Forbes.com

How utilities can succeed in the construction boom

By enhancing their project management capabilities, utilities can use resources more efficiently and maintain a positive reputation with regulators and customers.

Par Matt Abbott and Joseph Scalise

First published on février 08, 2013
min


This article originally appeared on Forbes.com. For the first time in nearly half a century, utilities in Europe and North America face enormous demand for new construction of electric generation and transmission facilities. In Europe, utility investments are expected to more than double, reaching peaks around 85 billion euros a year by the middle of this decade. Utilities in the US see a similar trend, with investments growing throughout the decade. These investments aim not only to replace and upgrade aging infrastructure, but also to meet new requirements to deliver more electricity from renewable energy sources like solar and wind. For example, California will require 33% of its electricity to come from renewables by 2020. Germany aims for at least 35% by the same year. This dramatic increase in activity comes with unique challenges for utilities. First, they have to dust off an outdated and incomplete playbook and relearn how to manage major projects. Projects are more complicated now than they were last time around, and given intense public scrutiny, departments like public affairs and environmental compliance play critical roles on project teams. Before a shovel ever touches dirt, utilities must secure a daunting set of licenses and permits from public and private authorities. They have to coordinate with a range of stakeholders, including rate payers, special interest groups and residents, who often have competing interests. A related complication is the workforce, which is both aging and inexperienced. Few engineers remain from the last construction boom, and those who are still working may not be as familiar with cutting-edge engineering technologies and productivity tools. Younger engineers may be technologically savvy, but they tend to lack experience designing and building major projects. Successfully managing these challenges is an exercise requiring muscles not ordinarily flexed. The best way to efficiently deliver major projects is to develop processes and approaches that ensure scarce resources are focused on the most critical projects, specify decision-making protocols, clearly articulate project progression from stage to stage and delineate team member roles—all of which are core project management skills. Make the right project commitments. Before any work begins, the first critical step is to identify and prioritize the projects that the utility will take on. Utilities can avoid starts and stops by assessing the project’s cost, the demand it aims to serve, and the risks involved – all well before any work begins. Interrupting a project after it’s begun sends a bad message to regulators and ratepayers, suggesting the utility isn’t making the best use of ratepayer funds. Delineate the stage-gate process. Efficient organizations manage smooth transitions from one stage to the next by clearly defining milestones and evaluating each project against consistent criteria. Project managers need a clear understanding of the inputs (technical analysis, stakeholder input, regulatory approval) required to pass each milestone before moving on to the next stage. Realistic measurements of progress help project managers maintain accurate schedules and cost projections. These must be updated as the project's requirements change over time with such modifications as a regulator’s route changes or additional environmental mitigations. Frequent updates to stakeholders can help maintain support for the project and avoid surprises. Determine how decisions will be made. Departments should work out ahead of time who will be responsible for decisions and how companywide input will be considered. A decision-making tool, such as Bain’s RAPID model (recommend, agree, perform, input, decide), can help create a uniform process that provides guidance to decision makers throughout the project. As part of that process, representatives from each department should articulate what decisions are needed to move to the next stage, and what each department's role is in those decisions. Describe the scope of each department's work. Successful teams also take the time to clearly describe the expectations of each department. Team members need to agree on the level of detail and depth—especially if other departments are relying on that input to inform their own efforts. For example, if one department has provided only desktop analysis while another is out in the field staking structure locations, the discrepancy in detail is bound to create misalignment and rework. By enhancing their project management capabilities, utilities can make the most efficient use of internal and external resources, all while maintaining a positive reputation with regulators and customers. Clarifying project selection criteria, specifying decision-making protocol, detailing step-by-step project requirements and outlining team member roles dramatically improves project team efficiency and helps companies move projects more quickly – and successfully - through the pipeline. Matt Abbott and Joseph Scalise are partners in Bain & Company's Utilities and Alternative Energy practice in Los Angeles and San Francisco, respectively.

This article originally appeared on Forbes.com.

For the first time in nearly half a century, utilities in Europe and North America face enormous demand for new construction of electric generation and transmission facilities. In Europe, utility investments are expected to more than double, reaching peaks around 85 billion euros a year by the middle of this decade. Utilities in the US see a similar trend, with investments growing throughout the decade. These investments aim not only to replace and upgrade aging infrastructure, but also to meet new requirements to deliver more electricity from renewable energy sources like solar and wind. For example, California will require 33% of its electricity to come from renewables by 2020. Germany aims for at least 35% by the same year.

This dramatic increase in activity comes with unique challenges for utilities. First, they have to dust off an outdated and incomplete playbook and relearn how to manage major projects. Projects are more complicated now than they were last time around, and given intense public scrutiny, departments like public affairs and environmental compliance play critical roles on project teams. Before a shovel ever touches dirt, utilities must secure a daunting set of licenses and permits from public and private authorities. They have to coordinate with a range of stakeholders, including rate payers, special interest groups and residents, who often have competing interests.

A related complication is the workforce, which is both aging and inexperienced. Few engineers remain from the last construction boom, and those who are still working may not be as familiar with cutting-edge engineering technologies and productivity tools. Younger engineers may be technologically savvy, but they tend to lack experience designing and building major projects.

Successfully managing these challenges is an exercise requiring muscles not ordinarily flexed. The best way to efficiently deliver major projects is to develop processes and approaches that ensure scarce resources are focused on the most critical projects, specify decision-making protocols, clearly articulate project progression from stage to stage and delineate team member roles—all of which are core project management skills.

Make the right project commitments. Before any work begins, the first critical step is to identify and prioritize the projects that the utility will take on. Utilities can avoid starts and stops by assessing the project’s cost, the demand it aims to serve, and the risks involved – all well before any work begins. Interrupting a project after it’s begun sends a bad message to regulators and ratepayers, suggesting the utility isn’t making the best use of ratepayer funds.

Delineate the stage-gate process. Efficient organizations manage smooth transitions from one stage to the next by clearly defining milestones and evaluating each project against consistent criteria. Project managers need a clear understanding of the inputs (technical analysis, stakeholder input, regulatory approval) required to pass each milestone before moving on to the next stage. Realistic measurements of progress help project managers maintain accurate schedules and cost projections. These must be updated as the project's requirements change over time with such modifications as a regulator’s route changes or additional environmental mitigations. Frequent updates to stakeholders can help maintain support for the project and avoid surprises.

Determine how decisions will be made. Departments should work out ahead of time who will be responsible for decisions and how companywide input will be considered. A decision-making tool, such as Bain’s RAPID model (recommend, agree, perform, input, decide), can help create a uniform process that provides guidance to decision makers throughout the project. As part of that process, representatives from each department should articulate what decisions are needed to move to the next stage, and what each department's role is in those decisions.

Describe the scope of each department's work. Successful teams also take the time to clearly describe the expectations of each department. Team members need to agree on the level of detail and depth—especially if other departments are relying on that input to inform their own efforts. For example, if one department has provided only desktop analysis while another is out in the field staking structure locations, the discrepancy in detail is bound to create misalignment and rework.

By enhancing their project management capabilities, utilities can make the most efficient use of internal and external resources, all while maintaining a positive reputation with regulators and customers. Clarifying project selection criteria, specifying decision-making protocol, detailing step-by-step project requirements and outlining team member roles dramatically improves project team efficiency and helps companies move projects more quickly – and successfully - through the pipeline.

Matt Abbott and Joseph Scalise are partners in Bain & Company's Utilities and Alternative Energy practice in Los Angeles and San Francisco, respectively.