APS1032H

Introduction to Energy Project

Management

Lecture 2
Energy Project Management Overview
 History of Energy Project Management
• Energy Project Management is the application of knowledge, skills, tools,
and techniques to project activities in the energy sector in order to meet or
exceed stakeholder needs and expectations.

• Project Management has existed for thousands of years. The science of Energy
Project Management, however, did not receive serious attention until early 1900s, and
then only in the context of ongoing enterprises.

• The recognition that managing projects requires a different set of skills than other
management disciplines is credited to the Institute of Civil Engineers of Great Britain.

• Modern energy project management tools, based upon mathematically derived

scheduling models, came about in the late 1950s with the advent of the Program
Evaluation and Review Technique (PERT) and Critical Path Method (CPM).

Payam Rahimi, PhD., P.Eng.

APS1032H: Introduction to Energy Project Management 2
 History of Energy Project Management

• PERT:
• Developed in 1958 and 1959 under the auspices of the US Navy’s
Special Projects Office for application in the Navy’s Polaris Missile
Program.

• The Navy, Lockheed Aircraft and consultant Booz, Allen and Hamilton
developed a scheduling model that incorporated statistical treatment of
uncertainty for predicting completion times.

• It also emphasized project control with a series of project status reports.

• Since the most important variable in the Polaris program was time,
PERT was primarily a schedule control application.

Payam Rahimi, PhD., P.Eng.

APS1032H: Introduction to Energy Project Management 3
 History of Energy Project Management
• CPM:
• Developed in 1957 – 1959 by the DuPont Company and Remington
Rand Univac to reduce the time required to construct or overhaul
chemical plants.

• It uses deterministic estimates of project completion time to develop a

project model that allowed project management to predict trade-offs
between project schedule and project cost.

• CPM and PERT were developed independent of each other,

however, the concept of the project network diagram was
central to both and has since become the backbone of modern
energy project management.

Payam Rahimi, PhD., P.Eng.

APS1032H: Introduction to Energy Project Management 4
 Project Management Failures
• Prior to 1960, project management was primarily practiced in the
construction industry and financial or schedule failures were not reported.

• In 1960s, Information Systems began executing projects and failures began to

be reported.

• During 1960s and 1970s, the electric utility industry embarked upon a
significant expansions of nuclear plant construction. A number of the
construction projects fell behind schedule and experienced cost overruns,
thus becoming well publicized “failures”.

• After three decades of project management as a science, there are still a large
number of failures.

Payam Rahimi, PhD., P.Eng.

APS1032H: Introduction to Energy Project Management 5
 Project Management Failures
• The software industry, which tracks and publicizes its failures
more aggressively, estimates that of the 175,000 projects
undertaken in a given year (at a cost of $250 billion):

• 31% will be cancelled before completion

• 53% will far exceed their original estimate
• 16% are completed on time and budget (for large companies that figure
drops to 9%)
• In 1995 alone, commercial companies and government agencies spent
$81 billion on cancelled projects and $59 billion on projects completed
late.

• Clearly, the advent of project management has not eliminated

project failure.

Payam Rahimi, PhD., P.Eng.

APS1032H: Introduction to Energy Project Management 6
 The Project Management Institute (PMI)
• It is a non-profit organization dedicated to the advancement of
professional management.

• Objectives are:
• Advance the recognition and acceptance of project management as a
profession
• Advance and improve the existing project management knowledge base
• Develop and expand the project management community
• Promote PMI organizational excellence and viability
• Become a global organization

• The same principals and framework is adopted by Energy

Project Managers.

Payam Rahimi, PhD., P.Eng.

APS1032H: Introduction to Energy Project Management 7
 Professional Energy Project Management
1. The Project Life Cycle
• A series of phases through which energy projects progress
from beginning to end.
• Typically a deliverable is identified at the end of each life
stage.

2. Organization
• Organizational structures must be addressed when
describing energy projects.
• Most Energy Projects are more process oriented than project
oriented since their revenue is derived from operating the
plant.
• Examples are the energy project team, the sponsoring
organization, other stakeholders, and individuals involved.
Payam Rahimi, PhD., P.Eng.
APS1032H: Introduction to Energy Project Management 8
 Energy Project Life Cycle
1. Concept Definition:
During concept definition, the need for a project is explored, potential
solutions are defined and both the need and potential solutions are validated.
It is often called a feasibility study.

2. Engineering and Development:

In this phase, the project team begins to determine the existing state of
affairs, the project need, and the product that can be produced to meet that
need.
It typically encompasses the design of a feasible solution and some of cost,
schedule, and risk of producing that solution.
A significant portion of this phase is devoted to planning a path to the
solution and providing the solution concept. Engineering and Development
involves conducting simulations or building models to determine potential
pitfalls with the solution and ends when the design of the solution is released
for production.

Payam Rahimi, PhD., P.Eng.

APS1032H: Introduction to Energy Project Management 9
 Energy Project Life Cycle
3. Project Execution:
The solution is developed, tested, and delivered to the users during Project
Execution. In Energy Sector, this phase is the most expensive and the
longest. Since it involves delivery to users, the energy project is substantially
complete at the end of this phase.

4. Operations and Support:

It involves maintaining the solution after delivery to users. It may or may not
be performed based upon the nature of the energy project.

Payam Rahimi, PhD., P.Eng.

APS1032H: Introduction to Energy Project Management 10
 Energy Project Processes
• Energy Project Management is an integrated endeavor that
consists of a number of interlinked processes:
• Initiating
• Planning
• Executing
• Controlling
• Closing

• Each Process interacts with one or more of the other processes

and their execution is not necessarily linear.

• Certain processes in each classification may be performed

iteratively and the entire set of processes may be performed
multiple times to arrive at the solution.
Payam Rahimi, PhD., P.Eng.
APS1032H: Introduction to Energy Project Management 11
 1. Initiating Processes

• Initiating Processes are those that commit the

project organization and stakeholders to begin
the project or the next phase of the project.

Payam Rahimi, PhD., P.Eng.

APS1032H: Introduction to Energy Project Management 12
 2. Planning Processes
• It is one of the most important phases of a project.

• Poor planning is repeatedly cited as the most common cause of

project failure.

• Planning processes take their input from Initiating Processes and

feed their output to the Execution Processes.

• Planning processes can be divided into two major categories:

• Core Processes
• Facilitating Processes.

Payam Rahimi, PhD., P.Eng.

APS1032H: Introduction to Energy Project Management 13
 2. Planning Processes
• Core processes has inherent dependencies that require them to
be performed in the same sequence on most energy projects.

• Core processes include:

• Scope Planning
• Scope Definition
• Activity Definition
• Activity Sequencing
• Activity Duration
• Resource Planning
• Cost Estimation
• Project Plan Development

Payam Rahimi, PhD., P.Eng.

APS1032H: Introduction to Energy Project Management 14
 2. Planning Processes
• Facilitating processes are typically performed intermittently on
an as needed basis.

• They include:
• Quality Planning
• Organizational Planning
• Staff Acquisition
• Communications Planning
• Risk Identification
• Risk Quantification
• Risk Response Development
• Procurement Planning
• Solicitation Planning

Payam Rahimi, PhD., P.Eng.

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 3. Executing Processes
• Executing processes involve performing the project.
• Executing processes input is from Planning and their output is to
Controlling.
• There is also a feedback loop where the Controlling processes
feed input to the Executing processes for corrective actions.
• Executing processes include:
• Project Plan Execution
• Scope Verification
• Quality Assurance
• Team Development
• Information Distribution
• Solicitation
• Source Selection
• Contract Administration

Payam Rahimi, PhD., P.Eng.

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 4. Controlling Processes
• Are those that identify variances from a plan and formulate
corrective action as appropriate.
• They monitor operations and the action to prevent problems
from occurring.
• The input is from Executing processes and output is to the
Closing processes. They also provide feedback to Executing
processes.
• Controlling processes include:
• Change Control
• Scope Change Control.
• Schedule Control
• Cost Control
• Quality Control
• Performance Reporting
• Risk Response Control
Payam Rahimi, PhD., P.Eng.
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 5. Closing Processes
• Closing processes are those that involve formally presenting
results to the stakeholders and administratively closing out the
project.

• They receive their input from the Controlling processes and

include:

• Administrative Closure

• Contract Close-out.

Payam Rahimi, PhD., P.Eng.

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 Definitions
• An energy project is defined as a temporary, unique
endeavor undertaken outside the routine base activities
of the normal work program.

• An energy project has the following characteristics:

• Incremental cost, over and above a base value.
• Execution duration is limited, with defined start and finish
dates.
• Work is clearly incremental to regular ongoing work, non-
repetitive in nature, greater than a specified interval.
• Sponsorship and management accountabilities can be clearly
defined.

Payam Rahimi, PhD., P.Eng.

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 The Energy Project Portfolio
• An energy project portfolio describes:

• A collection of approved projects whose funding has been

released for implementation per the current business plan,
and the cash flows described in the project’s Business Case
Summary (BCS).

• The high managerial position (CEO, VP, etc.) is responsible

for the management of the Portfolio with assistance from
other groups.

Payam Rahimi, PhD., P.Eng.

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 Energy Project Management
• Energy Project Management describes the application of
knowledge, skills, tools and techniques to activities which meet
or exceed stakeholder needs and expectations.

• The energy project management business process is described

through Project Life Cycle phases which are as follows:
• Project identification phase
• Project initiation phase – Front end planning
• Project scope definition phase
• Project execution
• Detailed engineering
• Pre-installation activities
• Installation
• Commissioning
• Available for service (AFS)
• Project close out and post implementation report
Payam Rahimi, PhD., P.Eng.
APS1032H: Introduction to Energy Project Management 21
 Energy Project Manager
• Is accountable to deliver the project within parameters defined
in the scope, cost, schedule and quality.

• Ensures corporate due diligence regarding the processes and

procedures that govern the project work programs of the project
team members.

• Is the facilitator of a project team which is working towards the

resolution of an identified issue on behalf of the project sponsor.

• Is accountable for the management of project risk.

• Incorporates inputs from the project stakeholders regarding risk
identification, quantifying the consequences. Develops and monitors the
mitigating actions.

Payam Rahimi, PhD., P.Eng.

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 Energy Project Sponsor

• The sponsor assumes the ownership of the identified

issue and is responsible to resolve the identified issue
in a timely manner.

• Sponsor is responsible for issuing Characterization

which identifies the problem by the following formula:
business drivers - current performance  business gap

• Sponsor with assistance from other groups calculates

the net present value (NPV) of the current
performance, that is how much is it costing the
company to continue with the problem.

Payam Rahimi, PhD., P.Eng.

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 Energy Project Design Manager
• Approve engineering or technical content of all
permanent or temporary changes and evaluate post
installation or construction data and commissioning
test results.

• Develop design requirements or scope of approved

modifications.

• Produce design engineering outputs including analysis,

master engineering changes, item equivalency
evaluation, and modification reviews, etc.

Payam Rahimi, PhD., P.Eng.

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 Energy Project Design Manager (continued)
• Review inspection and test plans coordinating all
current code and technical requirements, regulator
witness, hold points, and good practices and specify
commissioning specifications for modifications.

• Maintain design documents including design manuals,

safety reports, drawings, and other design documents.

• Specify clear and adequate procurement, technical, and

quality assurances requirements, and initiate
procurement action for equipment, materials,
component s, and spare parts.

Payam Rahimi, PhD., P.Eng.

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 Contrast Projects and Operations
Projects Operations

• Catalyst for change • Maintains status quo

• Unique product or • Standard product or

service service

• Matrix • Hierarchal
organization organization

• Start and end date • Ongoing

Payam Rahimi, PhD., P.Eng.

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 What makes a successful energy project?
When an energy project is

• Safely implemented.

• On time (schedule).

• Within budget (cost).

• Meets objectives (scope).

Payam Rahimi, PhD., P.Eng.

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 A Balancing Act
• Energy Project Managers need to
constantly balance the Project
Sponsor’s expectations against the
achievement of corporate business
goals.

• The impact of risk events can tip

the scale in either direction. Risks
must be analyzed, and have a
mitigation plan developed with
their risk triggers identified and
monitored.

Payam Rahimi, PhD., P.Eng.

APS1032H: Introduction to Energy Project Management 28
 Summary

• It is this standardization of energy project management

processes, grouped into knowledge areas and classified
into project processes, that represents the science of
energy project management.

• By applying a rigorous approach to ensure these

processes are addressed and performed as required, the
chances for project success are greatly improved.

Payam Rahimi, PhD., P.Eng.

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 References

• Project Management Institute (PMI), 1996, A guide to the

Project Management Body of Knowledge.
• R. Max Wideman, The Project Management Institute in the
beginning …, Project Management Journal, June 1985.
• Martino, R. Finding the Critical Path. American Management
Association Journal, 1964.
• The Standish Group 1995.
• EPRI Report TR-112143.

Payam Rahimi, PhD., P.Eng.

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