We have a Finance System. Why do we need a Project System?
Capital Controller
Crash! I had just gotten in from a frustrating day at work. Crash! Again, definitely coming from Paul’s house. I ran over to his house just in time to see him deliberately drive his car into the back wall of his garage for apparently the third time. Crash! When I drew level on the driver’s side I asked, “What on earth are you doing?” He replied, “I just got this car and I wasn’t able to close the garage door. The car is too long. So! I thought if I could just bend the front fender a bit it might fit.” My neighbor is somewhat eccentric. I pointed out that maybe the garage was too small and that he should consider getting it extended. He thought about it and agreed to stop ramming his perfectly good car into his perfectly good garage – and to call my cousin the builder.
I returned back to my house and thought how similar this was to my day at work. We had spent the whole 10 hours in meetings trying to explain to the ‘Transition Steering Committee’ that just because the corporation’s capital system of record did an efficient job of managing our core business does not automatically mean it is a perfect fit to manage our portfolio of capital projects.
Again and again they told us that in order to comply with corporate governance we must use the corporate system of record (CSoR) to control, report and monitor their project. We understand the need to have single governance, a risk and compliance system, and a system of record. However, the requirements of capital programs/projects can be can be at variance with the corporation’s main business activities.
Flexibility is the casualty: For example, such corporate systems need to be capable of adapting to differing contracting strategies. These strategies require diverse contract terms and conditions not available in the corporation’s standard purchase order ‘boilerplate’. Corporate systems are expecting to receive “goods received” notes to vouch for work delivered – “…try explaining the concept of mobilization fees.”
The complexity and structure of today’s projects are only limited by the imagination of the market. One project might exceed the capital value of the corporation. The next project in the portfolio may be of a Leaseback nature and therefore should not be controlled, monitored and reported in a capital accounting system.
One of our most experienced Project Managers told the Steering Comm of his previous experience with the PM module of this particular CSoR. “I just asked for some changes to the standard monthly report because my project had a unique situation. It took 8 months before we got it.” It was not the technical aspects of the report that took 8 months but all the governance committees and reviews it had to go through because it was run out of the CSoR.
The PSoR can be designed to adapt to differing contracting strategies even within the same project. Design is reimbursable but Construction is Lump Sum. The PSoR is able to deliver what is called the “ragged bottom” when it comes to work breakdown structure and other types of breakdown structures. It can cater to that one project in 100 where the client has to take over and directly manage the project at the lowest possible level or start enabling works before the project is awarded to an EPCM or General Contractor.
You are not running two sets of books: The PSoR provides the CSoR with the necessary information in order to comply with their governance requirements as it applies to capital projects. The CSoR manages the high level detail as it pertains to Scope, Schedule and Budget, whereas the finite detail is managed in the PSoR. They complement one another.
This ensures there is one version of the truth and that the Corporation, the PMO and the PM are all looking at the same data.
Crash! I had just gotten in from a frustrating day at work. Crash! Again, definitely coming from Paul’s house. I ran over to his house just in time to see him deliberately drive his car into the back wall of his garage for apparently the third time. Crash! When I drew level on the driver’s side I asked, “What on earth are you doing?” He replied, “I just got this car and I wasn’t able to close the garage door. The car is too long. So! I thought if I could just bend the front fender a bit it might fit.” My neighbor is somewhat eccentric. I pointed out that maybe the garage was too small and that he should consider getting it extended. He thought about it and agreed to stop ramming his perfectly good car into his perfectly good garage – and to call my cousin the builder.
I returned back to my house and thought how similar this was to my day at work. We had spent the whole 10 hours in meetings trying to explain to the ‘Transition Steering Committee’ that just because the corporation’s capital system of record did an efficient job of managing our core business does not automatically mean it is a perfect fit to manage our portfolio of capital projects.
Again and again they told us that in order to comply with corporate governance we must use the corporate system of record (CSoR) to control, report and monitor their project. We understand the need to have single governance, a risk and compliance system, and a system of record. However, the requirements of capital programs/projects can be can be at variance with the corporation’s main business activities.
Flexibility is the casualty: For example, such corporate systems need to be capable of adapting to differing contracting strategies. These strategies require diverse contract terms and conditions not available in the corporation’s standard purchase order ‘boilerplate’. Corporate systems are expecting to receive “goods received” notes to vouch for work delivered – “…try explaining the concept of mobilization fees.”
The complexity and structure of today’s projects are only limited by the imagination of the market. One project might exceed the capital value of the corporation. The next project in the portfolio may be of a Leaseback nature and therefore should not be controlled, monitored and reported in a capital accounting system.
One of our most experienced Project Managers told the Steering Comm of his previous experience with the PM module of this particular CSoR. “I just asked for some changes to the standard monthly report because my project had a unique situation. It took 8 months before we got it.” It was not the technical aspects of the report that took 8 months but all the governance committees and reviews it had to go through because it was run out of the CSoR.
The PSoR can be designed to adapt to differing contracting strategies even within the same project. Design is reimbursable but Construction is Lump Sum. The PSoR is able to deliver what is called the “ragged bottom” when it comes to work breakdown structure and other types of breakdown structures. It can cater to that one project in 100 where the client has to take over and directly manage the project at the lowest possible level or start enabling works before the project is awarded to an EPCM or General Contractor.
You are not running two sets of books: The PSoR provides the CSoR with the necessary information in order to comply with their governance requirements as it applies to capital projects. The CSoR manages the high level detail as it pertains to Scope, Schedule and Budget, whereas the finite detail is managed in the PSoR. They complement one another.
This ensures there is one version of the truth and that the Corporation, the PMO and the PM are all looking at the same data.
