimize cost, time and scope with the levers of process design, capacity, inventory and variability.

Project Management through the years has changed and continues to change and evolve. Era 3 – viewing Project as a Production System – overcomes the limitations of Era 1 and 2 to address the challenges of today’s complex and dynamic capital projects.

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