Tech Watt Value Risk Management - Case Study Example

TechWatt VRM Study Introduction This is a two-part VRM (Value Risk Management) Study. Part one studies Value Management. Part two studies Risk Management. Our growing business, TechWatt, has 27 employees. We need and want more space, and have 5 million to acquire a headquarters facility to house our 15 people in light manufacturing and 12 in management and administration. Acquiring a new facility means adding value but taking risk to do it. The Value Management Study aims to clearly define the scope and values of doing our Headquarters. The Royal Institute of British Architects (RIBA) has a systemised process that serves as an industry standard to do such projects. TechWatt shall use it starting by doing our Value Study (this Study) during the Headquarters briefing stage preparations. Assuming the Value Study validates that it is a good idea to follow through and do our HQP, we shall carry out the Risk Management Study after awarding the architect-design contract, but before site set-up. The following advice is among RIBA guidelines. Architects (VRM professionals) and clients need to make and use a Plan of Work. They must work closely to form a good team for a successful project, and to be sure that all project team-mates know the information they must provide and their clearly-defined responsibilities. This VRM Study is our set of working ideas at TechWatt to use for a smart plan, to optimise value and minimise risk, to foresee some possible problems and consider ways to deal with them, and to lose no value to risks; or lose as little value as possible. Background Our business wants a new headquarters that is valuable to us now and in the future. First, we must consider many things including at least: future growth and financial stability, our company's needs, the location and costs of a new headquarters, and the monetary and non-monetary benefits we expect from moving into a new headquarters. To keep optimum value we must make and follow a Plan of Work with our architect. Our Plan must include and address negative situations or risks that can take away value. This Study leads to the following Plan of Work (in this order): - TechWatt's Strategic Briefing which states requirements for a Headquarters facility - a Project Briefing that has Outline Proposals by the Design Team (based on a review and further development of ideas in the Strategic Briefing) - Detailed Proposals that build on the ideas outlined in the Project Briefing Each step moves nearer to design and site development. The Risk Management part of this VRM Study suggests ways and back-up plans to minimise loss from risk. TechWatt's professional business is making hardware & software products. With no appreciable experience in facility construction, we will rely greatly on our architectural Design Team. Value Management We seek "value" at TechWatt, for the present and the future. We must clearly define what value is. RIBA makes clearly defining value a high priority in projects. It is the project vision so all on the project team work for the same goal. So, as early as possible and from the start, TechWatt must define "value" so the architect-design-construction team can work to achieve value. It becomes the centre of the Pre-Project Briefing, the Plan of Work and is designed into our headquarters. Value is the compass giving direction to all activity. Pre-Project Briefing: Do good appraisals (RIBA Work Stage A) We must carefully consider and appraise options to make Headquarters. We'll brainstorm the definition of value in the Pre-Project Briefing and put those ideas into our Strategic Brief to give to our architect-design team partners. Lacking experience in this area, we shall depend heavily on our design participants for expert advice during the Pre-Project Briefing (PPB). The PPB is a good starting point for all parties. TechWatt's key participants will include top management and other resident experts who should help appraise needs for a new facility and moving into it. We need similar participation by architect-designers we invite to the PPB. We will explain TechWatt's ideas and discuss things we have considered. We want design participants to add expert knowledge and experience to help lead the PPB and focus efforts. The PPB is the first step to start the project going in the desired direction. More than one PPB may be needed. When that group meets it must work to ensure value for the 5 investment we are prepared to make. The goal of value is to be cost effective and get optimum worth. It is a big investment in the future. Thus the key goals of the PPB are to clearly say what value is for the Strategic Brief and the Design Team, and get everyone working for that value. Defining TechWatt's needs Satisfaction with a new headquarters includes having enough space for 15 light manufacturing people and extra room for possible future growth. This included production and laboratory areas. The new facility also needs room for 12 management and office people. This includes needed conference facilities for business visitors and a second conference room for TechWatt people when days come that we too must use a conference room while visiting customers use the other. The facility needs parking, a receiving/shipping and delivery bay, access to roads, landscaping, aesthetic exterior and interior design, appropriate lighting, etc. This only starts to list TechWatt's needs. To make the list of needs as complete as possible it is important to involve the right people. TechWatt's top managers know to be thinking of needs to put on the list, and they told production managers to do the same. In the PPB, we shall assign responsibilities to the best people to make each need happen. RIBA's Strategic Brief guidelines show needs are matched to people best able to carryout responsibilities and assignments. Selecting the architect - design team TechWatt wants to progress beyond the PPB, deliver the Strategic Briefing, and move the Design Team into Outline Proposals; which will happen after we award the contract to an architect and other consultants and suppliers. This team will focus on all known value and risk considerations to make the Headquarters succeed by meeting specified needs. In the PPB, TechWatt wants input from architect-design participants. We seek information before answering some questions. For example, we seek opinions of making Headquarters completely new or renovating an existing facility. We discussed making a facility big enough to lease part of it to another business to help pay some expenses. We seek information during the PPB to help answer concerns in our Strategic Brief. The PPB: There may be more than one The PPB should be the first pass to pave the way into the future. When all the key people discuss the ideas and concentrate on making TechWatt headquarters a reality, we will see ways to get there. Many of those ideas will be in the Strategic Brief, and again be in the Plan of Work and design details. This is 'continuity' from start to finish. TechWatt management is responsible for the vision of where to aim the project. Our Design Team leader (LC - Lead Consultant) is responsible pilot us. Together we carry needs and value from inception to design to construction. So far, TechWatt defined five needs: into the Headquarters facility, fit 15 light manufacturing and laboratory employees, 12 managers and administrative staff, facilities to accommodate visits and tours by customers, fulfil present and future value expectations, and do it within the 5 million set aside to make our new Headquarters. That's only pre-project information. Use PPB information to make the Strategic Briefing (RIBA Work Stage B) If the first PPB doesn't provide enough information to clearly define value as well as possible, we may need a follow-up PPB. Also, TechWatt may identify possible Design Team people we want to work with and invite them to get more involved in shaping the Headquarters project. RIBA suggests ongoing interaction sometimes is the most effective way for the Design Team to learn the needs of people who will use the facility. Starting such a business relation would encourage routine informal PPBs until enough decisions occur to leave limited choices that TechWatt can use to clearly define value and needs, and then issue our Strategic Briefing. Architect-Designer uses the Strategic Briefing (RIBA Work Stage C) The ideas in the Strategic Briefing should represent all agreements from the PPB meeting(s). It should include enough information for the Design Team to know where to innovate and where to use TechWatt-prescribed ideas. The design team builds into the Project Briefing the value and needs ideas and priorities identified and agreed during the PPB meeting(s). The Design Team should use the process of reviewing the Strategic Briefing to add ideas about design development and testing to present to TechWatt during the Project Briefing. This is a step in the process where the architect team can add its expertise to Headquarters in the early stage. This can include new or additional design ideas, design and construction process considerations, preliminary material, cost, schedule, labour concerns, etc. Subject-matter experts with such knowledge are architect-designers, structural and service engineers, procurement specialists, quantity surveyors, builders, planners, of course the Lead Consultant and others. Information and new ideas can include any of several things. But the architect-design team uses the Strategic Briefing to confirm they share our understanding and vision of values and needs and expected benefits from the TechWatt Headquarters and feedback how they plan to build them into the design as much as it can be seen in early developments. Outline Proposals (Work Stage C continues) The LC and Design Team will work on Outline Proposals to create a Project Briefing. Ideas in the Outline Proposals come from the team of experts (Structural Engineer, services engineers, Quantity Surveyor, Planning Specialist, Architect/Designer, and others to be identified as needed). Design concepts they outline will support Strategic Briefing ideas. The LC will work on TechWatt's behalf to ensure concepts fit together as well as meet our requirements. Many design concepts developed will be based on the site we select and if Headquarters will be new or a renovation. This will affect materials and skilled craftsmen needed, possibly time to prepare the facility for TechWatt to occupy it, and probably overall cost. But continuity is ensured by putting together the Outline Proposals to make the Project Briefing. During this process TechWatt prefers ongoing interaction with the LC and via communication avenues the LC specifies. The goal is to maintain focus, aim Outline Proposals at the goal. Doing this very well means that most Project Briefing is largely done before actually meeting. Project Briefing: Set priorities, rules for changes, name decision makers & communicators This should all be established immediately after the contract is awarded to an LC-architect and Design Team. But, no later than the start of the Project Briefing we need well-defined team structure. The Project Briefing must do several things. First, ensure that value and needs are met and team priorities set. We need clear communication and decisions. RIBA specifies establishing these guidelines as early as the PPB and no later than the actual Project Briefing. The team must specify priorities and also assign people who are responsible for communication and making decisions. Say when things must be communicated. Identify decision points. Specify conditions, events or situations for decision making and project communications. Make sure all people know who, and when, and what to expect. Also set guidelines to make changes. Too many changes hurt a project. Everyone must agree how to handle changes. It is best to develop the right ideas and design the first time. Minimise the need to change the design. Prepare communication channels and decision making for when risks arise and require action. What is the process and who is told about the risk The actual Risk Management Plan will specify. Priorities may change from the value viewpoint. By the end of the Project Brief, team members should know who makes such decisions and who communicates them in timely ways. Timeliness is important. Poor communication can make risks worse. In the actual Project Briefing, TechWatt, the LC and Design Team must agree on concepts to develop further and ideas to forget or leave for later. Doing all the previous things makes sure the Project Briefing fulfils its main purpose which is to verify that all team-mates understand each other. We all must work together to meet our needs at TechWatt and achieve the expected values and benefits. Plans and Reviews: staying synchronised The architect-design team uses the Strategic Brief to progress beyond inception, to develop high-level design (not detailed design) and a more detailed concept to review. This step translates Strategic Brief ideas into a design overview that fulfils our needs. We must review that design to ensure TechWatt's needs are addressed. This design process step requires interactive feedback. It is a key review step to revise the design as needed before approving development of a design with deeper details. The smart approach is to (without micro-managing) stay abreast of developing ideas. At the same time our LC works toward more-detailed design development plans with deeper levels of details (estimated timeline, costs, etc., a framework to add to the limited details possible at the high-level design stage), the review schedule, project scope, process and protocols, etc. This isn't done without enough information. But the LC, Planning Supervisor and others on the Design Team can always keep their eyes on the goal and plan for steps along the way. Information they gather about the site, various regulatory, environmental, physical, TechWatt, etc. requirements means careful co-operation of Design Team experts. They will routinely review ideas to stay in-step toward the goal. Teamwork To minimise poor communication and to maximise understanding, members from the Design Team can work closely with TechWatt's partners to be sure design details fulfil needs and provide value. Things the design team partners learn about specific TechWatt needs should appear in design details during follow-up reviews as designing progresses. Closely working together makes sure to minimise mistakes, the need for later changes, and extra costs. Architecture can design in ideas because designers got knowledge directly from TechWatt experts about fulfilling needs that deliver value. Our TechWatt people have hands-on, expert answers about our operations. They know things that their design team partner will understand from discussion. But other things a designer must see. For example, light manufacturing machines may need to be lined up in a way that does not fit in the space the designer imagines. If the designer must balance this need with the space available, seeing the situation should help a better design happen. This is a teamwork function. Things learned by working together will create mutual appreciation, designs with more value and benefits, and design review meetings that go smoother. Detailed Proposals (RIBA Work Stage D) Elements of the Project Briefing and its Outline Proposals that TechWatt approves and the LC and Design Team agree to shall be worked into Detailed Proposals. Design ideas and concepts are given greater details. Some examples are: clearly define size and space of the facility and property, inner and outer dimensions of workspaces and the structure, precise parking and flow of vehicle traffic, storm water and sewage control, construction style and materials for the structure as well as the whole site, ratio of outer walls to windows and their placement, construction contractors and trade crafts, and costs for all these plus many more details (e.g., plumbing, electric circuits, doors, hardware, roofing, etc.). Providers of detailed input include designers, engineers, craftsmen, specialists on safety, the environment, procurement and construction, possibly logistics and human factors for office layout (ergonomics) too, project accounting (quantity surveyor) and the Planning Supervisor. Work up of details gives TechWatt many line-item costs and better accountability. Detail information creates another chance to make decisions to add or subtract from the design. Development of Detailed Proposals should be done the way Outline Proposals were done so all Design Team members can know everything as they must access information. The LC oversees coordination of Detailed Proposals to be sure they fit together and to communicate information to TechWatt in a timely way. The aim is to present TechWatt with Detailed Proposals they already know about, have reviewed and mostly pre-approved. There are no new surprises or minimal. This way TechWatt should approve Development and the Design Team shall progress beyond Work Stage D. Summary with Recommendation This VRM Study uses TechWatt's five known decisions: 1) verify present and future value of making Headquarters, 2) provide workspace for light manufacturing, 3) provide office space, 4) accommodate visiting customers and 5) do all this within a 5 million budget. This is too little information to specify crystal-clear requirements about the site, whether to build new of renovate, and the long list of details that flow from those major decisions. TechWatt will make its major decisions, make our Strategic Briefing, give it to design experts, and start moving through the RIBA Plan of Work Stages to design our Headquarters facility. Recommendations are to work closely with select design experts. Use their knowledge to progress beyond today's pre-Brief information (five decisions). Also, be sure design experts learn most or all of TechWatt's needs by forming close working relations with them. Make sure that the LC-Architect and Design Team who earn the award to design and oversee construction already know most or all of TechWatt's needs for our future Headquarters. This includes minimising risk to optimise value. Risk Management Minimising risk can be a driving factor in site selection and making the Strategic Briefing. There are many risks to manage. Almost ten risks are standard in the construction industry. They include: 1) acts of Nature that people can not control (weather, floods, earthquakes, etc.) that delay site preparation and development, 2) problems that are part of the site (geologic such as unstable land, toxic waste clean-up, etc.) and need fixed, 3) regulation or government permits are difficult or impossible to get, 4) labour stops working, 5) worker is injured or worse, 6) costs go over budget, 7) don't meet design specifications, 8) defective work, 9) not meeting industry/regulatory standards, and 10) materials not available. The LC (Lead Consultant) manages the project to see and avoid problems before they happen to protect maximum value by minimising risk. Standard practises are part of the processes to design a facility and develop a construction site regarding most of the above risks. Of course Nature is beyond control of the project, but a smart site-selection decision can help minimise flood and earthquake damage. Avoid flood plains and fault lines. Good site surveys and land studies help avoid toxic clean-up and unstable land. Such site-wide problems can last an indefinite amount of time or forever. TechWatt seeks value, not problems. Identify and assess possible risks. Plan to avoid or minimise them. Ten well-known risks (list above) are already well identified. There are signs to help easy recognition, and avoid. There are plans to minimise or avoid them. For example, the risk of materials being unavailable or their costs increasing can be planned for and minimized by contracts (quantity for set price) and having back-up the supplier ready. The risk of labour stopping work can be planned for by learning if the contractor has a happy work force, or workers who want to do something (their employer resists or opposes) and could possibly stop work on a project as leverage. In both situations -labour and materials- the procurement specialist on the TechWatt Headquarters project should know recent performance history and reputation of possible suppliers. To analyse and assess a risk, the people who do so must determine how far the risk can go if it gets out of control. On the other hand, also determine how small the risk can be made by smart managing. Risks are different sizes. They can grow or be made smaller. Analysis will show possibilities and the factors that amplify or shrink risk. Smart managing follows. Also, risks last for different amounts of time. Some pass fast. Others never end. Many are in between. The expected life of a risk often helps determine actions and/or resources used against it. For example, who is the best person or who are the best people to deal with a specific risk Is that risk isolated to a work stage, or a design or development or construction function Is it an isolated incident, or a repeating risk How big is it - one person size, a group, or companywide Smartly put resources against it based on the answers. If the Headquarters project team finds a risk that can not be completely avoided, it must analyse it to determine the best way to handle it. Make it acceptable by minimising it. If a risk is a timing problem, manage project activities to minimise the window of opportunity for the risk to be unacceptable. Use time, resources and/or other factors to reduce the risk. Make that the Risk Handling Plan for that particular risk. Risk Management Strategy The overall strategy is to protect value by avoiding risk. There isn't one magic answer for all possible risks. The Risk Management Strategy is to use the best tactics to smartly manage each risk. The Headquarters project team must use its experience and knowledge to brainstorm possible risks to TechWatt value. Then apply the best plan to minimise that risk. Have a back-up (contingency) plan. Look ahead to see how one risk causes or avoids another. Find connections and use them to the best advantage of the project; break connections that could set off more risks, and use good connections that help kill other risks. Always look at risks while doing the project. Know which have passed, which risks must be managed now, as well as in the future, and how today's risks can interact with tomorrow's possible risks. Manage situations and events, and risk-minimisation plans to remove risks or make them acceptable. The ideas of the Management Strategy are summarized in the quote, "Risk can be managed, minimised, shared, transferred and accepted. It cannot be ignored." (Sir Michael Latham [a report entitled] "Trusting the Team"] Managing risks by using factors within control The LC has a design, development and construction management team. They control costs of building materials (quantity and quality -VS- realistic need and function) and must budget wisely. They control workmanship, performing to industry standards, meeting specifications, and minimising defects. All these risks are minimal when people perform to highest standards of professionalism. TechWatt expects and shall pay for professionalism by all people working on the Headquarters project. Specific Risks The preceding ideas about the ten well-known risks and overall views on Risk Management were general ideas. There are more specific risks. For example, TechWatt has a decision to own or lease its Headquarters facility. Ownership is good if the financial investment earns equity over time. Ownership can also be bad if the site develops expensive ongoing problems that are unknown until after TechWatt moves there. A lease can provide protection and let TechWatt be flexible. There is the risk of losing employees who won't move. TechWatt may upset the community if it moves away. Bad publicity often travels easier than good news. TechWatt can take steps to minimise such risks. Moving costs can swell to more than planned. If production work-in-process must be completed before moving, and TechWatt must stay longer than planned in its old facility, it may cost more. If extra business from customers comes at the exact time when TechWatt is to move, work turned away may upset the customer so much as to find and use competitors which will cost revenues in the long run. "Sick building syndrome" is when an existing structure has mould, bacteria or something that makes people ill. It can be hidden and not found behind the backside of walls or in the ventilation system. Illness and absent workers can increase and make production fall. This risk, all the risks in this subsection plus other risks must be considered as much as the Headquarters project team can see into the future. Each risk gets a management plan to minimise it. Also, risks must be clearly communicated among team members. They must be aware of possibilities and use an escalation procedure to bring increasing risks to the attention of the LC and TechWatt management who must make timely decisions about what is acceptable and/or the best course of action. Conclusion and Suggested Action TechWatt's Headquarters project team faces standard and specific risks. The standard risks have well-known ways of being handled, and the specific risks require some more creative Risk Management plans. TechWatt has expertise available on the project team to address risk issues. The main goal is to minimise risk so value stays at maximum. The Team must list the risks it faces, have an overall strategy (i.e.; manage and minimise), and have specific plans to eliminate or minimise each risk. It can measure how well it manages risks by tracking the risks on the list compared to how they go away and if value is saved or lost. The Team must be flexible to deal with changing risks and situations that increase or decrease risks, and prioritize them for action as needed. They must watch risks as a mass as well as individually, and manage them to give optimum benefit to TechWatt. Read More