If your projects involve other companies doing most of the work, then this presentation can open the door to faster, better and less expensive projects. You don't have to spend more to get your project sooner. Critical Chain Project Management (CCPM) has worked wonders in many industries..but has not had much impact in sectors such as construction. We think we know why. Take a look ad let us know what you think www.profitableprojects.org

1. Risk Manage
faster
construction Collaboration better
BIM
Lean
Major Projects Partn
Alliance
Engineering cheape
Critical Chain Selection
CCPM
contracting
Contract
Earned Value
Value Analysis
forecast
planning
estimate

2. These slides are based on a presentation made a the
European Public Sector Effectiveness Conference
held on 24 October 2013 in Vilnius, Lithuania,
a flagship event of the Lithuanian presidency of the European Union
(July-December 2013)
Additional words have been added to several slides to make them
suitable for reading
© Ian Heptinstall

3. Effective procurement
of major projects
Opportunities for major improvements in speed,
quality and value
Ian Heptinstall
MD PMMS Middle East
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4. Synopsis
• The Situation Addressed
• Projects where the majority of the work is carried out by companies other than the
main client.
• The Problem
• Projects have inconsistent results, many being late, over budget or leaving needs
unmet.
• Traditional methodologies do not seem to guarantee high levels of success
• Success is as much down to the experience of project manager as the methodology
• The Prize
• Projects delivered on time in less time, and on budget at lower cost, whilst
maintaining or improving quality/scope.
• Resulting in higher return on investment in the private sector, or more and faster
projects in a budget-constrained public sector
• Using methods that can be easily taught, transferred and managed
• A project team which can implement and exploit other proven & evolving
improvement techniques more easily and with higher success
• The Direction of the Solution
• Manage the project using the CCPM approach
• Select your project team/supply chain using collaborative selection & contracting
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5. The Idea:
Success Equation for Major Projects
Money
Time
+
=
Money
Time
CCPM
+
Collaborate
More, sooner, for
=
less & better
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6. Project Value?
1. Cost Drivers on Projects
2. Managing projects
3. Commercial relationships
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7. Project Planning & Project Cost
How costs breakdown
Margin
Inherent
Asset
BETTER =
• Buy Smart
• Use Team
Cost
Project
BETTER =
• Managed
• Cost = Quantity x Rate
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A simple breakdown of a project’s cost. The inherent asset represents the goods bought that stay with
the completed project. The project element of the costs are the one-off costs necessary to plan, manage
and build the inherent asset. To reduce the cost of these elements requires different actions and
capabilities. This presentation focuses on reducing the project cost element. There are some reductions
in the inherent asset cost, but they are mostly incidental. I am not saying these are unimportant, just not
the direct benefit of this proposed approach. One of the benefits of this approach is that it produces a
project team environment more amenable to the implementing of other value-improving techniques

8. Project Planning & Project Cost
How costs breakdown
Same Project
On-time .. In less time
On-budget .. At lower cost
Margin
Inherent
Asset
Margin
Inherent
Asset
Cost
Project
Project
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The right-hand column shows the impact on cost of this method.
• A different management approach significantly reduces the project duration, and the quantity of all
time-related resources such as design, management, construction, and hired items.
• The integrated team can also have a contribution to improving the design and this cost of the inherent
asset.
Even if the supply chain make the same margin from their involvement, the project is significantly less
expensive. Is this an example of the elusive “win-win”?

9. Procuring Major Projects:
There are significant issues today
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In 2007 the UK’s Chartered Institute of Building reported on a study into project delays in construction
projects around the world.
One standout feature was the lack of even basic planning in the industry. Under 5% of projects had a
logically sequenced programme. 50% only had a high-level master plan, with short-term planning done
inconsistently or on-the-fly. No one reported a single integrated project plan from initial conception
through design to building , commissioning then handover.
On the one hand worrying, on the other it shows the enormous potential to improve

11. Why are large projects a problem?
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12. Why are large projects a problem?
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• Its never been done before – you cant
copy/learn as easily
• The team hasn’t worked together before
• Low skill & awareness of key elements of
major project management
• Lack of trust amongst main players – or
wrong types of trust
Use of the inappropriate techniques
• Design – Bid – Build
• Arms-length competitive tendering
• Soft-and-fluffy partnering
• Certainty-based planning
• Management by detail & control

13. Major Projects
• Known & Defined methodology
• But….
• Inconsistent delivery dates
• Inconsistent budget performance
• Better & Faster means more expense
• Expensive Control
• The new kid on the block
• Critical Chain Project Management
(CCPM)
• 1995
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14. Late 1990’s CCPM made public
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15. CCPM
Critical Chain Project Management
• A methodology for managing project execution
• Delivers shorter, more reliable, higher quality projects
• Used around the globe
•
•
•
•
•
New Product Development
Capital Projects
IT
Maintenance, Repair & Overhauls
Services & Administration
• 3 Core “Rules”
• Reduce bad multi-tasking and WIP
• Plan for uncertainty at project-level not task-level
• Control execution using buffer penetration/priorities
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16. CCPM Rule 1:
No Bad Multitasking
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• The colours represent 4 projects that need to be done. Doing them in sequence produces the best
results – a steady stream of completed projects, with the shortest time between start & finish.
• However, many factors in real life conspire to put significant pressure to start projects (multi-task). This
is the 2nd line. Even if resources could switch without any waste, project completions are delayed &
bunched – look when the projects finish & compare lines 1 and 2.
• But in real life frequent switching is inefficient, and we get the 3rd line – everything is later
• Major organisations have cut ongoing projects by 50-90% and seen a dramatic increase in completions!!

17. CCPM Rule 2:
S
hared S
afety
Project Buffer
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Traditional planning is based on task durations with a high degree of certainty – “Give me a date you can
be sure to achieve”. In reality no one can predict the future, and the true answer would be “Probably
somewhere between 4 weeks and 7 weeks depending”. Project planners don’t like this answer, so
estimators tend to answer “7 weeks”. Tasks in the plan therefore have built-in safety to cover uncertainty,
shown in the simple programme a the top.
CCPM forms the basic schedule as shown below – with all this safety removed from the individual tasks.
The task duration is based on the “50% chance” duration

18. CCPM Rule 2:
S
hared S
afety
Typically 25% shorter
FB
Project Buffer
FB
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However, the safety is NOT removed from the project. It is placed in the programme where is can protect
the whole project. This is key to CCPM: Protect the project from the variability that you know will
happen, not the task.
You can be sure that something will happen to delay a task, you just don’t know which task will have the
delay! Statistics and vast experience shows that you need much less safety of it is in the right place –
giving a duration around 75% of the traditional project.
The main safety is the Project Buffer. Feeding Buffers protect the “critical chain” from delay on less critical
tasks. The critical chain is slightly different to the more common critical path.

19. % of Buffer Used
CCPM Rule 3:
Management Focus - Buffer
% of Buffer Used
% of Project Complete
 Project D
 Project A
 Project F
 Project E
 Project H
 Project G
 Project B
 Project C
% of Project Complete
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The project buffer becomes the main focus for project control and management.
Compared to traditional measures is it simple and provides good early warning or issues, allowing them to
be tackled when small.
Tasks that are underway report frequently the date they expect to be finished. The amount of project
buffer “used” is compared to the overall project progress in a simple graph – top left.
Green = OK. Yellow = Watch/Prepare. Red = Act to Recover
The bottom right shows an organisation-wide (or programme) overview. This allows managers to quickly
identify projects that require support.

20. Public Works Construction (Japan)
Major Product Engineering (Boeing)
New Product Introduction
A few CCPM users who have reported
improvement of 25-95%
Administrative
Processes
Engineered Systems
IT Systems
Implementation
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21. CCPM is proven to work
Same Project
On-time .. In less time
On-budget .. At lower cost
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22. “Tell me how you measure me and I will
tell you how I will behave. If you measure
me in an illogical way... do not complain
about illogical behaviour.” Eli Goldratt, Business Guru & Inventor of CCPM
“Tell me how you pay me and I will
tell you how I will behave. If you pay
me in an illogical way... do not complain
about my illogical behaviour.”
Ian Heptinstall
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23. Major obstacles to exploiting CCPM
Selection
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24. Collaboration
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25. Collaboration on Capital Projects
• CCPM is very difficult on a traditionally-contracted project
• Partnering – many tried, many failed
• When done right, and in the right circumstances, collaborative
sourcing can beat competitive sourcing
• Collaboration is customised – not one-size-fits all
•
•
•
•
Together
Everyone
Achieves
More
“It is amazing what you can
accomplish if you do not care
who gets the credit.”
Harry S Truman, 33rd president of the USA
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26. Compete or Collaborate?
Price
MARGIN
COST
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Although it is a slight simplification, the main difference between collaboration and competition is
• Completion focuses on battling over the supplier’s margin
• Collaboration focuses on working together to remove unnecessary cost

27. The Potential
Make Money
Preferential Access to Innovation
Reduced Risk
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This shows the potential of the two approaches
• Many really significant cost reduction achievements have been made by collaboration between
buyer and supplier. Its collaborative supply network (keiretsu) helped Toyota to become the lowest
cost car manufacturer
• If you want to reduce risk you have to understand the risks in your supply chain. Collaboration
requires increased honesty & openness – prerequisites to identifying supply-side risks
• Competition is very unlikely to lead to preferential access to supplier-driven innovation

28. A few companies that have used and
benefited from Collaboration
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29. Collaboration in IT
IBM 2013
•
•
•
•
•
•
•
IT Sourcing
1351 Companies
40% C-level Executives
35% >10,000 staff
18 industries
12 countries
70% from mature
markets
Relative results from those
(19%) of companies using true
collaboration aimed at more
than just cost reduction
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30. The Pay-off: 300 construction
projects studied, those using
collaboration got…
-10% Cost
-20% Time
-65% Changes
+25% Profit
-83% Claims
+30%
Satisfaction
-99.8% LTA
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31. Collaboration
Critical Success Factors
Aligning interests & sharing risk
Ensuring “doing the right thing” for the client is also
the “right thing” for the supplier
Behaviours + Selection + Contract
Contract is at the heart of the agreement – not in the back-office
Collective responsibility for overall contract management
Early selection of the team
Requirement and freedom to innovate and change
Negotiate the process/relationship
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32. Being Collaborative on Projects.
Not a simple addition – complete change
Competition
Collaboration
• Late-as-possible selection
• Detailed bids based on
scheme (Design-BidBuild)
• Select lowest/fastest bid
• A Chain selected one at a
time
• Conflicting commercials
• Early-as-possible selection
• Outline bids based on
capability (Bid-DesignBuild)
• Select best available team
• A team selected together
• Aligned commercials
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33. So why isn’t collaboration more
common?
It is unstable
It’s not how we were trained
Rare
Better the devil you know
We don’t know how to do it correctly
“It’s the rules”
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34. Value-driven Procurement
• Competition is not the only way…. and often it’s not the
best way
• Collaboration is simple (in concept) but not easy (to do)
• Apply Collaboration and CCPM on your major projects to
give your business
•
•
•
•
More projects for the same investment
Higher returns
Greater viability
Greater profitability
• Anyone can spend their way to better
• Is that good enough for you?...
“Life is boring without challenges”
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35. In Summary
CCPM
+
Collaborative
Procurement
Money
Time
On-time
.. in less time
On-budget
.. at lower cost
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36. Thank you
Ian Heptinstall
ian.heptinstall@pmms-group.com
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37. Ian Heptinstall
• Ian helps organisations to improve the value added by their
supply base.
• He is involved in developing new and innovative approaches to
major supply issues, and is currently working on opportunities
to significantly improve major construction projects and retail
supply chains.
• His career has covered procurement and supply chain
management, management consulting, engineering and
capital project management. He has worked across many
business sectors including construction, engineering,
consulting, process and chemicals, pharmaceuticals,
manufacturing and retail.
• Before moving into consultancy, Ian was supply chain director for a leading construction
company in the UK. He is a qualified engineer who started his career in the process and
pharmaceuticals industries, and is now managing director of PMMS Consulting Group’s
Middle East operation.
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38. PMMS Consulting Group
Global reach and local knowledge with offices across five continents
and the capability to deliver in 10 different languages
PMMS North America
Toronto
PMMS Europe
UK, France, Germany, Switzerland, Turkey
PMMS Asia Pacific
PMMS Middle East
Dubai
Australia,
New Zealand, Hong Kong,
Japan
PMMS Southern Africa
Pretoria
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39. A sample of our recent clients
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