December 16th, 2020
An agile project management approach can help facilitate on time and on budget delivery of capital projects. The size and scope of projects, coupled with long project time horizons create many challenges for project teams. But it also plays to the strengths of agile project management.
For organizations reliant on large capital projects to drive their business, the stakes are high and the trends are troubling. According to the Construction Industry Institute, less than 6% of capital projects deliver planned financial returns. Anything that provides an edge is worth investigating.
What is Agile Project Management?
Agile project management is an iterative approach to project management where a complex project is broken down into smaller, more manageable pieces. It promotes close collaboration, frequent reviews, and the breakdown of siloes to provide a project delivery process that is more resilient and adaptable in the face of change.
An Overview of Agile Project Management
Agile Project Management Methodology was originally developed in 2000 by a group of software developers trying to identify a path to delivering software to market faster and more efficiently. The groups of developers believed that there had to be a method to develop software more simply, without rigid processes, documentation, and overhead of waterfall and other popular methodologies. Previously, software projects had been done using waterfall methods which is a sequential, gated method like those used in construction or capital projects. Projects go through initiation, planning, execution, and rollout. As projects grow larger and more complex, and some of the requirements became more ambiguous, significant project issues often occur, including cost overruns, delays, and project failures.
As Agile Methodologies became prevalent in IT, industries that faced similar challenges (such as R&D and manufacturing) have incorporated agile approaches to compensate for organizational inefficiencies. While the use of agile methods in capital projects is still uncommon, some early adopters have been able to reduce capital expenditures by a minimum of 10% and increase productivity and reduce completion times by 10% each. The potential for agile to transform the capital-project process are beginning to pique the interest of industry leaders.
Concerns regarding project performance for capital projects are all too familiar. The reasons for poor performance are also familiar:
- Failure to control and manage design and scope changes
- Failure to identify, manage and control risk
- Poor initial estimates and inaccurate forecasting
- Inability to measure and control contractor performance
- Miscommunication and limited collaboration (silos of information)
Let’s review some of the basic concepts of Agile Methodologies and then explore how we can leverage these concepts on capital projects.
The 12 Principles of Agile Project Management
The Manifesto for Agile Software Development (Beck et al., 2001) detailed the basic concepts of the Agile Methodology, summarized in 12 principles. The exact principles are widely available, but I’d like to identify how they extrapolate to fit into capital projects:
- Customer satisfaction and involvement
- Early delivery of functional systems into test and operation
- Value added delivery
- Focus on delivering working systems rather than delivering specified contract deliverables
- Minimize silos and encourage close cooperation
- Follow a team, rather than adversarial approach
- Integrated meetings are held to share information, rather than only electronic data sharing (reports, emails)
- Motivation of the team, with shared goals and objectives is critical to success. Individual contributions are encouraged, and improvements based on individual ideas are implemented
- Provide support systems to optimize work
- Schedule and resource leveling to maintain a trained, experienced workforce, with project and site-specific knowledge to maximize productivity and quality
- The better the design, drawing, specifications, and work packages, the less delay in field work. Clear and simple designs are best and lowest risk
- Root causes of issues, delays, or problems are identified, and problems fixed. Improvement ideas are encouraged and sought by all stakeholders.
Applying Agile Concepts to Capital Projects
The core of utilizing Agile methodologies in capital projects is to put in place a method that can quickly adapt to changes in delivery or design which allow for the reduction in time between problem identification and resolution.
Let’s look at how Agile Methodologies can be leveraged in the phases of a capital project:
Design and pre-design phase
- Increase customer involvement, encouraging customer participation in project deliverable definition (i.e. what the finished building or construction will be).
- Identify opportunities to break up complex projects into easier, more manageable work packages that are more frequently integrated into the overall design. Smaller work packages reduce the chance of uncertainty and improve the management of project risks. This division allows for increased accuracy and confidence in construction cost estimating.
- Make greater use of prefabricated assemblies. Prefabricated elements make the projects more like manufacturing projects. As a result, unpredictable factors like the weather or labor availability have less effect.
- This approach requires a much more dynamic staffing model that assigns people for weeks, not months or years, and dedicates people at a much higher percentage to fewer projects at once. Doing this allows organizations to significantly reduce complexity, reduce spending, and compress schedules.
- Construction tasks are notoriously difficult when trying to track project schedules and manage critical path activities. Agile methods help by breaking down the project delivery into smaller, more manageable, parts.
- Agile capital projects approach construction as a network of interconnected and defined tasks and resources. To reduce inventory and shorten the schedule, they break down the silos between disciplines by setting up cross-functional production teams and managing the flow of finished packages through to system completion.
- Agile methods also necessitate frequent reviews to improve project financial management, specifically in the areas of productivity and profitability.
- The key characteristic of an agile project is the empowered, cross-functional team, which works across silos to create end-to-end accountability. Teams are able to carry out work out in shorter, more iterative “sprints” that enable them to quickly test and adjust ideas, minimizing risk of miscommunication or overdesign.
It’s important to note that agile might not work in every situation, and its use must be tailored to the project and organization. A core understanding agile methods is also critical. The success of agile methods has been revolutionary and if capital projects were to achieve a fraction of other industries, it could easily bring projects in budget and on schedule and drive further improvements to net present value (NPV).
Requirements for Tools Supporting Agile Methodologies in Capital Projects
Critical to implementing an agile approach is ensuring there is software to enable and automate you project activities. It is extremely beneficial to have all your agile project components fully integrated with more traditional or waterfall components in a single solution. Key needs in managing agile activities in software include:
- Flexibility in project structures like Work Breakdown Structures to support agile, waterfall, or blended approaches
- Tracking progress of completed activities, sprints and epics
- Visibility into resource availability and assignments
- Support for traditional agile frameworks, which includes:
- Define the work
- Choose the work (remember our maxim of quickly testing and adjusting ideas)
- Execute the work
- Close out the work
- Visibility into the whole as well as the more limited sprint scope
- Integration with other critical sources of project data to track KPIs and inform decision making
Employing agile principles, combined with the right software solution, into the construction sector can provide tremendous and real benefits just as it has done with software, manufacturing, and R&D projects.
Mark Nelson has been in the Enterprise Project Performance industry for over 15 years. He has worked as a software implementation and business process consultant in helping customers define their processes and leverage best practices for large global organizations. His current role as part of the EcoSys go-to-market team is to identify industry trends, product strategy, and best practices for customer’s Enterprise Project Performance solutions. Mark has experience that spans multiple sectors including Transportation Infrastructure, Construction, High Tech, New Product Development, and IT.