6 - Ian Heptinstall - 31 TOCPA - Finland - 9 Mar 2017 Web Version

31st International Conference of the
KukonAskel
TOC Practitioners Alliance - TOCPA
www.tocpractice.com 9 March, 2017 Helsinki, Finland
CCPM and Construction Projects
Necessary but not Sufficient?
Ian Heptinstall, UK
9 March, 2017
CCPM
CCPM Works
Delivers projects in significantly less time that they
would otherwise take
Highly reliable end dates
Demonstrated time and time again
So why is it hardly known in one of the largest

parts of the global economy,
capital & construction projects?

www.tocpractice.com KukonAskel 31st International Conference of the TOC Practitioners Alliance - TOCPA 2
The construction industry is
worth $10 trillion a year.
Even a 1% share is worth $10

billion a year!
It represents 8-10% of global

GDP, and 6-8% of all
employees work in the
sector
Why is CCPM hardly known in
construction?
It isnt because their projects are different

It isnt that they dont experience the same
UDEs
My take on capex projects
Significant Inertia:
Well established methodologies
Pockets of good performance
Significant vested interest in the status quo
Entrepreneurial Project & Contract Managers
Professional Advisers
Significant public sector market (typically 30-50%)
Cost needs managing as well as time
Most of the work is outsourced
CCPM requires a collaborative
project team
CCPM focuses on the project

Project completion, rather than task
completion
Buffers are shared, not pre-allocated
But the prevailing contracting and procurement

strategies are far from collaborative in nature,
and thus encourage each of the contracted
parties to focus on their local optimum.
The Contractors Dilemma
Maximise
Do A
profitability
Be a successful
contractor/
supplier
Help project
client to be Dont do A
successful
To those outside the industry
this might seem strange.
However, in most cases a

contractor makes more money
under their contract, if the
change is expensive. Typically
they make a %age of the cost of
the change.
So if they point out errors in the

clients scope early, these are
easy to modify they might have
no impact on the contractors
contract.
Or, worse for the contractor, the

change might REDUCE their
scope of work, and hence profit.
Direction of a solution
From competition to collaboration
Fixed prices Performance-related fee

Independent Suppliers Aligned suppliers
Push risk down WBS Manage risk across
Every one for project
themselves, separate Single team, same
measures measures
The CII carried out research
in the mid 1990s across
several hundred projects in
the US.
The results alongside are the

difference between projects
using collaborative contract
approaches compared to
thus using more traditional
construction procurement,
which is more adversarial in
nature
Also in the 1990s, there
were 2 influential reports
published in the UK.
Both concluded that the

industry was suffering from
the adversarial relationships,
and they recommended
moving to more collaborative
team formation.
Whilst influential and well

respected, clients and the
industry didnt follow their
recommendations
Project Team Collaboration
A Holy Grail
Lack of true project team
collaboration is not only an
issue for CCPM.
Many other great ideas and

practices, including Lean
Construction, BIM, value
analysis, and risk analysis,
are inhibited by the lack of a
collaborative team, selected
early in the project
programme.
Common Construction
Procurement Models
Business Concept Detailed

Build
Case Design Design
Professional Advisers
Architect/Technology Specialist
Detailed Engineering Design
Supply & Build
So-called traditional procurement Design Bid Build
Design & Build - EPC

An industry truism
An industry truism
Are fixed price contracts
compatible with CCPM?
If the procured content is relatively low, and not

a significant part of the CC
Sure just buffer the supplier promised lead
time
But if your project is 80-90% outsourced, this is

not practical.
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
Ian Heptinstall about my illogical behaviour.
The following slides summarise
a project in the UK in the late
1990s.
This used the then novel

approach of Project Alliancing.
This formed a multi-party

contract, where the supply
members profit was linked to
the overall project success.
This aligns suppliers

commercial interest with each
other and the client, removing
most contractual barriers to
cross-team collaboration.
Project Collaboration Case Study
Rohm & Haas Fix 7 Project
Project Alliance
3-company contract
Reduced waste & policing
Difficult Goals
Client Traditional Client
Approach Alliance Contract
EPCM
EPCM Construct
Construct
Sub-
Sub- Suppliers
Suppliers contractors
contractors
Integrated Project Team
Project Collaboration Case Study
Rohm & Haas Fix 7 Project
4 week selection for $6M construction work

RFP was 3 pages
Payment
Cost + Fixed Fee + Performance Fee
PF 2 PF 2
Contin.y PF 1 Safety
PF 1
FF 2
FF 1
Schedule
Constr FF 2
Shutdown
FF 1
Cost
Cost Behaviour
EPCM
Example Variable Fees
On time in less time
On budget at lower cost
No compromise on scope or quality
Higher Higher
client Supplier
ROI Profit
Project is faster,
lower cost,
& better
RESULTS
DRIVERS
Plan &
manage
using CCPM 3: Exploiter: Ensure the collaborative
Collaborative team delivers great results
Project Project Team
Alliance 2: Foundation: Teamwork built on common goals and trust
Contracting
1: Enabler: Remove all obstacles to project team collaboration
If you think getting work package
owners to put their safety into
the project buffer
try getting the capex sector to

move away from fixed price
bidding as well!
Ian Heptinstall
Degree in Mechanical Engineering & Business

Studies.
Early corporate career project management in
chemical industry, both as client and service
provider.
Later corporate worked as Chief Procurement
Officer in a UK construction contractor.
Consulting experience in supply management
and procurement.
Author of The Executive Guide to Breakthrough
Project Management, written with Robert Bolton
Ians current main project is to get the ideas ian@ianheptinstall.com
shared in this presentation applied widely in the
+44 7807 848688
capex project sectors, and to build his own
www.ianheptinstall.com
business supporting their application
www.BreakthroughProjectManagement.com

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31st International Conference of the

CCPM and Construction Projects

Necessary but not Sufficient?

So why is it hardly known in one of the largest

capital & construction projects?

Even a 1% share is worth $10

It represents 8-10% of global

It isnt because their projects are different

Cost needs managing as well as time

Most of the work is outsourced

CCPM focuses on the project

But the prevailing contracting and procurement

However, in most cases a

So if they point out errors in the

Or, worse for the contractor, the

Fixed prices Performance-related fee

The results alongside are the

Both concluded that the

Whilst influential and well

Many other great ideas and

Business Concept Detailed

Supply & Build

So-called traditional procurement Design Bid Build

Design & Build - EPC

If the procured content is relatively low, and not

But if your project is 80-90% outsourced, this is

Tell me how you pay me and I will

This used the then novel

This formed a multi-party

This aligns suppliers

4 week selection for $6M construction work

try getting the capex sector to

Degree in Mechanical Engineering & Business

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