McKinsey & Company report on CU construction

Pre-Decisional - Proprietary and Confidential

Developing Capital Excellence

Full report January 2016

1 Pre-Decisional - Proprietary and Confidential |

Executive summary (1/2)

1 Budget performance based on initial Vice-chancellor approval limit for projects, not legislative approval 2 Compared to original estimated completion date in program planning

Diagnostic CU Boulder makes significant investments in capital projects and is exploring ideas and opportunities to improve efficiency and effectiveness in the execution of these projects

Completed 1900+ Minor and Outlay projects over the past five years routinely fall under budget similar to other public organizations, accounting for about 18% of total budget value

Completed 30 Major projects (those above $2M), which account for 80%+ of the total spend. Approximately 8 projects requiring additional spending limit were typically those impacted by accelerated timeline, scope changes, or decision delays

Interviews with over 40 personnel across all stakeholder groups, review of selected projects, and analysis of available documentation on processes surfaced opportunities for increased excellence: a) Capital planning: Right-time commitment of funds in the project planning stage to align with available information

on scope and schedule b) Contracting methodology: Provide clear guidelines for the project delivery method or contracting terms to

manage owner risk c) Communication: Proactively manage risks through increased project tracking and clarity in communicating

progress with appropriate stakeholders d) Project Manager workforce: Enhance PM workforce execution through structured training and onboarding

processes Recommendations four themes have emerged as opportunities for increasing capital excellence based on the

above diagnostic: Develop a clear, well-documented, and scalable stage gate process to drive capital investment success Adopt clear guidelines in contracting strategy to address project risk based on project scope, target cost, expected

delivery schedule, market conditions, and internal capability Deploy project controls to drive transparency of cost, schedule, and milestones during project execution thus

increasing consistency Train and retain the Project Manager workforce to ensure best practices adoption and execution in project delivery


Executive summary (2/2)

Implementation CU Boulder has the opportunity to transform its capital program and potentially capture up to 15% in planned capital spend

In addition to the efficiencies captured, the implementation of the recommendations would bring other performance and health benefits to CU Boulder including: Performance: improve pipeline management; ability to attract best contractors; ability to anticipate and

resolve performance issues Health: improve relationships across stakeholders; increase in morale, accountability and ownership;

heighten value proposition to current and potential workforce

Though current recommendations focus primarily on streamlining project delivery, CU Boulder can engage in a broader set of available strategies for capital excellence which could potentially result in even higher savings

Athletics Complex project review reveals that the Athletics Complex faced several challenges in scope and schedule management due to complex, often unclear, multi-party interactions at an accelerated pace

Scope misalignment between Athletics, designer, and PD&C resulted in ongoing changes and cost escalations throughout the project lifecycle

High staff turnover both internal and external to PD&C created coordination and communication challenges given lack of continuity in an already fast-tracked project

In order to prevent future costs, project closeout and quality assurance is an important final step and may require additional support to supplement capacity of existing team structure


Over the past 5 years, CU Boulders capital spend has been concentrated on Major projects with a valued budget of ~$870M

302

980

957

Total budget on projects1 Number of projects

Projects over $2M Athletics Complex Systems biotechnology

building Recreation facilities

improvements

Projects between $25k-$2M Food service renovation Replace boilers, roof Lab renovation

Projects under $25k Sound proofing Temporary cooling Fire alarm upgrade

Examples

PRELIMINARY

Project size range Total value

1,967 Total $1,046M

Outlays $8M

$867M

Range $25k-$500K Total value $91M

Range $1-$2M Total value $39M

$171M

Category I Range $2-$50

Total value $318M Major

Minor

Range $500K-$1M Total value $42M

Category II Range $50-$100

Total value $240M

Category III Range $100+

Total value $308M

Source: PD&C, Team analysis

1 Representative project scale but not exhaustive. Current budget for projects from March 2010 after the implementations of the CP module to September 2015 across all stages of development from planning (~$30 M) to closed. Budget defined as most recently approved budget in FAMIS as of mid-September 2015

2 Two grants listed as separate projects were merged with their associated projects. Three projects out of the 30 are ESCO with combined project value of USD ~21 M


Projects requiring additional spending limit were typically impacted by accelerated timeline, scope changes, or decision delays

Source: Team Analysis, PD&C

SB Academic Wing1

Campus Utility1

SPSC - Data room

Ekeley Middle Wing

13

22

12

Ketchum1

JILA 60 SEEC1

12

28

75

System Biotech 113

Athletics Complex1 142

% Change in legislative spending limit

Initial legislative spending limit2

1 Ongoing project | 2 Initial legislative approval | 3 Current legislative approval

PRELIMINARY

18

14

Stad - Video Board

5 GIPF Bldg (Athletics) 1

Bball/ Vball Practice 11

IBS

Wilderness1 EUCLID1 (CASE)

7 Wilderness - Recom

4

4

Hallett Renovation

Atmospheric Lab

Glenn Miller Ballroom

7

3

Rec Facilities 64 43

USD Change in legislative spending limit

N/A

16

56

18

2

10

6

10

53

0

0

0

0

0

0

2

0

0

3

0

17%

35%

21%

75%

28%

88%

12%

50%

N/A

0%

10%

0%

2%

0%

0%

0%

13%

14%

0%

0%

Current legislative spending limit3

N/A

169

23

28

37

91

160

14

112

4

43

64

4

20

5

7

11

16

3

7

USD Million

Projects impacted by significant scope or timeline fluctu-ations

Normal projects

Observed difference in performance between projects which are pursued as expected and those impacted by: Accelerated

scheduling Significant or

constant scope changes

Delayed timing in decision-making

NON-EXHAUSTIVE Detailed next


Based on 40+ interviews, select project reviews, data analysis, and focus groups we identified a set of opportunities

Opportunities to increase efficiency and effectiveness

Cap

ital

Plan

ning

More consistent Program Planning efforts, aligned with paced project schedule to decrease owner risk

Address backlog in maintenance through improved capital allocation Enhance integrated portfolio view with clear project prioritization Rethink approval process to match the release of funds to the maturity level of the project

Des

ign Augment alignment between PD&C and administration in regards to project budget estimates

and timelines Continue with recently launched effort for early engagement of Project Manager in project

lifecycle

Con

trac

t- in

g

Refine choice in contracting strategy (choice of delivery model, contract type, award process) to align to scope, project schedule, market conditions, and owner execution capability

Consistently enforce contract terms in the field leading to lower owner risk

Proj

ect

exec

utio

n Standardize project execution processes Adopt and enforce tools and as a standardization method Increase ownership of project controls (i.e., cost and schedule tracking)

Enhance communication on project progress Celebrate success Leverage performance monitoring (e.g., lessons learned at project completion) as source of

insight Provide training for onboarding new employees and continuous development

Cro

ss-c

uttin

g

Emerging themes for developing excellence

Develop a clear, well-documented, and scalable stage gate process to drive capital investment success

Adopt clear guidelines in contracting strategy to address project risk based on project scope, target cost, expected delivery schedule, market conditions, and internal capability

Deploy project controls to drive transparency of cost, schedule, and milestones during project execution thus increasing consistency

Train and retain the Project Manager workforce to ensure best practices adoption and execution in project management

Source: Interviews


CU Boulder can adapt best practices in capital management across the four themes to continue to pursue excellence

Emerging theme Description Best practice

Stage-Gate process: how do projects move through multiple fund and scope approval gates through the lifecycle?

Stage-gate process matches the release of required funds to the maturity level of project definition; specifically, it ensures projects do not progress without an adequate evaluation of the underlying business case, completion of key deliverables, and mitigation of critical risks

Single and comprehensive capital investment framework

Transparency: how do project controls allow for right information at the right time?

Project controls dashboards enable PMs and Project Coordinators to: Proactively identify issues Ensure relevant information is at hand to

contribute to the decision making process in a timely manner

Tracking information on cost, schedule and milestones for each project

Contracting: how project delivery and contracting methods are selected

Selecting contracting strategy (delivery model, contract terms, award process) based on project specifications (size, cost, delivery schedule, complexity), market conditions, and internal capability

Clear guidelines on contracting strategy to best manage owner risk McKinsey & Company

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Contracting strategy entails defining 3 linked elements of a project

Delivery model (How do I determine optimal contracting scope?) Should I own the asset or are other ownership structures more

suitable, e.g., lease?

Which project value chain steps should be done internally and which ones by contractor(s)?

Into how many contracts should the project scope be split? What is the optimal split of scope between the contractors?

Contract terms (How do I ensure most optimal contracting terms?) What are the key project cost, performance, and schedule risks? Who is the natural owner of the risks? What mechanisms exist to transfer or share risk? How can objectives be aligned between owner and contractor to

ensure an efficient execution through compensation elements such as incentives, penalties, warranties, etc.?

Key dimensions of contracting strategy Key questions to be considered

Award process (How do I select my contractors?) How can the effectiveness of existing award process be enhanced ? How many and which suppliers/contractors should be invited? How do we get the suppliers interested? What is the criteria for evaluation various suppliers?

Deliverymodel

Awardprocess

Contract terms

2

1

3

Project Managers: how well is project management best practice followed?

Establishing standardized methods, training for PM staff on consistent approaches, and support from key decision makers which allow PM team to increase success in delivery of projects

Standardized processes with capability building training to ensure consistent execution

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5

4 Planning and scheduling process

Planning team

Create WBS Identify critical

milestones Create/ update

plan Publish plan

Monitor & report project progress

Recommend focus actions/ area

Publish report

Recommend & perform required analyses

Publish analysis report

Process step

Users

Create/ update plan

Provide timely, accurate inputs

Help in identifying critical milestones

Progress measurement


Execute recom-mended focus actions

Customized analysis

Identify required analyses


Roles

A

B

C

D


Adding stage gates to existing Capital Project Process will focus University resources and increase control for Major projects

# Funding gate # Review-only gate

STAGE GATE PROCESS A

to

Operations From...

Project Initiation/ Concept

Development

Project Obtains Board Approval and is Funded

Schematic Design

Construction Documents

Bidding and Negotiation

Program Planning

Consultant and

Contractor Selection

Design Development Construction Close Out

PD&C Planning Led Process PD&C Project Manager Led Process

Cabinet Review and Authorization

2 1

Consultant and



Development

Develop feasible options. Release seed money.

Design Development

Start-up/ Commission-

ing Close Out

Program Planning/

Scope Selection

Schematic Design Construction

Is this needed? Is it a priority?


Is the best option still viable after scoping? Freeze Scope. Release full budget. Is the project ready to begin operation?

Is option still viable given the refined estimate?

Any outstanding accounts or issues? Is the project ready to be turned over?

6



2b 1 2a 3 4 5

Source: PD&C process, Expert interviews, Team Analysis


Proposed contracting process establishes a consistent risk based approach to enhance project outcomes

CONTRACTING PROCESS

Steps Select a Delivery Model

Goals

Integrate Contractor selection process into Contracting Strategy Playbook to best utilize process to meet cost, schedule or quality based outcomes

Establish a Contracting Strategy Playbook for optimizing cost/schedule/quality aligned with State regulations and CU Boulder past experience

Understand how alternative models (bundling, PPP, IPC) could be utilized to better spread risks

Understand CU Boulder desired role (skill building)

Transfer project risks to align objectives between owner and contractors, not to outsource them

Ensure the terms of the performance contract are pragmatic, clear, and measurable

Who to involve

PD&C Legal Procurement Vice Chancellor Contractor Rep Design Team Rep

PD&C Legal Procurement Vice Chancellor Contractor Rep Design Team Rep

PD&C Legal Procurement Vice Chancellor

Select a Contractor Determine Contract Terms and Sign

Actions

Develop Contracting Strategy Playbook working group to explore best delivery options of CU Boulder projects

Integrate contractor selection methods into Contracting Strategy Playbook Formalize Contractor Score

Card

Develop standard language added to State contracts to provide a fair and equitable balance of risk on large Capital Projects

B


CU Boulder requires a systematic approach to building transparency among stakeholders in project delivery

TRANSPARENCY

Description

Define key data and clear KPIs for project delivery

CU Boulder should define Key Performance Indicators (KPIs) at a project level based on project categories defined (i.e. Major, Minor, and Outlays) with clear targets across each

An individual should also be identified as a responsible party for reporting and meeting the KPI target (may be different individuals)

Clear direction and training should be provided on how to calculate and report the KPI

C1

Create an accessible KPI dashboard

KPI dashboard should be accessible at multiple levels (e.g. project level and portfolio level) to the relevant stakeholders

The accessible dashboard can be communicated widely to build transparency among all stakeholders (e.g. users, administration, PD&C) and increase project accountability

C2

Provide a forum for decision making

KPI dashboards can be used as a tool in a regular forum of stakeholders (e.g. a Project Review Board) to discuss project progress

Project Review Boards will also help resolve issues proactively as it will: Enable decision makers to have the right information Allow PMs to raise concerns at right time

C3

KPI dashboard is designed at both project and portfolio level

Source: Expert interviews, Team Analysis

C


Project manager performance is the single most influential driver of construction project profitability

We have found that project performance is highly correlated with project manager capabilities Project performance is not correlated with: Geography Asset class Complexity Customer Project manager age or tenure

(grey hair)

D

High performing PMs excel at these skills

Org

ca

pabi

litie

s

I

Fina

ncia

l as

tute

ness

C

omm

erci

al

orie

ntat

ion

Mgm

t ca

pabi

litie

s

II

III

IV 1. Managing client needs (e.g. change orders)

1. Optimizing schedule, scope, and cost dimensions

1. Leveraging organization resources

1. Understanding financial statements

1. Mitigating project risk

1. Maintaining project lifecycle view

1. Overseeing contractors effectively

1. Mastering contract details

1. Planning & tracking project performance

1. Managing internal and external teams

10

9

4

3

6

5

8

7

1

2

We have run an analysis of 10,000 projects, checking the correlation of project performance with different factors

Source: Interviews, Team analysis

Highest priority

Sustain Train Skills

PROJECT MANAGER PERFORMANCE D


A field and forum format ensures appropriate balance between effort, effectiveness, and reach

Source: Team analysis

2015 2016

Q2 Q3 Q4 Q4 Q1

Forum Classroom

setting where skills are taught by

experienced PMs and standard setters

Field Practice

application of lessons and

coaching sessions to help PMs

operate with excellence

Field work (~12 weeks) Field work

(~12 weeks)

#1 (1 day) #4 (1 day) #3 (1 day) #2 (1 day)

Field work (~12 weeks) Field work

(~12 weeks)

Preparation for forums Select

partici-pants

Plan curricu-lum and field work

Set expectations through program overview

Deliver first series of workshops combining activities and pure lecture modules

Outline field work assignments

Celebrate stories of success from field work

Establish forum for PMs to discuss what worked and what was challenging

Deliver next set of lectures and field work

Repeat defined forum format ILLUSTRATIVE

Provide workshops for clients on PD&Cs processes

Perform project kick-off with client

Use transparency tools throughout project

Fill out KPIs and use to have discussions with management, clients, and contracts on the progress and performance of projects

Leverage contracting playbook during contracting

Create risk assessments before project on critical areas and develop mitigation plans

Coach new PMs in process

Engage with internal/ external teams to develop improved working processes

Session sequence Forum 1 Overseeing contractors

effectively and Mitigating project risk Forum 2 Planning & tracking project

performance Forum 3 Managing client needs Forum 4 Managing internal & external

teams

Sustain Train Skills

Partnering with training provider can help reduce timeframe required for field work

PROJECT MANAGER PERFORMANCE D


Applying capital productivity levers can increase CU Boulders effectiveness and improve its organizational health in the project delivery functions

Source: Expert interviews, Team Analysis

Applying capital productivity levers can achieve substantial efficiency in capital deployment.

in addition to multiple other benefits to University of Colorado, Boulder

Estimated savings of 15% of the overall capital spend based on select levers of streamlining project delivery: Stage-Gate process: move through multiple

fund and scope approval gates across lifecycle allocating full funding when with a higher degree of cost certainty

Contracting: select the project delivery method and contract terms to match the project goals and share risks

Transparency: add project controls and tracking to provide right information at the right time

Project Managers: spread project management best practice to create consistent approach

Estimated savings of 30% based on all capital levers across project prioritization, streamlining delivery, and making the most of existing facilities

Grow a transparent and trust-based relationship across all stakeholders (Board of Regents, Administration, Planning, Design & Construction, and Users) involved in project delivery

Increase morale, accountability, and ownership of projects in project delivery functions

Better able to attract and retain top talent in the project delivery functions at CU Boulder

Better able to manage the pipeline of upcoming projects from an internal resource perspective

Attract best contractors to engage in project delivery of complex and base projects

Better able to anticipate and resolve project performance related issues

Maintain and enhance the beauty of the unique campus architecture in a cost effective manner


CU Boulder has started initiatives that address aspects of the four recommendation focus areas

Source: CU Boulder Master Plan and Interviews

Initiative

Creating Key Performance Indicators dashboard

Developing preliminary set of project KPIs dashboards with Office of Performance Improvement

Detailing project plans through Project Charter

Providing an executive summary of Program Plan covering agreed budget, schedule, and scope, signed by PD&C and Administration

Simplifying campus design formats

Redeveloping campus design standards to more concise format

Description Involving PM earlier in the process

Involving PM earlier at project conceptualization instead of Design Development phase

Investing in software tools and solutions

Undergoing an evaluation of software options to be used across Facilities Management (e.g. developing database for smaller projects to provide better cost estimates)

Stag

e ga

te

Con

tr-

actin

g Tr

ansp

aren

cy

PM

Tool

s

Leverage technology for permitting and inspections

Implementing electronic permitting technology to ensure tracking of permitting and inspection

Engaging contractors with performance specifications

Investigating use of performance-based specifications to transfer risk to contractor and design team


Overall implementation plan

2015 2016 Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

E. PMO for implementation

Launch field and forum trainings Define & implement policy to ensure sustainment (e.g. training refreshers, assessments, etc.)

Activity

Complex Minor and Outlays

Define stage-gate process for CU (roles, deliverables, etc @ each gate)

B. Contracting strategy

Launch: pilot, adjust, scale to all complex projects

Create contracting strategy playbook

Share plan and create SG working group

Identify CS working group

Syndicate with key stakeholders

Workshop(s) to share recommendations and future plan

Assess results and define next steps (e.g. extend to base Minor and Outlays projects)

Major projects

A. Stage gate process

Assess results of PMs and define next steps

Scale v2.0 to all projects

Map needed PM skills (and current state)

C. Transparency

Design, pilot, and adjust PRB & dashboard v2.0

Assess results and define next steps

Assess results and define next steps

Launch: pilot, adjust, scale to all projects Syndicate with key stakeholders

Implement version 1.0 for all Major projects

Identify mode for PM trainings (internal/external)

Syndicate version 1.0 of transparency measures (dashboard and PRB)

D. Project Managers

Implementation of 1.0 continues until v2.0 is scaled to all

Design program (curriculum and format)

PRELIMINARY

Phase 3: sustaining excellence Phase 2: building excellence Phase 1: quick wins & critical actions Phase 4: future considerations



Appendix


Organization context Athletics project review Overall diagnostic Recommendations Value at stake Implementation plan

Contents


Planning Design & Construction is a ~65 FTE organization within Facilities Management that manages project delivery for CU Boulder Department of Facilities Management Planning, Design and Construction

Facilities Management

PD&C

Facilities Engineering (12)

Reviews designs for compliance with codes, UCB standards, good engineering practices

Provides engineering support to the facilities maintenance and operations staff, design guidance to UCB project managers, and design-oversight of consultants.

Develops and maintains university standards, design guidelines, and construction-requirements lists in cooperation with maintenance staff.

Ensures code compliance

Facilities Planning (7)

Manages and directs the planning and design of campus facilities and grounds

Maintains the space database

Processes official requests for space

Performs space utilization/needs analyses

CAD/Document Management/ CASP (6)

Maintains library of campus site and building engineering drawings

Catalogs and archives campus project documents and related materials

Updates achieve drawings accurately reflect the campus and its structures.

Develops and maintains campus GIS and maps database

Design & Construction (37)

Provides administrative, management and professional services required to facilitate and accomplish projects on the campus

Coordinates the bidding process procuring consulting services

Administers and maintains contracts, budgets, and schedules

Office Administration (3)

Supports PD&C

Source: CU Boulder organizational chart and PD&C website


PD&C uses the following capital construction process for Major projects (1/2) BCPC = Boulder Campus Planning Commission CCHE = Colorado Commission on Higher Ed.

FM = Facilities Management

Defines the basic scope and likely cost of the project

Informs the administration about the project

Secures campus administration approval to proceed with development of a program plan

Project Initiation and Feasibility

Outcome: Approval to prepare a Program Plan

Program Planning

Defines the programmatic requirements for the designer

Defines limits of work, including site and infrastructure requirements

Builds consensus as to scope, cost and time line of the project

Defines the financial plan and sources of funds

Outcome: Campus agreement on scope of project and a funding plan identifying sources of revenue

Approvals

Secures Approval from Board of Regents and CCHE

Incorporates project into larger capital financial planning of university and state

Develops support for the project at all levels of state government

Secures funding for State-funded project

Outcome: Authorization to begin expending money on a capital construction project

Architect Selection

Selects the most-qualified architect and engineering firms to do the project

Encumbers money to begin the project

Contractors are selected for some delivery methods

Outcome: A design team is contracted to design the entire project

Concept and Schematic Design

Confirms and enhances program plan requirements

Generates concept for final building

Provides room by room layout of spaces

Secures approval of DRB and review by BCPC of schematic plans

Outcome: Schematic design is approved and project budget is confirmed

Source: Colorado.edu


PD&C uses the following capital construction process for Major projects (2/2)

Develops detailed room requirements

Integrates infrastructure systems into the building design

Provides pricing documents for contractor

Secures final DRB approval and other entitlements

Design Development

Outcome: Design Develop-ment is approved within the contract budget.


Translates the design intent into documents from which a builder can construct the project

Describes the quantity and quality of the materials to be provided by the contractor

Provides final estimates of the project prior to bidding

Outcome: A complete set of plans and specifications is produced that describes the design fully.

Bidding & Negotiation

Initiates procurement processes for all trades

Produces a final construc-tion price

Contracts with builders to construct the project

Outcome: Final contract for construction

Construction

Contractor constructs the project

FM ensures that the building is built per plans and specs and meets building codes

Outcome: The project is realized

Occupancy and Warranty Period

The building is occupied by the users for which it has been designed

FM monitors the project to identify and correct any construction defects

Outcome: The building is accepted and available to move in

Source: Colorado.edu

BCPC = Boulder Campus Planning Commission CCHE = Colorado Commission on Higher Ed. FM = Facilities Management



Contents


Athletics Complex has been a challenging program and continues to be a source of concern for CU Boulder


Original Program Plan called for a phased approach and was envisioned to be completed August 2016/17 Accelerated timeline and performing all phases concurrently has created additional

stress on delivery model

Internal misunderstanding in early phases between Athletics and PD&C resulted in ongoing project changes and cost escalations

Lack of team continuity, both internal and external, created hand-off challenges and eventually coordination and communication challenges

GMP was not executed, despite constant assurance provided by Mortenson and an agreed upon scope and budget that led to an agreement in GMP GMP agreement of USD 141 M achieved in April 2015 In May 2015 Mortenson refused to sign

Quality assurance during project closeout is an important final step in Athletics Complex project in order to prevent future costs and may require additional support to supplement capacity of existing team structure Current closeout process is mainly safety focus and user has already discovered

some closeout issues


Introduction to the Folsom Field Athletic Complex upgrade plan

1 Includes Space for Olympic Sports teams and their support spaces, training table, and renovated and expanded academic support center

Last major construction effort in 1991 with addition of Dal Ward Upgrade to the facilities was an effort to increase recruitment

success of top-performing student athletes which were being drawn to nearby schools with more advance facilities

Original Program Plan (and original cost) called for a phased approach with the following phase split: Phase 1: 4th Floor Build-Out to serve as Olympics Sports

Offices (USD 6.1 M) Phase 2: Indoor facility, practice fields, site development, and

above ground parking lot (USD 117.9 M) Phase 3: Dal Ward renovation1 (USD 15.8 M)

Original occupancy date was estimated August 2016/17

Contract was drafted as a Design/Build with a Guaranteed Maximum Price (GMP) but clause was not executed

Under design/build contract, lead contractor is tasked with developing designs for the end building and executing on that design

GMP clause is a clause which sets an upper budgetary limit which project is expected not to surpass. Costs which exceed that limit are not to be paid by the client and is an effective risk mitigation tool GMP clause was never formally executed by Mortenson

Contract form is ideal for fixed and known project scope, situations similar Folsom Field Athletic Complex with evolving scope is not best suited

Athletic Complex project was intended to modernize and advance CUs facilities among growing talent competition

Phases were intended to help reduce cost and inconvenience of a full blown construction site but would have taken longer

Winners of contract were contractor Mortenson and architectural engineering firm Populous

Phase 1: 4th Floor Buildout

1

Phase 2: Indoor facility, practice field, and parking

2

Phase 3: Dal Ward

3

1 2

3

Team Governance

Final decision-maker for build team

Made recommenda-tions which needed Mortensons approval

Site presence

Multiple staff flying in as needed

Select staff moved to Boulder, others

Winning contractor, led contractor relationship with CU

Design part of bid team, essentially worked for Mortenson

Role on project

Source: Interviews, Athletic Complex Program Plan


Athletics Complex has been impacted by high rates of personnel turnover both at CU and Mortenson

Source: Interviews

Lack of continuity has significantly impacted progress of the project

2013 2015 2014

Group Position Active period

Present

Athletics Department

Planning, Design, & Const-ruction

Mortenson

Populous

AD 1 AD Athletic Director

Assistant AD AAD 1 AAD 2

Adminis-tration User Rep UR 1 No replacement

CA 1 CA 2 Campus Architect, Director of PDC

Project Manager PM 1 PM 2

Lead estimator LE 1 and CDL 2

C&D Liaison CDL 1

PM 1 Project Manager

Lead Designer LD 1

VP, Gen Manager VP 1

Dir 2 Dir 1 Dir of Project Dev

SR Proj Manager PM 1 Multiple PMs


Changes represented a significant upward budgetary push, which were offset by cost cutting initiatives in other areas of the project

Source: Interviews

PRELIMINARY

Increases driven by twelve significant scope evolutions, but those increases were controlled by three reductions

701

3

012

11

Total Apr Jan

-2

Dec Sep Jul Jun May Mar Feb

1

8

Dal Ward -6

IPF2 Height Reduct

-1

IPF2 Track

Total

24Indoor Parking1

1 Separate project but had schedule and cost implications on Athletics Complex 2 IPF = Indoor Practice Field

2014 2015

USD millions

1

3

2

4

2

1

1

Total

Grounds Temp

Foot- print

1

1

Total

Kitchen

Total 0.2

Brand 0.2

3

1

Total

IPF2 Sprink- lers

-0

Aud/ Vis 2

Rooftop Design

1

1

Total

Tenant Finish

0

0

Total

DAS Systems

0.7

0.4

0.3

Total

Rooftop bridge

5th Floor Add-on

-2

-2

Total

Value Eng

5

6

7

8 9 10 13

11

12

14 15 16

Focus of changes only on significant changes to scope

Does not include required changes to schedule, manpower, and other changes required to support scope change


Going forward, there are three important considerations for the Athletics Complex project

1

2

3 Throughout the project, Mortenson provided constant assurance to CU personnel that project was on track with agreed upon budget and timeframe

Current closeout process has strong administrative and safety focus, no identifiable quality assurance closeout plan is in place and may require additional support capacity

As of December 2015, the project is 93% of budget (USD 140 M) has been released to Mortenson

Source: Interviews, Press Search, Mortenson



Contents


Overall capital program diagnostic

Quantitative performance on CU Boulders capital portfolio over the past 5 years shows overruns and delays for a set of Major projects as well as underruns for Minor and Outlay projects

Major projects (projects above $2M) comprise of 80% of the spend. Approximately 8 projects requiring additional spending limit were typically those impacted by accelerated timeline, scope changes, or decision delays

Significant portion of the spend, ~$250M, is still outstanding and provides an opportunity to improve project delivery in on-going projects

Though market conditions impacted the overall cost of projects since 2009, there is no immediate impact on attractiveness of CU projects based on bid analyses

More than half (>1000 projects) of all Minor and Outlay projects are completed at 5% or more under the original target cost, similar to other public agencies

Qualitative analyses and review of select Major projects show that CU Boulders capital program faces challenges in both strategy and project delivery with the following key opportunities: Capital planning: Meet target costs by rethinking approval process to match the release of funds to

the maturity level of the project Contracting methodology: Manage owner risk through clear guidelines on selection project delivery

method or contracting terms Communication: Manage risks proactively by increasing project tracking and clarity in

communicating progress with appropriate stakeholders Project Manager workforce: Increase consistency in PM workforce through structured training and

onboarding processes and a decrease in turnover


Over the past 5 years, CU Boulders capital spend has been concentrated on Major projects with a valued budget of ~$870M

302

980

957

Total budget on projects1 Number of projects

Projects over $2M Athletics Complex Systems biotechnology

building Recreation facilities

improvements

Projects between $25k-$2M Food service renovation Replace boilers, roof Lab renovation

Projects under $25k Sound proofing Temporary cooling Fire alarm upgrade

Examples

PRELIMINARY

Project size range Total value

1,967 Total $1,046M

Outlays $8M

$867M

Range $25k-$500K Total value $91M

Range $1-$2M Total value $39M

$171M

Category I Range $2-$50

Total value $318M Major

Minor

Range $500K-$1M Total value $42M

Category II Range $50-$100

Total value $240M

Category III Range $100+

Total value $308M


1 Representative project scale but not exhaustive. Current budget for projects from March 2010 after the implementations of the CP module to September 2015 across all stages of development from planning (~$30 M) to closed. Budget defined as most recently approved budget in FAMIS as of mid-September 2015

2 Two grants listed as separate projects were merged with their associated projects. Three projects out of the 30 are ESCO with combined project value of USD ~21 M


Projects requiring additional spending limit were typically impacted by accelerated timeline, scope changes, or decision delays


SB Academic Wing1

Campus Utility1

SPSC - Data room

Ekeley Middle Wing

13

22

12

Ketchum1

JILA 60 SEEC1

12

28

75

System Biotech 113

Athletics Complex1 142

% Change in legislative spending limit

Initial legislative spending limit2

1 Ongoing project | 2 Initial legislative approval | 3 Current legislative approval

PRELIMINARY

18

14

Stad - Video Board

5 GIPF Bldg (Athletics) 1

Bball/ Vball Practice 11

IBS

Wilderness1 EUCLID1 (CASE)

7 Wilderness - Recom

4

4

Hallett Renovation

Atmospheric Lab

Glenn Miller Ballroom

7

3

Rec Facilities 64 43

USD Change in legislative spending limit

N/A

16

56

18

2

10

6

10

53

0

0

0

0

0

0

2

0

0

3

0

17%

35%

21%

75%

28%

88%

12%

50%

N/A

0%

10%

0%

2%

0%

0%

0%

13%

14%

0%

0%

Current legislative spending limit3

N/A

169

23

28

37

91

160

14

112

4

43

64

4

20

5

7

11

16

3

7

USD Million

Projects impacted by significant scope or timeline fluctu-ations

Normal projects

Observed difference in performance between projects which are pursued as expected and those impacted by: Accelerated

scheduling Significant or

constant scope changes

Delayed timing in decision-making

NON-EXHAUSTIVE Detailed next


Specific context of building projects reveal important details about on the dynamic process of design and construction (1/3)


Athletics Complex

Driver for cost change: Accelerated project timeline, insufficient time for program planning complex project

Additional context Accelerated timeline provided limited time for

planning efforts to which external consultant was hired to supplement

Inadequate familiarity/attention to capital process and requirements by new campus staff

Important changes and decisions were being made as late as construction

System Biotech

Driver for cost change: Unforeseen construction escalation in laboratories and need to master plan the building site for East Campus

Additional context Efforts were required to master plan the site for

East Campus impacting the budget and schedule Laboratory facilities required more advanced

features than expected Additional design fees for LEED certification

Campus Utility

Driver for cost change: Delayed approval and new environmental requirements

Additional context Original program plan developed in 2007 which

set budget in dollars for that market Original plan called for $134 M project but

program was only approved for $75 M plan was reworked

Approved 2011 plan operated in a more expensive market; student support for continued CoGen

SEEC

Driver for cost change: Delayed funding, changed site and program fluctuation

Additional context Program planning efforts began in 2002 and were

paused, restarted and finalized in 2008 Series of approval delays and program plan

amendments led to the escalation of cost compared to original budget request

Nature of the building and the market costs changed significantly from 2008 to 2015




JILA

Driver for cost change: Delayed federal funding and unforeseen construction needs

Additional context Original project cost estimated in 2007 but federal

funding was not available until 2009 Unforeseen existing conditions around hazardous

materials were discovered underground (e.g. aged plant fuel storage tanks)

High sensitivity of research equipment required advanced vibration-prevention features

Systems Biotechnology Academic Wing

Driver for cost change: Delayed funding availability Additional context

Educational wing of this facility delayed from 2006 to 2015-16 due to the demand for state capital construction funding and economic hardship

Original cost was completed before the construction upswing in the Denver area

Increase of cost driven by higher market demand and inflationary cost which occurred between 2008 and present day

Ketchum

Driver for cost change: Scope significantly evolved from original capital renewal scope

Additional context First state funding request was in 1998 which was

only for capital renewal of the building; Circa 1938 building

Appropriated design funds rescinded along with construction phase funding in 2007-08

2014 funding was granted for a complete overhaul with an expanded program plan

Ekeley

Driver for cost change: Delayed funding and inflationary impact of costs

Additional context Project plan originally scoped in late 1990s Appropriated design funds rescinded along with

construction funding in 2007-08 Inflationary cost pressures from the original

funding approval impacted the budgetary needs of the project




SPSC Data Room

Driver for cost change: Cost decreased significantly due to dramatic technological innovation in market

Additional context Original plan was to develop a facility to hold data servers

to back-up crucial university information Popularization of online cloud memory capabilities

significantly drove down the need to purchase devices to support data needs of university

Project costs were dramatically reduced


Denver market conditions impact project performance (both positively and negatively) and need to be accounted for in planning

4,450

4,3424,317

4,178

7,0787,0106,9856,890

6,341

3,900

3,950

4,000

4,050

4,100

4,150

4,200

4,250

4,300

4,350

4,400

4,450

4,500

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

5,500

6,000

6,500

7,000

7,500

3,975

6,384

4,092

Observations: Denver area market

experienced growth increase in prices over the past five years

From June 2009 to July 2010 the compound aggregated growth rate was 1.91% for BCI and 3.04% for CCI

Further pricing pressure may existing due to scarcity of labor at subcontracting levels and increasing project demands coming online

CCI

BCI

2010 2011 2012 2013 2014 2015

Recession recovery

Growth period

NOTE: The ENR indexes measure how much it costs to purchase the following hypothetical package of goods compared to what it was in the base year. The CCI uses 200 hours of common labor, multiplied by the 20-city average rate for wages and fringe benefits. The BCI uses 68.38 hours of skilled labor, multiplied by the 20-city wage- fringe average for three tradesbricklayers, carpenters and structural ironworkers. For their materials component, both indexes use 25 cwt of fabricated standard structural steel at the 20-city average price, 1.128 tons of bulk portland cement priced locally and 1,088 board ft of 2x4 lumber priced locally.

Source: Engineering New Record, Team analysis


Analysis of bids reveal CU projects are attractive to general market

Source: PD&C, Team Analysis

Total interested bidders

Second Lowest Lowest Spread (%) Project

Construction start

Highest Lowest Spread (%)

Total qualified bidders

Project budget (USD M)

32

43

211

22

7

4

91

3

4

1386

64

7

432

4

7

11

13

148

143 IBS Jun 09

6

5

210

8

3

1410

9

4

4

148

10

4

613

6

7

89

6

8

3

5

24

3

64

4

35

5

5

4

6

24%

32%

41%

12%

12%

17%

23%

32%

23%

23%

14%

40%

40%

13%

6%

13%

35%

18%

10%

11%

23

46%

15%

3%

1%

17%

6%

8

4%

4%

3%

5%

6%

0%

0%

5%

3%

1%

40%

25%

2%

3%

6%

22%

Sys biotech Sep 09

B/V Ball Apr 10

WLRD Rec May 10

E-wing Jan 161

Euclid Oct 15

Ecme Hvac Sep 15

Wilderness Mar 15

Ketchum Jan 15

GIPF Blg Sep 14

GM Ballrm May 14

Athletics Apr 14

MAC Dec 13

Atmos lab Aug 13

Comp data Aug 13

EKLC Apr 12

Utility syst Aug 12

Rec facility Jun 12

Video board Apr 12

East Elect May 11

Jila May 10

HLET May 10

1 Expected construction start

No discernable trend can be identified when reviewing past history of Major bids, while total number of interested bidders is trending lower in 2nd half of 2015


Minor and Outlay projects are routinely under budget

Source: PD&C, Team Analysis

106

214

342

105

20-50 50+

1092

-5-5 -20- -5 5-20 >-20

1 Includes Substantial Completion, Post Construction, and Closed Representative from March 2010 after the implementations of the CP module to September 2015

2 Excludes projects with USD 0 spend, Minor = 11 and Outlay = 12 3 Excludes 215 closed projects with a budget of USD 0 but representing USD 890 K of actual spend

99122

176186

1524

50+ 20-50 >-20 5-20 -5-5 -20- -5

Percentage over/under budget Percentage over/under budget

Minor projects1 N = 7862

Outlay projects1 N = 6102,3

-0.1 0 0 0.2 0.5 0.8 -0.2 0 0.6 3.1 3.1 14.7

# Total budget over/underrun USD Millions

55% of projects USD 20.2 M

underrun

64% of projects USD 1.5 M

underrun

Majority of projects were under budget by more than 5% (55% of Minor and 64% of Outlay)

Underruns in Minor and Outlay projects amount to ~$22M, less than 2% of overall capital budget over five years

Underruns are expected given low project values and lack of knowledge on existing field conditions

PRELIMINARY


Potential to unlock limited value by tightening budget estimation processes or employing staged release of funds during project execution Lower underruns may allow greater budget to

perform more projects Performance metrics need to capture user

satisfaction, delivery schedule, and execution cost

Among other public organizations, regular underruns for Minor and Outlays are not uncommon but may constrain user access to capital

Source: PD&C, Team Analysis, Press search

PRELIMINARY

Underrun represents approximately 18% of total budgeted amount for Outlay and Minor projects1

120

21 1078

Underrun

0 0 1

Overrun

-22 2

Budgeted

129

Spend

Minor

Outlay

which is in line with other public organizations setting budgets for similar projects

Public org 1

18%

14-18%

CU

Public org 2 Up to 30%+

USD Millions Average % budget underrun

1 Includes Substantial Completion, Post Construction, and Closed Representative from March 2010 after the implementations of the CP module to September 2015


Rapid diagnostic evaluates the effectiveness of CU Boulders Capital program across the following dimensions

Organization Mindsets and capabilities Processes and tools

Strategy translation Risk/return appetite estimation Capital headroom calculation

Portfolio review Portfolio allocation Ongoing returns tracking

Opportunity Origination Business case optimization and concept selection Design, procurement, & contracting Construction & Execution Comm. & Ramp-up Project control

Best practice area Description

Organization structures and standards applied to capital Personnel attitudes and skill sets devoted to capital Enabling systems applied to capital budgeting and delivery

Formal mechanisms for ensuring corporate strategy implementation Establishing corporate/group level risk and return expectations Calculation/simulation of cash generation and investment ability Top down review of project portfolios, including improvement

potential

Selecting projects for execution, understanding interactions, risk Evaluating how results match to risk/return appetite Initial scoping of opportunities and preparation for project success Development and testing of concepts against a reference case for

most effective selection

Detailed project design, planning, and procurement

Tactical project execution including scope changes Startup and handoff to ongoing operating team Assessing project outcomes, establishing feedback loops

Enablers

Capital Strategy

Portfolio Strategy

Project Delivery

Source: McKinsey Capital Productivity Practice


Rapid diagnostic based on interviews and select project reviews reveals that strategy as well as project delivery are below industry average at CU Boulder

0.0

1.0

2.0

3.0

4.0 Organization

Processes and tools

Mindsets and capabilities

Strategy translation to asset base

Risk/Return appetite

Capital headroom calculation

Portfolio review

Portfolio allocation Ongoing returns tracking

Opportunity origination

Business case definition and concept

Design. procurement. and contracting

Construction and Execution

Commissioning and ramp-up

Project control Opportunity origination Concept selectionProject definition and approval

Project ramp-up

Project execution

Opportunity origination

Concept selection

Project definition and approval

Project ramp-up

Project execution

Portfolio Strategy

Capital Strategy

Project delivery

Source: Based on 40+ interviews with PD&C

PRELIMINARY

Enablers

Industry average = 2-3


Based on 40+ interviews, select project reviews, data analysis, and focus groups we identified a set of opportunities

Opportunities to increase efficiency and effectiveness

Cap

ital

Plan

ning

More consistent Program Planning efforts, aligned with paced project schedule to decrease owner risk

Address backlog in maintenance through improved capital allocation Enhance integrated portfolio view with clear project prioritization Rethink approval process to match the release of funds to the maturity level of the project

Des

ign Augment alignment between PD&C and administration in regards to project budget estimates

and timelines Continue with recently launched effort for early engagement of Project Manager in project

lifecycle

Con

trac

t- in

g

Refine choice in contracting strategy (choice of delivery model, contract type, award process) to align to scope, project schedule, market conditions, and owner execution capability

Consistently enforce contract terms in the field leading to lower owner risk

Proj

ect

exec

utio

n Standardize project execution processes Adopt and enforce tools and as a standardization method Increase ownership of project controls (i.e., cost and schedule tracking)

Enhance communication on project progress Celebrate success Leverage performance monitoring (e.g., lessons learned at project completion) as source of

insight Provide training for onboarding new employees and continuous development

Cro

ss-c

uttin

g

Emerging themes for developing excellence

Develop a clear, well-documented, and scalable stage gate process to drive capital investment success

Adopt clear guidelines in contracting strategy to address project risk based on project scope, target cost, expected delivery schedule, market conditions, and internal capability

Deploy project controls to drive transparency of cost, schedule, and milestones during project execution thus increasing consistency

Train and retain the Project Manager workforce to ensure best practices adoption and execution in project management

Source: Interviews



Contents


CU Boulder can adapt best practices in capital management across the four themes to begin developing excellence












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Deliverymodel

Awardprocess

Contract terms

2

1

3

Project Managers: how well is project management best practice followed?

Establishing standardized methods, training for PM staff on consistent approaches, and support from key decision makers which allow PM team to increase success in delivery of projects

Standardized processes with capability building training to ensure consistent execution

McKinsey & Company

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5

4 Planning and scheduling process

Planning team

Create WBS Identify critical

milestones Create/ update

plan Publish plan

Monitor & report project progress

Recommend focus actions/ area

Publish report

Recommend & perform required analyses

Publish analysis report

Process step

Users

Create/ update plan


Help in identifying critical milestones

Progress measurement


Execute recom-mended focus actions

Customized analysis

Identify required analyses


Roles

A

B

C

D

Source: Interviews, Expert interviews, Team analysis


Existing CU Boulder approval process for Major projects does not match project maturity with funding commitments

x

Current Process

Observations

Unclear project pipeline prioritization process leads to suboptimal use of resources in developing Program Plans Consensus must be built across many campus departments to develop a Program Plan which requires considerable investment

of time and effort from the PD&C planning staff

100% of project target cost is established and committed before design is adequately developed Length of time from project approval at funding gate 2 to project bidding exposes CU Boulder to market conditions as project

estimates no longer reflect the current market conditions

Project Managers enter the process after critical project decisions regarding scope and schedule are made Continued scope development occurs in the schematic design and design development stage through user input

Program Planning

Close Out and Warranty Period


Schematic Design

Construc-tion Docu-ments

Bidding and Nego-tiation

Con-sultant and Contractor Selection

Design Develop-ment

Construc-tion

Project Initiation/ Concept Develop-ment

Cabinet review and authorization

Project obtains board approval and is funded

2 1

Source: CU Boulder PD&C website and interviews




Operations

Adding stage gates to existing Capital Project Process will focus University resources and increase control for Major projects

Consultant and


to

From...


Development

Project Obtains Board Approval and is Funded

Schematic Design



Program Planning

Consultant and


Design Development Construction Close Out


Cabinet Review and Authorization

2 1


Development

Develop feasible options. Release seed money.

Design Development

Start-up/ Commission-

ing Close Out

Program Planning/

Scope Selection

Schematic Design Construction

Is this needed? Is it a priority?


Is the best option still viable after scoping? Freeze Scope. Release full budget. Is the project ready to begin operation?

Is option still viable given the refined estimate?

Any outstanding accounts or issues? Is the project ready to be turned over?

6



2b 1 2a 3 4 5

Source: Expert interviews, Team analysis




Proposed process splits the funding gate and provides an opportunity to develop the design prior to committing total funds

Project Initiation and Concept Development

Program Planning Schematic Design

Design Development

0

5

10

15

20

25

30>50

50

40

30

20

10

0

-10

-20

-30

-40

-50

Share of total Percent

30%

10% 5-15%

2%

5%

0.5%

Estimate Accuracy1 Percent

Estimate accuracy Engineering complete Funding required (percent of total investment cost)

Consultant and Contractor Selection

Cabinet Review and Authorization pre-design

Release full project funds with stronger confidence

100% of funding committed

Select best option or set of alternatives to further develop

2a 1 2b

0.5 10% of funding

committed




1- Cost estimate accuracy increases (narrows) as design progresses, even as the cost estimate mid-point fluctuates as design progresses.


Stage-Gate Process for complex projects at CU Boulder will help manage resources and provide more financial control (1/2)

Stag

es

Act

iviti

es

Someone identifies a project Options are generated

with order of magnitude estimates

Design Team and/or Contractor Selected either in a temporary (Paid competition/initial design phase contract) or permanent basis depending on project and delivery method selected Basic engineering is conducted to create a

decision-worthy estimate

Project Initiation and Concept Development

Program Planning Schematic Design

A/E and/or Contractor Selection

2a 1 2b

Review gate 1

Gate questions: Is the project need legitimate? Is it a priority?

Funding gate 2a

Gate questions: Do feasible options exist that

match the intended purpose?

Funding gate 2b

Stakeholders: User PD&C (Planning) Vice Chancellor, Administration Board of Regents (Informed)

Stakeholders: User PD&C (Planning and PM) Vice Chancellor, Administration CFO Finance BCPC (Informed)

Stakeholders: User PD&C (PM, Eng., Shops) Design Team & Contractor Vice Chancellor, Administration BCPC Board of Regents

Gate questions: Is the best option still viable after

scoping?

Final approval authority: Vice Chancellor

Final approval authority: CFO

Final approval authority: Board of Regents

The best option is selected and funds are allocated to complete preliminary engineering





Stage-Gate Process comparison for the Wildlife Place project Ex

istin

g Pr

oces

s Pr

opos

ed P

roce

ss

Program Planning 2 1

Contractor Selection/Sche-

matic Design Design

Development Construction Documents

2b Program Planning 2a 1 Contractor

Selection/Sche-matic Design

Design Development


Funding Required

Program Plan Funding

Board of Regents

Project Estimate

% Design Complete

Funding Required

Board of Regents

Project Estimate

% Design Complete

--

0%

--

Program Plan Funding

--

0%

--

After Funding: Increase to $22.4M at 100% DD estimate VE and ESCO engaged, schedule slips Board of Regents approves additional $2.5M (Total $20.4M) Additional funding required to achieve project scope

100% of project estimate

$17.9M

5%

Board approves full capital spend

$20.2M (mid-point of estimate less $2.2M from Stage 2a funding gate)

Project estimate tightens through SD ($19M - $25.8M ) VE to reduce cost, based on need and function, retain quality

30-50%

Board of Regents approves capital spend for remaining unfunded portion of project (~80-90%)

$2.2M (12.5% of Estimate)

$9M - $26.9M ($17.9M)

5%

Board informed of design start





An internal stage gate working group of stakeholders can design processes and develop necessary documentation

Stage Gate documentation: suggested table of contents

Gate 2b

Gates 3-6

Appendix

Objectives for Gate Key Deliverables for Gate

By Function Timeline

Critical Functions of Team Summary Process Map for Gate Project Managers Roles in completing Gate How to ensure success at Gate 2b

Alternative Gates for Special Projects CU Boulder Standard forms



Critical Functions of Team Summary Process Map for Gate Project Managers Roles in completing Gate How to ensure success at Gate 2b

Gate 1

Stage Gates

Gate 2a Objectives for Gate Key Deliverables for Gate

By Function Critical Functions of Team Summary Process Map for Gate Project Managers Roles in completing

Gate How to ensure success at Gate 2a



Critical Functions of Team Summary Process Map for Gate Project Managers Roles in completing

Gate How to ensure success at Gate 1

Decision and funding gates for: Base Projects Complex Projects

Stage Gate Playbook creation process

Activities: Conduct a series of

workshops to address each section of the stage gate playbook

Review playbook with key stakeholders to validate approach

Suggested working group: PD&C (3)

Planning Representative

Project Manager Engineering

Vice Chancellor Potential Participants (at

key intervals): Users Legal


Detailed next (sample)



Stage 1 Project Initiation and Concept Development Objectives, key deliverables, and critical functions

Select best scope alternative that meets the CU Boulders needs and objectives

Define all scope elements to a level enabling sound decision making

Define project execution plan to meet targets as required

Explicit reconciliation of variances against project requirements

Complete scope identification and selection of a single option for all scope elements

Complete draft of a project execution plan

Initial risk assessment Cost estimate with an accuracy of

50%; and a first estimate at an operations expenditure budget

Develop an initial schedule through completion, including resources for next phase

Objectives Critical functions Key deliverables

Planner - lead Users Engineering Operations / Shop support Outside support:

Estimating Scheduling

Support functions

Finance Vice Chancellor

STAGE GATE PROCESS

ILLUSTRATIVE


A


Function Deliverable

Stage 1 Project Initiation and Concept Development (1/2) Deliverables by function

PD&C (Planning and Project Manager)

Project charter Issue record of decision for alternative selection Provide detailed scope Conduct analysis to facilitate key decision points(e.g., site, execution

strategy) Develop initial project execution plan (scope / change management plan;

project team and resources; contracting strategy; risk management; project controls (KPIs); estimate (50%), quality, procurement, testing and close out, schedule; communication plan; contractor management

Engineering lead

Evaluate technical alternatives analysis and provide recommendation Complete basic engineering data requirements (e.g., load requirements,

equipment sizing, energy use, etc.) Implement optional value improving practices (VIPs):

Types of plant and equipment Concept optimization Constructability reviews

Regulatory Assign code representative, if applicable Assign environmental representative, if applicable

STAGE GATE PROCESS

ILLUSTRATIVE


A


Stage 1 Project Initiation and Concept Development (2/2) Deliverables by function

STAGE GATE PROCESS

ILLUSTRATIVE

Function

Contracting Strategy

Define delivery method, contract award method, and contract terms

Operations and Maintenance

Provide OPEX cost estimate, if applicable Assign operations representative for next phase, if applicable Define maintenance requirements, if applicable

Quality assurance

Define quality oversight

Finance Review estimate, validate financial view calculation Input project into the budget

Legal Provide support, as required

Deliverable


A


Stage 1 Project Initiation and Concept Development (1/2) Summary process map

STAGE GATE PROCESS

ILLUSTRATIVE

Form core project team Review

business case Clarify roles and

responsibilities Identify targets

as per CU Boulder needs

Review project charter

Identify additional resources required

Project manager assigned

Initiate conceptual engineering User

requirements Preliminary

massing Assess

infrastructure requirements

Narrow down potential sites (if applicable)

Narrow down building concept and potential MEP systems

Update conceptual engineering Include massing Process control

strategies

Identify financial and logistical issues

Apply value improvement practices Finalize

programmed areas

Agree on standards and specifications

Conduct process simplification and/or value engineering

Conduct early constructability analysis

Scope and document the best option: Conduct formal

evaluation of alternatives including fatal flaws analysis, and select best available option for application

Document record of decision


A


Stage 1 Project Initiation and Concept Development (2/2) Summary process map

Confirm basic engineering requirements Develop renderings

Review engineering requirements for permits

Decision Gate

Confirm business objectives, risks and uncertainties and confirm compliance with both CU Boulder and user requirements and strategies

Confirm scope to be developed and compliance with University objectives

Present cost and schedule

Confirm project objectives, priorities, trade-offs

Summarize project execution strategy and plans

Identify resource requirements for next phase and through project completion

Issue record of decision

STAGE GATE PROCESS

ILLUSTRATIVE

Develop schedule to reach Stage 2a and detailed milestone schedule for execution phase

Prepare factored estimate (50%)

Develop Plans for Completing: Basic

engineering Detailed

engineering Procurement Construction Contracting Project controls

Develop detailed risk matrix

Conduct preliminary equipment sizing

Reconcile project objectives

Develop resource requirements for Stage 2a

Update Campus project budget

Finalize and review scope of work

Estimate OPEX

Develop operations and maintenance strategies Recycle

Proceed to Stage 2a Cancel/postpone


A


Though the proposed stage-gate process is currently defined for Major projects, CU Boulder can extend the process to complex and eventually all Minor and Outlay projects (1/2)

STAGE GATE PROCESS

Rough cost of project

150,000

500,000

Low Med/High

Complexity

Base projects

Complex projects

2,000,000

Major Project Threshold


A

Base Projects can continue to utilize existing stage gate process, potentially adding key QA/QC steps

Complex and Major Projects should use proposed stage gate process

Definition of thresholds should be agreed through Stage-Gate working group


Though the proposed stage-gate process is currently defined for Major projects, CU Boulder can extend the process to complex and eventually all Minor and Outlay projects (2/2)


STAGE GATE PROCESS

Phase 3 (2 months)

All Minor/Outlay Projects: Applicable processes from

Phases 1 and 2 New processes, etc. with a

focus for streamlining

Phase 2 (3 months)

Develop and Implement Process for Complex Minor Projects ($0.5M-2M): Applicable processes from Phase 1 New processes, templates, agendas,

reviews required for Phase 2

Phase 1 (4.5 months)

Develop and Implement Stage Gate Process for Major Projects ($2M and over) including: Pre-work required for each gate Templates Agenda for stage gate meetings Reviews required

Expansion of stage gate process

Time line of stage gate rollout

A


University capital project funding thresholds vary widely but are typically higher than CU Boulders

Source: Press Search

Initial project approvals thresholds

Change approval thresholds

CU Boulder has low approval thresholds even after accounting for expected regional cost variations (e.g. UC expected $/sqft costs are 1.6-1.8x CU expected costs, but UC initial approval thresholds are 10x CU thresholds)

Delegated approval systems require up-front Board approval of Long Range Development Plans and thereafter allow Campuses to act autonomously up to a larger cap

Percentage of budget expansion varies widely, with common aim to keep projects moving in uncertain circumstances

Smaller campuses networks

have smaller thresholds

20101052

40

60

15 5

25% 30%

5% 10% 10%

USD Millions

Percent of initial cost

# of academic campuses

Expected $/sqft1

4 1 8 10

185-305 185-305 265-395 340-490

1

1 Hard construction costs $/GSF for University buildings in select US cities, Rider Levett Bucknall Quarterly Construction Report, 2nd Quarter 2015

NA

Delgated budget threshold

Observations

A STAGE GATE PROCESS


CU Boulder can adapt best practices in capital management across the four themes to begin developing excellence












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Deliverymodel

Awardprocess

McKinsey & Company report on CU construction

Documents

Transcript of McKinsey & Company report on CU construction