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Project Management InstituteApril 19, 2004

Hydro One Project Management

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Agenda

• Historical Perspectives

• Changing Environment

• The Challenge

• Our Values

• Getting the Work Done

• Capital Project Life Cycle

• A Different View

• The Project Team

• Management Principles

• Reading List

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Historical Perspectives

Fast Track Project Rationale

• Originally driven by high interest rates of the 1970’s and desire to reduce the cost of Interest During Construction.

Today driven by:

• pace of change and desire to reduce risk of business needs changing before a project is complete.

• tendency in many businesses to leave investment decisions to the last possible moment due to unstable investment climate

Profit making businesses work in a changing business climate requiring quick paybacks and fast project delivery.

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Historical Perspectives

Hydro One Business Strategies

• Ontario Hydro a fully integrated public utility with long term system planning responsibilities but hampered by often changing political direction. Primary expectation was to ensure electricity supply in Ontario.

• Hydro One from 1998 to mid 2002 a business corporation involved in Transmission and Distribution only. No long term planning responsibilities. Expected to respond solely to “market signals” in making system investments. Prime expectation was to maintain the integrity of the current assets, grow the company in geographic coverage and make a commercial profit for the shareholder in anticipation of an IPO.

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Historical Perspectives

Hydro One Business Strategies (cont’d)

• Since mid 2002 company has been focused solely on transmission and distribution in Ontario. No external distractions.

• Since August 14th Blackout and election of 2003 long term planning for transmission has been restored to Hydro One by shareholder. Prime expectation is maintaining and developing the assets to serve Ontario.

Businesses driven by profit alone can not send or receive “market signals” in a utility business with social policy implications and paybacks of 25 to 50 years on new investments.

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Changing Environment

Profit making businesses work in a changing business climate requiring quick paybacks and fast project delivery.

Businesses driven by profit alone can not send or receive “market signals” in a utility business with social policy implications and paybacks of 25 to 50 years on new investments.

• From 1998 to mid 2003 major new investments in the transmission system were not made for lack of “market signals.”

• We have to play a game of catch-up and time is of the essence. Projects, once identified will require faster tracks than ever before.

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Changing Environment

Heightened Expectations

• The Ten Year Transmission Plan identifies $2 Billion of new Transmission assets which may be required in Ontario in addition to the normal refurbishment and customer connection work which will be in the same order of magnitude itself.

• Parkway TS (Phase I: 2x750 MVA 500/230 kV and new 230 kV lines) is a $140 million 280 hectare station at Hwy 407 and Warden Ave. with over 17 km of HV buswork. T1 will be in service March 2005, only 16 months after project initiation, and T2 in service October 2005, 23 months after project initiation. Phase I of the similar Longwood TS completed in 1990 was built in 42 months.

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The Challenge

• We proved our competitive costing and customer orientation in the open market in 2002 and 2003. We won all tendered transmission line work we targeted and all new customer connection stations we wanted for our asset base. We must not allow these gains to be lost.

• We have a highly skilled workforce of engineers, project managers, supply chain professionals, construction superintendents and tradesmen. We work from internal SIU and LIU standards and an accumulation of over 25,000 years of directly related experience. We do not have to wait for drawings and specifications in order to proceed with our work. We will have to use outside consultants but we must not allow their focus on liability minimization and risk adverse practices to extend our project delivery times.

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The Challenge

Our challenge is to mobilize the resources and expertise, both within Hydro One and in the larger community of consulting engineers and construction companies to deliver the projects which are needed to ensure the ability to deliver electricity to the people of Ontario.

We will be competent and imaginative professionals as we project manage our internal work and contract manage that done for us by consultants and contractors.

We are Project Managers. We will deliver on time, every time.

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Our Values

• Safety

• Customer Service

• Quality of Workmanship

• Getting the Work Done

• Responsible Financial Management

• Building the Hydro One Team

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Getting the Work Done

Getting the work done is the primary accountability of the project manager. What that means in terms of schedule, cost and functionality will be defined in general terms by the Investment Planning Team and in specific terms by the Project Execution Team, both teams always working closely together.

These teams work in parallel through much of the project life cycle, comparing notes and ideas, converging quickly on the solution to be built.

Teams are built on the matrix concept and focus heavily on effective communications along both axes of the matrix.

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Pre-Project Phase Project Definition Phase Project Execution Phase Project Close-Out

Investment Planning Involvement

Engineering and Construction Project Life Cycle

New Asset in Service

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Stage Gates Project Definition Report

PDR Delivered to Investment Planning

PDR Delivered to Investment Planning

Other Major Milestones

Executive Approval of Project

Executive Approval of Project

Capital Project Life-Cycle

Funding Released for Project

Definition Phase

Funding Released for Project

Definition Phase

Approval of Technical Solution

Approval of Technical Solution Funding Released

for Project Execution

Funding Released for Project Execution

Construction Mobilization

Construction Mobilization

Network Operating System Updated

Network Operating System Updated Asset In Service

Asset In Service

Asset Capitalized

Asset Capitalized Lessons

Learned Report

Lessons Learned Report

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SG#1 to SG#2

•Develop project objectives

•Define success criteriaIdentify and compare options

•Select option for implementation

•Define scope, develop WBS, list deliverables

•Prepared capital appropriation grade budget

•Prepare Level III schedule

•Prepare Business Case for Approval

SG#2 to SG#3

•Project Execution Plan

•SLD’s

•GA’s

•Equipment List

•Equipment Technical Specifications

•Bidders lists

•Control System Definition

•Value Engineering

•Detailed control budget

•Level IV Schedule

Procurement

•invite, receive, tabulate bids

•evaluate bids

•recommend award

•place contract

•inspect

•expedite

•receive and issue

•process invoices

Detailed Design

•working drawings

•purchase requisitions

•installation specifications

Construction

•workplace safety

•interpret design

•commodity materials procurement

•work scheduling

•setting out the work

•inspect work for conformance with design

•evaluate and report progress

•certify completion

•revise drawings to “as-built” status from site records kept by contractor

Project Management

Safety, progress measurement, cost control, document management, resource management, QA/QC, reporting to management

Commissioning

•planning

•test and acceptance

•adjust settings

•certify ready for operation

•place in service

•O&M Manuals

Internal Customer Relationship Management

Closeout

•Lessons learned

•Update cost database

General Consulting

•studies

•records management

•data acquisition, management and analysis

Project Definition Phase Project Execution Phase

A Different View

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The Project Team

VP E&CSVP E&CS

CEO Hydro One

CEO Hydro One

Project Managemen

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Project Managemen

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ConstructionConstructionFinanceFinance Supply Chain

Supply Chain

SVP AssetsSVP Assets CFOCFO

Engineering

Engineering

Business Managemen

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Business Managemen

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IPIP

Construction General Foreman

Construction General Foreman

Project ManagerProject

Manager

Engineering Co-

Ordinator

Engineering Co-

Ordinator

Engineering Planner and Cost

Technician

Engineering Planner and Cost

Technician

Project Planner and Cost

Technician

Project Planner and Cost

Technician

Materials Co-

Ordinator

Materials Co-

Ordinator

Project Services Manager

Project Services Manager

Construction Planner and Cost

Technician

Construction Planner and Cost

Technician

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Management Principles

• Aim for the 70% solution. There is no perfect plan.

• Find the essence. If it looks too complex look deeper.

• Keep plans simple and flexible. Anticipate change.

• Build a capability-based team. Make it a living thing. Change it when change is needed, and don’t procrastinate.

• Organize the team for the task. Change it when needs change. Use proven performers.

• Orient to speed and complexity. Be nimble.

• Organize to the rule of no more than three responsibilities per team member. In stressful circumstances that’s all a person can handle.

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Management Principles (cont’d)

• Empower all levels of the team to act when necessary. Opportunity lost can never be regained.

• Manage by end state and intent. Leave the details to the team. Don’t micromanage.

• Encourage intelligent risk taking. Reward failure.

• Demand to be questioned. Do not tolerate “yes men.”

• Establish a team identity. Instill values that support its success. Instill pride in the team.

• Experiment. Try new approaches. Don’t always look to the past for solutions, but learn from the past.

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• Get an outside perspective. Someone else may already have solved your problem.

Management Principles (cont’d)

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Suggested Reading

• Culture Shift The Employee Handbook for Changing Culture

Price Pritchett, PhD ISBN 0-944002-12-9

• Corps Business

David H. Freedman ISBN 0-06-661979-3

• Secrets of Face-to-Face Communication

Peter Urs Bender ISBN 0-7737-6184-5

• Earned Value Project Management

Quenton W. Fleming ISBN 1-880410-27-3