Troubled Project Turnarounds

1. Troubled Project Turnarounds
Old Turkish Proverb…
“He who fails has no friends.”
Presented by Paul Allen, OIM, PMP
Troubled Project Turnaround Presentation
PMI Process Industry Focus Group
PMI Houston Energy Corridor – Nov. 1, 2011

2. When YOU KNOW you have a problem…
SOME BEHAVIOR CHANGES! , i.e.
• Everything is becoming TOO QUIET…
• COMMUNICATIONS are being reduced…
• People don’t return e-mails or telephone calls…
• Project Teams are quietly digging their FOXHOLES…
• More time around the coffee pot and water fountain…
• Folks are starting to throw, or a least leave, some grenades…
• Folks not on the team are starting to avoid those that are…
• Vendors and subcontractors are starting to complain…
• Management is forgetting about the project…What project?
• Evidence of CYA, SML and CLM concerns start or grow…
• The BLAME GAME starts… no one can focus on fixing problems!
Troubled Project Turnaround Presentation
PMI Process Industry Focus Group
2
PMI Houston Energy Corridor – Nov. 1, 2011

3. Some Troubled Projects Sources & Causes
• Introduction to Cost Engineering
• Estimate Accuracy
• Estimating Approaches/Classes
• Estimating Methods
• Computerized Estimating
• Labor Productivity
• Indirect Costs
• Data Collection and Management
• Estimate Coding and Documentation
• Predicting Future Escalation
• Contingency - A Provision for Uncertainty
• Estimating a Project
• BUT…YOU came here to learn HOW TO FIX THEM, RIGHT?
Troubled Project Turnaround Presentation
PMI Process Industry Focus Group
3
PMI Houston Energy Corridor – Nov. 1, 2011

4. Troubled Projects – Assessment & FIXING!
1. Failure to … Learn, Anticipate, Adapt
 Any one of the first two above (Single FAILURE – usually recoverable
 Combination of first two (Aggregate FAILURE) – usually recoverable
 Presence of all 3 (Catastrophic FAILURE) – usually NOT recoverable
2. People, Process, Technology or Combination
3. External Unpredictable, External Predictable, Internal Non-Technical,
Technical, Legal
4. Org: Corporate, Business Unit, Project Management, Project Team, etc.
5. Decision: Corp Policy, Strategic, Tactical, Indecision, Bad Decision, etc.
STOP & SHOW: Troubled Project Workshop Spreadsheet Results
ACTIONS – Range of FIX Possibilities
• Adjust, Realign, Stopgap, Partial Salvage, Full Salvage, Abandonment
Troubled Project Turnaround Presentation
PMI Process Industry Focus Group
4
PMI Houston Energy Corridor – Nov. 1, 2011

5. Overall Project Gas Supply (Non E&C)
Schedule Overview
Pre- and Post-
Financing Defined
Gas Trains (E&C)
E&C Contracts
• Early Site Work
• Site Work
• Gas Trains
• Utilities & Off-sites
• Permanent Buildings for Owner
• Tanks
• Dredging & Breakwater
• Jetty & Trestle
SUC
6 mos
Financing Activities
Project Finance – PPMS – 54 Months Plus 4 Months for SUC and 2 Months Ramp Up AFTER 1 st Lift
Business Systems (3) 1st Lift
Financial
Closing 1st Lift
Mo Year
Tankage (E&C) Mo Year
Dredging–Breakwater– Jetty & Trestle (E&C)
Financing IS the
Critical Path post
FEED completion Shipping (Non E&C)
Critical Path INCLUDING KEY MILESTONES for FINANCIAL CLOSING
Near Critical Path
Troubled Project Turnaround Presentation Potential Critical Path
PMI Process Industry Focus Group
Other Critical Path/s
PMI Houston Energy Corridor – Nov. 1, 2011

6. Normal Structured Project Finance Requirements
to Get to Financial Closing
Project Schedule Overview
LSTK or Design-Build Contract for E&C
Pre- Financing Defined Environmental Approved
E&C Subcontracts
• Early Site Work Land Acquisition Completed
• Gas Trains
• Dredging & Breakwater Host Country Agreements in Place
• Jetty & Trestle
• Site Work
• Utilities & Off-sites
• Tanks for Storage
• Permanent Buildings for Owner
• SUC (within Contract)
Project Finance Risks Neutralized Key Project Financing Agreements in Place PF Documentation Complete Financial Closing
Business Plan with Offering Memorandum Contracts & Structure Documentation & Securitization
Financial Pro-forma
Community Agreements in Place
Shareholder Agreement Completed
Sustainable Development Plan Agreed
Shipping Agreement Completed
$$$
Technology Agreement Executed Gas Supply Agreements in Place
Critical Path post FEED – Structured Project Financing Requirements
Troubled Project Turnaround Presentation
PMI Process Industry Focus Group
PMI Houston Energy Corridor – Nov. 1, 2011

7. Shareholder Agreement Completed
Gas Supply (Non E&C)
Gas Supply Agreements in place
Environmental Approved It is all about
Land Acquisition Completed
Host Country Agreements in Place
Gas Trains (E&C) Schedule!
Sustainable Development Plan Agreed
EPC Contract with GC
Community Agreements in Place
Other E&C Contracts
• Early Site Work
• Site Work
• Utilities & Off-sites
• Permanent Buildings for Owner
• Tanks
• Dredging & Breakwater
• Jetty & Trestle
SUC
Financial Closing Project Finance – PPMS (Project Payment Milestone Schedule)
Business Systems 1st Lift
Cryogenic Tanks (E&C)
PF Documentation Complete
Dredging–Breakwater– Jetty & Trestle (E&C)
Key Project Financing Agreements in Place
Technology Agreement Executed
Shipping Agreement Completed Shipping (Non E&C)
Critical Path Project Schedule Overview
Near Critical Path Post-Financing Defined
Troubled Project Turnaround Presentation Potential Critical Path
PMI Process Industry Focus Group
Other Critical Path/s
PMI Houston Energy Corridor – Nov. 1, 2011

8. Introduction to Turnarounds - Comparing
Company Turnaround Project Turnaround
Cash Management Time Management
• Rescuer OR Grave Dancer • Usurper OR PM Team Developer
• CASH is usually the problem. • TIME is usually the problem.
• Usually made PUBLIC! WHY? • Usually kept PRIVATE! WHY?
Troubled Project Turnaround Presentation
PMI Process Industry Focus Group
PMI Houston Energy Corridor – Nov. 1, 2011 8

9. Outcomes, Phases, Timelines
Company Turnaround Project Turnaround
Possible Outcomes Possible Outcomes
1. Bankruptcy: 11,etc., even 7 1. Adjustment to the project
2. Turnaround, no bankruptcy, 2. Alignment to the project
with management change
3. Stop-gap measures
3. Turnaround, no bankruptcy,
no management change 4. Partial salvage
4. Disposal of the company 5. Complete salvage
Phases 6. Abandonment
1. Analyze the Situation – days Timeline (Overlap Phases)
2. Triage – Immediate – days Triage – 24-72 hours - MAX
3. Develop/Implement Plan - weeks Crisis Plan/Begin Execute < 2 weeks
4. Restructuring – months
Stabilization – 1-90 Days
5. Stability – over time as needed
Maintenance – as needed
YOU have a 2-WEEK Honeymoon!
Troubled Project Turnaround Presentation
PMI Process Industry Focus Group
PMI Houston Energy Corridor – Nov. 1, 2011 9

10. Rules of Engagement for Project Turnaround Managers
1. Do NOT replace the project manager out of hand.
2. REINFORCE the Project with a Turnaround Team
• Turnaround (Engagement) Project Manager & Assistant/s
• Most the time, an engagement manager – NOT a camper
• Larger, more complex, can require one to two project controls
and possibly a documentation person
3. The Turnaround Manager as Lead, Coach & Mentor to Team
4. The Turnaround Manager DOES NOT get involved in daily project
management activities, but focuses on the crisis at hand and
managing the recovery or salvage of the project.
5. Usually moves into PT support role after MAX 2-week Planning
6. May leave one project controls “boots on the ground” for the
“Stability” and possibly the “Maintain” phase of the turnaround.
7. Very large projects may require extensions of time and the other
personnel previously mentioned above for longer.
Troubled Project Turnaround Presentation
PMI Process Industry Focus Group 10
PMI Houston Energy Corridor – Nov. 1, 2011

11. Troubled Project Turnaround Management - OVERVIEW
The Importance of Stealth Assistance and Bedside Manner.
Stealth Assistance
Phases of SILENT ASSISTANCE. Smoothing the Waters, Silently!
I. Triage PLUS
II. Crisis Plan Execution
III. Stabilizing Plan Execution
IV. Stability Maintenance
Bedside Manner
Troubled Project Turnaround Presentation
PMI Process Industry Focus Group
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PMI Houston Energy Corridor – Nov. 1, 2011

12. Turnaround Processes Groups & Timeline Expectations
TRIAGE 1-3 Days
CRISIS PLAN
1-14 Days The Honeymoon is OVER. You must take ACTIONS.
EXECUTION
STABILIZING PLAN EXECUTION 1-90 Days Validate Turnaround.
STABILITY MAINTENANCE
OVERLAPPING, NON-Sequential, Phases
Troubled Project Turnaround Presentation
PMI Process Industry Focus Group
12
PMI Houston Energy Corridor – Nov. 1, 2011

13. I. Triage PLUS
Definition of Triage - A Verb. Source: Wikipedia
Triage is the process of determining the priority of patients' treatments based
on the severity of their condition. At its most primitive, those responsible for
the removal of the wounded from a battlefield or their care afterwards have
divided victims into three categories:
1. Those who are likely to live, regardless of what care they receive;
2. Those who are likely to die, regardless of what care they receive;
3. Those for whom immediate care might make a positive difference in
outcome. THESE ARE THE ONES YOU SPEND TIME ON!
Triage PLUS - Substitute “patient” with “Scope and Tasks”
- Stop the hemorrhaging, determine vital signs, take action
- Time: usually hours, within 24-72 hours maximum
- Triage PLUS activities - immediate assessments and actions taken
Troubled Project Turnaround Presentation
PMI Process Industry Focus Group
13
PMI Houston Energy Corridor – Nov. 1, 2011

14. II. Crisis Plan Execution
Definition of Crisis - A Noun. Source: American Heritage Dictionary
1. A crucial or decisive point or situation; a turning point.
2. An unstable condition, as in political, social, or economic affairs, involving an
impending abrupt or decisive change.
3. An emotionally stressful event or traumatic change in a person's life.
4. A point when a conflict reaches its highest tension and must be resolved.
Crisis Plan Execution
- Surgery where necessary, decisive actions and plan
- Time: days or within two weeks maximum
- Crisis Plan Execution activities
- Overall Project Viability Assessment - Recovery or Salvage?
- Project Integrity Validation - Project, Technical, Business aspects
Troubled Project Turnaround Presentation
PMI Process Industry Focus Group
14
PMI Houston Energy Corridor – Nov. 1, 2011

15. Crisis Mgt Skills
Do YOU Understand Crisis Management
Crisis management = Clear Your Calendar…we have a crisis!!
– A crisis is a major, unpredictable event that threatens to harm
an organization and its stakeholders. Although crisis events are
unpredictable, they are not unexpected (Coombs, 1999).
– Crises can affect all segments of society – businesses, churches,
educational institutions, families, non-profits and the
government and are caused by a wide range of reasons.
– Although the definitions can vary greatly, three (3) elements are
common to most definitions of crisis:
1. a threat to the organization
2. the element of surprise, and
3. a short decision time (Seeger, Sellnow & Ulmer, 1998).
Troubled Project Turnaround Presentation
PMI Process Industry Focus Group
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PMI Houston Energy Corridor – Nov. 1, 2011

16. III. Stabilizing Plan Execution
Definition of Stability – A Noun. Source: American Heritage Dictionary
The state or quality of being stable, especially:
1. Resistance to change, deterioration, or displacement.
2. Constancy of character or purpose; steadfastness.
3. Reliability; dependability.
Stabilizing Plan Execution
- Assist Project Team and Project Manager
- Time: 30 to 90 days maximum
- Stabilizing activities development and execution, aligned team
Troubled Project Turnaround Presentation
PMI Process Industry Focus Group
16
PMI Houston Energy Corridor – Nov. 1, 2011

17. IV. Stability Maintenance
Definition of Maintenance
The act of maintaining or the state of being maintained.
The work of keeping something in proper condition; upkeep.
• Provision of support or livelihood: took over the maintenance of …
• Means of support or livelihood: was ordered to pay maintenance for …
Stability Maintenance
- Oversight Role (part-time validation of activities)
- Time: duration of the project until completed and closed out
- Determine and implement Stability Maintenance Management;
Ensuring project remains stabilized and actions sustained for results
- Delivering results with the new or adjusted project plan
Troubled Project Turnaround Presentation
PMI Process Industry Focus Group
17
PMI Houston Energy Corridor – Nov. 1, 2011

18. Troubled Project Turnaround Training
• This program presents the skills necessary to professionally
troubled projects with a business mindset and focus. There is heavy
emphasis on when and how to use the tools and techniques of
the professional troubled project turnaround specialist and
provides a valuable set of tools and skills every project
management professional should have before they need it!
Participants will gain a comprehensive appreciation and
understanding of the importance of quickly "assessing and fixing"
troubled projects, whether they are capital projects or systems
projects...they all need the professional skills to turn them around
via recovery or salvage.
• http://projectexecutive.com/Training33OutlineSyl.html
Troubled Project Turnaround Presentation
PMI Process Industry Focus Group
18
PMI Houston Energy Corridor – Nov. 1, 2011

19. Troubled Project Turnarounds
QUESTIONS?
IF you would like an electronic copy of
1. This Presentation
2. The Annual Troubled Project Workshop 2009 Presentation
3. The Rice Troubled Project Workshop Spreadsheet Results
… please drop your “business card” on the way out
Troubled Project Turnaround Presentation
PMI Process Industry Focus Group
PMI Houston Energy Corridor – Nov. 1, 2011