Internal Audit, Risk, Business & Technology Consulting
19th Annual Regional Audit Conference “How to be Efficient and Innovative while auditing Capital Projects”
© 2019 Protiviti Member Firm for the Middle East Region CONFIDENTIAL – This document is for your organization’s internal use only and should not be copied or distributed to any third party.
KEY OBJECTIVES
Understanding the need of capital project auditing
Glance through transformation journey of capital project audits
Exploring efficient & innovative tools & techniques to audit capital projects
Adopting comprehensive and proactive approach
How disruptive technologies will drive capital projects in future
2
© 2019 Protiviti Member Firm for the Middle East Region CONFIDENTIAL – This document is for your organization’s internal use only and should not be copied or distributed to any third party.
WHERE DO WE STAND TODAY?
3
Internal Audit, Risk, Business & Technology Consulting
NEED OF CAPITAL PROJECT AUDITING
© 2019 Protiviti Member Firm for the Middle East Region CONFIDENTIAL – This document is for your organization’s internal use only and should not be copied or distributed to any third party.
UNDERSTANDING CAPITAL PROJECTS
5
Capital project is a long-term, capital-intensive investment project with a purpose to build upon, add to, or improve a capital asset. They are defined by their large scale, large cost with extensive planning & resources.
Segmentation
Economic Infrastructure Others
Healthcare
Telecom
Transport Energy & Utilities
Social Infrastructure
Roads & Bridges
Airports
Ports
Railways
Urban mass
transit
Cargo and
Logistics centers
Oil & Gas
Power Generation,
Transmission &
Distribution
Water & Sewage
Gas storage and
distribution
Manufacturing &
processing plants
Renewable energy
Metals & Mining
Townships / Smart City
Educational Institutions
Sports stadiums & facilities
Convention centers
Public housing
Community facilities
Economic Zones
Industrial Facilities & Free Zones
Industry Segmentation
Investors - Owners – Developers – EPC’s – Contractors – Banks - Operators - Authorities
5
© 2019 Protiviti Member Firm for the Middle East Region CONFIDENTIAL – This document is for your organization’s internal use only and should not be copied or distributed to any third party.
GLOBAL PROJECTED CAPITAL PROJECT SPEND - US$ 43 TRILLION, UPTO 2025
6
Asia/Oceania $ 13.8 T
Middle East $ 3.5 T
Africa $ 2.8 T
Europe $ 9.1 T
US/Canada $ 6.5 T
South & Latin America
$ 7.4 T
© 2019 Protiviti Member Firm for the Middle East Region CONFIDENTIAL – This document is for your organization’s internal use only and should not be copied or distributed to any third party.
GLOBAL CAPITAL PROJECT LANDSCAPE
Brazil
Angola
USA
Russia China
Australia
Korea
Canada
Middle East
South East Asia
Japan
North Sea
India
• Globalization of EPC resources
• Increased environmental
requirements
• Increased contracting needs
• Increased regulatory requirements
• Aging workforce
• Transitional workforce
• Globalization of EPC
resources
• Limited specialty
engineering and project
management resources
• Aging workforce
• Globalization of EPC
resources
• Limited specialty
engineering and project
management resources
• Globalization of EPC
resources
• Limited specialty
engineering and project
management resources
• Increased
environmental
requirements
• Increased in country
content needs
• Limited specialty engineering and
project management resources
• Increased in country content
needs
• Political Govt. stability
• Globalization of EPC
resources
• Limited specialty
engineering and project
management resources
Nigeria
• Transitional workforce
• Globalization of EPC resources
• Limited specialty engineering and project
management resources
• Strong competition for construction resources
• Strong focus on in- country content
• Growing Mfg. / specialty
engineering and project
management resources
• Corruption
• Strong focus on in- country
content
• Limited specialty engineering and
project management resources
• Political instability
• Globalization of EPC sector
• Fast track projects
• Growing specialty engineering
and project management
resources
• Limited EPC access
• Political stability
• Corruption
• Logistics
• Increased Arctic
exploration
• Growing specialty engineering and
project management resources
• Growing construction
capabilities
• Growing mfg. & construction capabilities
• Rising labor costs
• Growing specialty engineering and project management
resources
South Africa
• Long term Government policies
• Globalization of EPC resources
• Skills development to fill specialty
engineering and project management
resources
7
© 2019 Protiviti Member Firm for the Middle East Region CONFIDENTIAL – This document is for your organization’s internal use only and should not be copied or distributed to any third party.
GCC CAPITAL PROJECT SPEND
8
46%
25%
13%
10%
4% 2%
KSA
UAE
Kuwait
Qatar
Oman
Bahrain
61% 15%
10%
9%
4% 1%
Real Estate
Transportation
Oil and Gas
Power and Water
Manufacturing
Mining
Source: meedprojects.com.
2%
13%
6%
4% 1%
68%
1%
5% Water
Transport
Oil
Gas
Industrial
Real Estate
Chemical
Power
Key Highlights
• Almost 80% of large projects are over budget in terms of cost and approx. 20% in term of schedule;
• $ 31 MN average value of dispute;
• 30% projects on HOLD;
Overall GCC Market - $ 2.8 T
(5300 Active Projects) GCC - Sector Split UAE - Sector Split
© 2019 Protiviti Member Firm for the Middle East Region CONFIDENTIAL – This document is for your organization’s internal use only and should not be copied or distributed to any third party.
CAPITAL PROJECTS ARE BECOMING INCREASINGLY COMPLEX AND EXPENSIVE
9
Startup Effort 1%
Engineering Management – 3%
Project Management – 3%
Construction Management
5%
Other 6%
Engineering 11%
Bulk Materials 18%
Engineered Equipment
15%
Construction 38%
Typical Capital Project Cost Breakdown
An industry survey conducted by the Construction Management Association of America (CMAA)
indicates that 40-50% of major construction projects
run longer than planned and incur significant cost overruns. (http://www.cmaanet.org)
According to The Association of Certified Fraud Examiners (ACFE), the global cost of fraud and
corruption in the construction industry could result in
potential annual losses to owners in excess of $1.5 trillion by 2025. (http://www.aconex.com)
Major Capital Projects encounter significant planning, design, construction, commercial & closeout
challenges to meet cost, schedule, quality and safety
objectives, which may result in erosion of shareholder value and ROI before project completion;
© 2019 Protiviti Member Firm for the Middle East Region CONFIDENTIAL – This document is for your organization’s internal use only and should not be copied or distributed to any third party.
KEY CHALLENGES ACROSS CAPITAL PROJECT VALUE CHAIN
Develop Execute Operate Decommission
Concept
approval
FID Construction
start
First
production
Value
delivery
Asset
closure
Project Phase
Assess Select Define Engineering Procurement Construction Commissioning Operations,
maintenance Decommission
C. Adequately balance EPC risks
E. Changing business and regulatory contexts
F. Managing and optimizing talent availability
B. Getting the plan right and then executing on budget and schedule
D. Integrating information from different disciplines and stakeholders involved in the project for proper decision making
A. Selecting the right projects and optimizing capital
allocation
H. Developing the right offer to the country and managing local content
Ch
alle
ng
es
G. Achieving effective handover &
ramp up
Macro Influences includes:
• Unstable global
market conditions
• Commodity Prices
• Highly competitive
landscape
• Rapid technological
advancement etc.
10
© 2019 Protiviti Member Firm for the Middle East Region CONFIDENTIAL – This document is for your organization’s internal use only and should not be copied or distributed to any third party.
KEY STAKEHOLDER CHALLENGES
11
External Challenges Source: survey conducted by leading MNC
Internal Challenges
© 2019 Protiviti Member Firm for the Middle East Region CONFIDENTIAL – This document is for your organization’s internal use only and should not be copied or distributed to any third party.
KEY RISKS ACROSS PROJECT PROCESS
12
Governance Risks
Cost & Schedule Risks
Commercial Risks
Financial Risks
Realistic Schedule
Estimation Errors
Drop in Productivity of Resources
Process & Regulatory Delays
Improper cost to complete assessment
Inconsistent Reporting
Misinterpretation of contract clauses
Inadequate Contract admin. process
Recording/drafting of claims
Issues in Final Account Settlement
Issues in Project Funding
Fraudulent activities
© 2019 Protiviti Member Firm for the Middle East Region CONFIDENTIAL – This document is for your organization’s internal use only and should not be copied or distributed to any third party.
DETAILED PROJECT RISKS
13
ILLUSTRATIVE
Initiate
• Project funding not approved
• Undefined project organization
• Lack of delegation of authority
• Project Charter not documented
• Project feasibility not established
• Poor scope definition
• Unrealistic development timeframe
• Inadequate PM resources
• Environmental and regulatory
assessments not performed
Plan
• Lack of PM processes, controls,
systems and protocols
• PM plans do not address all risks
• Inadequate resource estimating
• Ineffective stakeholder input
• Lack of PM technology tools
• Lack of contingency planning
• Lack of regulatory pre-approvals
• Project program not validated
• Lack of QHSE planning
Design
• Poor design management
• Uncontrolled design changes
• Value engineering not performed
• Constructability not performed
• Design errors and omissions
• Lack of design performance
• Lack of stakeholder design input
Procure
• Lack of competitive procurement
• Lack of transparent Award process
• Project delivery, contracting and
packaging strategies not defined
• Bid collusion and fraud
• Selection of unqualified vendors
• Allocation of contractual risk
• Lack of contractor pre-qualification
• Hidden contingencies in bids
Construct
• Regulatory noncompliance
• Improper construction sequencing
• Unforeseen site conditions
• Contract noncompliance
• Poor risk management
• Inadequate QHSE monitoring
• Poor sub-contractor management
• Inaccurate progress reporting
• Inadequate cost control
• Uncontrolled changes
Commission
• Lack of commissioning plans
• Inspections and testing failures
• Integrated testing not performed
• Training not conducted
• Lack of operating approvals/NOCs
• Poor systems integration
Close
• Pending punch list work
• Lack of completion certificates
• Final project signoffs not obtained
• Noncompliance with project closeout
• Unresolved claims and disputes
• O&M manuals and warranty
Completed contracts not closed
• Lack of defect liability and warranty
Operate
• Lack of facility management plans
• Asset management plan not in-place
• Safety procedures not operational
• Documentation issues
Internal Audit, Risk, Business & Technology Consulting
TRANSFORMATION JOURNEY OF CAPITAL PROJECTS AUDITING
© 2019 Protiviti Member Firm for the Middle East Region CONFIDENTIAL – This document is for your organization’s internal use only and should not be copied or distributed to any third party.
EVOLUTION JOURNEY OF CAPITAL PROJECTS
15
2010
Construction Time Period: 1631- 1648
(17 years)
Project Cost- 485 MN USD
Construction Time Period: 2004 – 2010
(6 years)
Project Cost- 1.5 BN USD
TAJ MAHAL, INDIA BURJ KHALIFA, UAE
Traditional Modern
↑ Time ↑Cost ↓Time ↓Cost
Improved efficiency
Mitigated Risk
Better controls
Innovative systems
Hand Drawing 3D BIM Model
Evolution
© 2019 Protiviti Member Firm for the Middle East Region CONFIDENTIAL – This document is for your organization’s internal use only and should not be copied or distributed to any third party.
COMMON CHALLENGES FACED IN AUDITING OF CAPITAL PROJECTS
16
Sample & documents extensive
Unique Project risks
Lack of in-house technical skills
Multiple stakeholders
Lack of standard project documentation/ data
Complex nature of contracts
© 2019 Protiviti Member Firm for the Middle East Region CONFIDENTIAL – This document is for your organization’s internal use only and should not be copied or distributed to any third party.
TRANSFORMATION JOURNEY (EFFICIENT & INNOVATIVE WAY OF PERFORMING CAPITAL PROJECTS AUDIT)
17
Generalists
• Finance & Accounting
• Chartered Accountants
• Engineers
Strong Specialization
• Contracts & Claims
• Quantity Surveying
• Planner / Architects
• Cost & Commercial
• Quality & Safety
Compliance Focused
• Milestone based reviews
• Internal controls evaluation
• Governance based
Customized Solutions
• Mix of Process & Project based approach
• Focus on core areas like Schedule Quality
Reviews, Cost Recovery, Contract
Performance , Operational Readiness etc.
• Involvement from beginning / key stages
Data Driven & Tool based
• Monte Carol Risk analysis
• Primavera P6 & Deltek Acumen
• Drone based reporting
• Process Mining, Data Analytics, RPA
• Project Database & Best Practices
People Process Technology
Standard Tools
• ERP systems – SAP, Oracle
• Accounting Software – Tally
• MS Office – Excel & MS Project
Tra
dit
ion
al
Ap
pro
ach
C
urr
en
t S
cen
ari
o
© 2019 Protiviti Member Firm for the Middle East Region CONFIDENTIAL – This document is for your organization’s internal use only and should not be copied or distributed to any third party.
SCHEDULE MANAGEMENT REVIEWS
18
General Auditors
Review limited to compliance, project
milestones, etc.
No tools used
• Difficult to give realistic assurance on project
timeline completion;
• Schedule quality issues
such as activities with missing logic, hard
constraints, negative logic
were not identified;
• Inadequate risk factoring;
Industry & Functional Expert with Primavera skills
Comprehensive schedule review – Work Front loading, productivity
analysis, resource loading, etc.
Primavera P6, Deltek Acumen Fuse & Monte Carlo Simulation to
assure on project completion
• Schedule quality improvisation
• Rigorous schedule tracking and monitoring
• Realistic project timelines using risk based approach
• Confidence in timely project completion
Provide independent assurance on quality of project schedule including success rate of project completion using various schedule analysis tool and benchmarking techniques.
Conventional Challenges Efficient Way
PE
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© 2019 Protiviti Member Firm for the Middle East Region CONFIDENTIAL – This document is for your organization’s internal use only and should not be copied or distributed to any third party.
SCHEDULE MANAGEMENT REVIEWS
19
Init
iate
Strategic Operational
Des
ign
&
Pla
n
Pro
cu
re
Deli
ve
r H
an
do
ve
r
Compliance Financial
• No Alignment of master
schedule with Management
objective.
• Absence of In-build buffer in
project schedule
• Inadequate assumptions
supporting schedule
• Inadequate scope coverage in
master schedule
• Absence of schedule
management procedure
• No Master schedule prepared in
line with schedule management
procedure.
• Absence of progress update on
master schedule periodically till
baseline schedule preparation.
• Schedule not prepared as per
procurement and execution
strategy.
• Unrealistic development time
frame.
• Inadequate key design activities
• Improper sequencing of activities
• No detailed schedule with
resource deployment plan
• Absence of Consultant review of
baseline project schedule
• Absence of Client approval of
baseline schedule
• Absence of agreed progress
measurement methodology
• Project schedule not reported as
per approved baseline schedule.
• Absence of project critical path
reporting
• Poor procurement planning
• Absence of procurement
schedules update and forecast
impact on construction
• Non-alignment with strategic
procurement planning
• Absence of procurement status
report.
• Non-alignment of project
schedule with strategic vision
• Absence of detailed schedules
updates and forecast impact on
completion
• Inadequate Delay Assessment &
Recovery Plan
• Non compliance to schedule
update and review mentioned in
contractor and consultant
contract respectively.
• Non- Compliance to schedule
update process
• Reporting unrealistic project
completion date to Management.
• Absence of critical path of the
project in periodic reports.
• Absence of Project close-out
documents
• Absence of As-Build schedule
• Absence of Handover schedule
and punch points
• Non adherence to Schedule
completion checklist as per
contract conditions
• Absence of lessons learnt
document in schedule
management.
© 2019 Protiviti Member Firm for the Middle East Region CONFIDENTIAL – This document is for your organization’s internal use only and should not be copied or distributed to any third party.
SCHEDULE MANAGEMENT REVIEWS
20
KEY OUTPUTS
Forecasted Projection Fuse Schedule Index
Work package Phase 2&3 Construction
Completion date 1 July 2019 Program name as
received P_1081-u (25.09.18)R
Summary
schedule
analysis Poor schedule quality mainly due to the average number of logic links per activity is high which causes
complex logic.
Schedule quality overall
Schedule quality metrics
Score results Interpretation
Overall
Missing Logic
2 <1% Good score, as activities with missing logic (successors and predecessors) should not exceed 5%
Logic Density
9.22 This indicates complex logic within the schedule, as the average links per activity is close to 4
Critical 0 0% 0% of the activities are on the critical path, which prevents the contractor to track the works to be targeted. Also this approach will have a negative impact in the Extension of Time claims.
Hard Constraints
0 0% A good schedule should have no hard constraints
Negative Float
0 0% Good score, ideally there should not be any negative float in the schedule
Insufficient Detail
13 0% Average score as there are 13 activities with no enough breakdown
Number of Lags
1544 8% Average metric performance, as lags tend to hide detail in schedules and should typically be replaced with activities
Number of Leads
0 0% Good score as this indicates that less than 5% of activities are carrying negative lag.
Merge Hotspot
12952 70% Average metric performance as 70% of the activities might face delay in their start due to a high number of predecessors
Score 26 / 100 The schedule quality is average and there is moderate likelihood of not achieving project completion on time
Schedule Quality
Schedule Risk Drivers Critical Path Analysis Schedule with Risk events
© 2019 Protiviti Member Firm for the Middle East Region CONFIDENTIAL – This document is for your organization’s internal use only and should not be copied or distributed to any third party.
COST MANAGEMENT REVIEWS
21
General Auditors
Review limited to compliance and
budget adequacy
No tools used
Industry & Functional Expert with Project Controls &
Quantity Surveying skills
Analyzing project budget, actual spent, identifying areas
of major cost overruns and
balance cost to go.
Data Analytics Tools taking input from ERPs like SAP,
Oracle
• Assurance to Management on the Project cost to complete and ensuring profitability.
• Assurance to any external institutions and share holders interested with the project
• Provide better control over various project cost heads
• Provide independent assurance on project cost to complete by analyzing project budget, actual spent, identifying areas of major cost overruns and balance cost to go.
• Assist Management for effective decision making and visibility on project profitability at all stages.
Conventional Challenges Efficient Way
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• Difficult to give realistic assurance on project Cost
Overrun & Variations, cost
to complete;
• Inaccurate cash flow forecasts and factoring of
risks in CTC calculations;
• Unstructured Data, Multiple
file records;
OB
JE
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© 2019 Protiviti Member Firm for the Middle East Region CONFIDENTIAL – This document is for your organization’s internal use only and should not be copied or distributed to any third party.
COST MANAGEMENT REVIEWS
22
Init
iate
Strategic Operational
Des
ign
&
Pla
n
Pro
cu
re
Deli
ve
r H
an
do
ve
r
Compliance Financial
• Lack of Capital Management
Plan
• Lack of financial stability
assessment.
• Lack of commercial feasibility
• No cost estimate at concept
stage
• Non compliance to budgeting
procedure.
• Feasibility cost and budget are
inconsistent.
• Non adherence to standard
estimation criteria
• Absence of budget and high
level cost estimate reporting to
management
• Lack of detailed design brief
• Risk of cost overrun due to
frequent changes
• No Contingency as per
quantitative risk assessment
• Incomplete design cost estimate
• Non comprehensive cost Heads
• Cost estimate not as per
schedule and resource
deployment.
• Stage gate approvals without
cost plan.
• Improper estimation review by
cost consultant.
• Absence of cost plan reporting to
management during design.
• Absence of cash flow report.
• Ineffective contracting strategy.
• Absence of pre tender estimate
• Absence of value engineering
• Non adherence to packaging
strategy and estimate.
• Non Compliance to regulations
such as anti-bribery and anti-
corruption laws.
• No report highlighting cost as
per budget vs commitment.
• Risk of project cost escalation
and losses
• Inadequate monitoring lead to
depletion of contingency
• Improper cost to complete
estimate.
• No proper budget monitoring
and transfer process
• Absence of corrective action
plan.
• Non compliance to budget
transfer policy.
•
• Delusion of cost at completion.
• No periodic reporting of cost
performance
• No cash flow updates.
• Absence of Project cost
reconciliation.
• Absence of commercial audit
• Non settlement of all invoices.
• Non settlement of Warranties
and guarantees.
• Non settlement of contracts as
per contract • Absence of Lesson learnt.
© 2019 Protiviti Member Firm for the Middle East Region CONFIDENTIAL – This document is for your organization’s internal use only and should not be copied or distributed to any third party.
COST MANAGEMENT REVIEWS
23
KEY OUTPUTS
CTC Analysis
Divis ion Accepted
Contract Value
Revised Contract
Incl . Appr'd VOs ,
EOTs & ESCs
Forecasted
Contract Incl .
Appl ied VOs ,
EOTs & ESCs
Budget at
Completion
Cumulative
Actual Cost
Incurred
Remaining
Cost to
Complete
Total Cost at
Completion
Forecasted
OH & Profi t
(1) (2) (3) (4) (5) (6) (7) (8)=(3)-(7)
TOTAL 2,825,000,000 2,709,781,348 2,917,157,526 2,837,486,111 1,274,535,749 1,603,039,515 2,877,575,264 39,582,262
Prelims 256,028,525 280,089,323 361,050,231 410,055,515 322,652,821 133,135,913 455,788,734 (94,738,504)
Site Construction 48,904,248 47,395,605 48,111,094 45,585,024 6,432,652 42,539,409 48,972,061 (860,967)
Concrete 437,598,605 538,217,811 540,674,136 479,118,937 486,625,057 25,455,680 512,080,737 28,593,399
Masonry 5,718,210 24,515,110 24,987,978 22,013,918 14,244,205 9,530,544 23,774,748 1,213,229
Metals 24,575,636 21,493,982 24,602,518 22,748,484 11,225,199 12,216,894 23,442,092 1,160,426
Wood and Plastics 4,708,721 5,063,949 5,063,949 4,464,854 - 4,627,170 4,627,170 436,778
Thermal and Moisture Protection 18,353,105 38,163,247 38,163,247 34,703,615 3,441,848 32,670,909 36,112,757 2,050,490
Doors and Windows 277,297,704 275,449,014 282,728,823 262,422,865 76,287,244 183,662,952 259,950,196 22,778,626
Project CTC Summary
Cash Flow Analysis
Cash Flow Analysis
© 2019 Protiviti Member Firm for the Middle East Region CONFIDENTIAL – This document is for your organization’s internal use only and should not be copied or distributed to any third party.
CONTRACT AND CLAIMS MANAGEMENT REVIEWS
General Auditors
Review limited to compliance and
No tools used
Industry & Functional Expert with Contract Management &
Commercial skills
Analyzing contracts, payments & commercial areas
Optical Character Recognition Tool
• Assurance on the adequacy of controls over the contract performance & compliance during execution
• Independent review to attain savings in areas of variations, payment certification, final account settlement etc.
Conventional Challenges Efficient Way
• Identify potential cost recovery or cost optimization opportunities & Identify risk areas within the contract before leading to claims, variations, dispute / arbitration.
• Enable organizations to quickly identify greater value from their contractual arrangements (performance & compliance) and to sustain value across the contract lifecycle.
24
• Difficult to ascertain confidence on to-be Claim
& Variations;
• Non identification of
contract lapses;
• Not able to surface upon Contract performance
issues;
• No focus on cost recovery;
PE
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© 2019 Protiviti Member Firm for the Middle East Region CONFIDENTIAL – This document is for your organization’s internal use only and should not be copied or distributed to any third party.
CONTRACT AND CLAIMS MANAGEMENT REVIEWS
Financial Leakage
Material Reconciliati
on
Claims & Variations
Duplicate Payments
Contract Over
Payments
• Mismatch in Bill of Quantities claimed vs. agreed within Baseline
• Consistency with BOQ Rates
• Advance Payments, Retention, Deductions (NCR’s / Non-
Performance)
• Interim Payments, Material On-Site Payments
• Provisional Sum Items
• Free Issue Materials
• Performance Bank Guarantees
• Claim / Variations
• Liability
Typical Areas of Contractual Overpayments
25
KEY OUTPUTS
© 2019 Protiviti Member Firm for the Middle East Region CONFIDENTIAL – This document is for your organization’s internal use only and should not be copied or distributed to any third party.
OPERATIONAL READINESS, ASSET & FACILITY MANAGEMENT REVIEWS
26
General Auditors
Review limited to FM contracts compliance
No tools used
Industry & Functional Expert with operation and maintenance skills
Performance driven approach for analyzing the FM, AM, PPM,
Hanover, Close-out areas
Drones, BMS, DA Applications and IOT devices
• Efficient Energy Cost Monitoring & Reduction
• Reduction in the maintenance expenses
• Timely Start-up
• Efficient Spare Management
• Identification of hotspots which might lead to accident.
Conventional Challenges Efficient Way
• Identify and manage project handover issues and mitigating risks to ensure safe & timely start-up for revenue generation including effective Operational Readiness monitoring & tracking;
• Identify potential reduction in asset maintenance costs;
PE
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• Inability to determine core operational issues;
• Review not focused on
contract performance & FM
cost reduction;
• Not able to surface upon Contract performance
issues;
OB
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© 2019 Protiviti Member Firm for the Middle East Region CONFIDENTIAL – This document is for your organization’s internal use only and should not be copied or distributed to any third party.
OPERATIONAL READINESS, ASSET & FACILITY MANAGEMENT REVIEWS
27
KEY OUTPUTS
Drone Captures Defects in Assets and Poor workmanship
IOT based Building Facility Management
Internal Audit, Risk, Business & Technology Consulting
ADOPTING COMPREHENSIVE AND PROACTIVE APPROACH
© 2019 Protiviti Member Firm for the Middle East Region CONFIDENTIAL – This document is for your organization’s internal use only and should not be copied or distributed to any third party.
IDENTIFYING AUDIT AREAS ACROSS PROJECT VALUE CHAIN TO GAIN SYNERGIES
Initiate Plan Build Operate
Project
Conceptualizati
on & Initiation
Planning Procurement Engineering Operation and
Maintenance Construction
• Market Study
• Design brief
• Financial Feasibility
• Technical Feasibility
• Procurement Strategy
• Project Baseline Plan
• Procurement Plan
• Resource Deployment
• Procurement plan
• Design finalization
• Scheme design
• Detailed engineering
• Tender documentation
• Estimation &
Tendering
• Advanced works
procurement
• General works
procurement
• Construction
• Materials
• QHSE
• Finishing works
• Assembly and
commissioning
• Start up
• Operations
• Maintenance
• Documentation Act
ivit
ies
Audit Areas
• Feasibility Audit • Estimation Audit
• Governance,
Design, Schedule &
Cost Audits
• Procurement &
tendering Audit
Project Mgmt., QHSE,
Constr., Contract &
Payment Audit
• Handover, Close-
out, FM Audits
29
© 2019 Protiviti Member Firm for the Middle East Region CONFIDENTIAL – This document is for your organization’s internal use only and should not be copied or distributed to any third party.
ADOPTING HORIZONTAL & VERTICAL APPROACH ALIGNED TO AUDIT OBJECTIVES
Tendering &
Estim
ation
Pro
ject
Manag
em
en
t
Schedule
Managem
ent
Cost
Manag
em
en
t
Project-1
Horizontal Approach Vertical Approach
Project-2
Pro
ject
Revi
ew
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• Focus is on process and coverage
• Focus is on project objectives such
as timely completion of project &
within cost including any cost
recovery opportunity
30
© 2019 Protiviti Member Firm for the Middle East Region CONFIDENTIAL – This document is for your organization’s internal use only and should not be copied or distributed to any third party.
ADOPTING HORIZONTAL & VERTICAL APPROACH ALIGNED TO AUDIT OBJECTIVES
Cost and Financial
Management Procurement
Management Project Controls, Quality and
Risk Management
Project strategy,
Organization and Administration
Schedule
Management Project
Schedule Management
Project
Integration Management
Reporting &
Stakeholder Management
Human
Resources &
Labor Relations
Project
Estimating
& Cost Management
Financial
Management
Asset
Management
Procurement
Management
Project Scope
Management
Risk
Management
Regulatory and
Environmental
Health & Safety
Quality
Management
Information
Management
Project
Charter
Roles &
Responsibilities
Lessons
Learned
Project
Breakdown
Structure
Document
Management
Code of
Conduct
& Ethics
Recruiting,
Hiring &
Retention Labour
Relations &
Industrial
Action
Management Training &
Development
of Resources
Performance
Management
Taxation &
Duties
Financial
Management
&
Accounting Progress &
Other
Payments
Cash Flow
Management
Prime
Contracting
Contracting &
Purchasing
Contracting
Administratio
n
Materials
Management
Claims
Management
Scope
Management
Change
Control
Management
Design
Standards &
Specifications
Risk
Identification
Qualitative
Risk Analysis
Risk
Response
Planning
Risk
Monitoring
& Control
Quantitative
Risk Analysis
EH&S
Training Environmenta
l
Management
&
Compliance Occupational
Health &
Safety
Management
& Compliance EH&S
Reporting
Site
Security
Quality
Assurance
Quality
Control
Info.
Management
System
Information
Security
Progress
Management
Schedule
Change
Management
Schedule
Integration
Asset
Categorizatio
n
Asset
Register
Asset
Transfer
Budget
Revisions
Contingency
Management
Funding
Revision
Cost
Management
Trend
Management
Implementati
on
Management
Reporting
Governance
Protocols
Stakeholder
Identification
&
Communicati
on
Planning
Resource
Planning &
Management
Baseline
Estimate &
Budget
Corporate
Treasury
Management
Asset
Management
Strategy &
Planning
Procurement
Planning
Baseline
Scope
Development
Risk
Management
Strategy &
Planning
Policies,
Procedures &
Standards
Quality
Planning
Info.
Management
Process
Design
Baseline
Schedule
Development
Schedule
Reporting
Environmental, Health,
Safety & Security Reporting
Quality
Reporting
Risk
Reporting Cost
Reporting
Project-1 (Residential Tower)
Project-2 (Power Sub Station)
31
© 2019 Protiviti Member Firm for the Middle East Region CONFIDENTIAL – This document is for your organization’s internal use only and should not be copied or distributed to any third party.
IDENTIFYING KEY SKILLSETS REQUIRED AS PER EACH SPECIALIZED AUDIT AREA FOR GAINING EFFICIENCY
32
Key Skills Review Areas
1 Project Management / Project Controls
Project Reviews, Schedule Delay & Forensics Analysis, Cost To Complete Reviews, PMO,
Enterprise & Project Risk Management, Profitability & Cash Flow Analysis,, QHSE & EHS
reviews, Material Balancing, Productivity Analysis
2 Contracts & Commercial Estimation & Commercial Viability Review, Contract Performance & Compliance Reviews,
Claims & Variations Assessment, Investigation
3 Operations Operations & maintenance (O&M), Asset & Facility Management , Energy Management
4 Supply Chain Procurement Review , Logistics Review
5 Finance & Accounting Cost Accounting, Capital expenditure reviews , Revenue Assurance
© 2019 Protiviti Member Firm for the Middle East Region CONFIDENTIAL – This document is for your organization’s internal use only and should not be copied or distributed to any third party.
USE OF STANDARD FRAMEWORK, METHODOLOGIES & TEMPLATES TO OPTIMIZE AUDIT TIMELINE
Schedule Review Project Review Framework Risk Management
Cost Review Feasibility Review Commercial & Contracts
Review
33
© 2019 Protiviti Member Firm for the Middle East Region CONFIDENTIAL – This document is for your organization’s internal use only and should not be copied or distributed to any third party.
ADOPTING AN OUTCOME DRIVEN APPROACH
34
© 2019 Protiviti Member Firm for the Middle East Region CONFIDENTIAL – This document is for your organization’s internal use only and should not be copied or distributed to any third party.
USE OF TOOLS TO COVER WIDER SAMPLES & GAIN EFFICIENCY
35
Project Due Diligence Process Mining Drone Visualization
Primavera Tool Deltek Schedule Analyzer Monte Carlo Risk Analysis Tool
35
© 2019 Protiviti Member Firm for the Middle East Region CONFIDENTIAL – This document is for your organization’s internal use only and should not be copied or distributed to any third party.
USE OF TECHNIQUES FOR PERFORMANCE ANALYSIS
Duration Sensitivity Analysis Budget analysis & forecast cost at completion
Project different delay analysis techniques Cash flow historical performance and forecast
Critical Path and Delay Analysis
36
© 2019 Protiviti Member Firm for the Middle East Region CONFIDENTIAL – This document is for your organization’s internal use only and should not be copied or distributed to any third party.
LEVERAGING PROJECT DATABASE, BENCHMARKS & INDUSTRY BEST PRACTICES TO INNOVATE & ADD VALUE
37
Project Lifecycle Risk Library PMP Best Practices PMP Risk Model
Industry Leading Practice &
Benchmarks Project Controls Library
Internal Audit, Risk, Business & Technology Consulting
DISRUPTION IN FUTURE CAPITAL PROJECTS
© 2019 Protiviti Member Firm for the Middle East Region CONFIDENTIAL – This document is for your organization’s internal use only and should not be copied or distributed to any third party.
EMERGING TECHNOLOGIES IN CAPITAL PROJECTS
39
Risks
• Inability to source the right data
• Lack of assurance mechanisms
• Exposure to cyber risks
• Difficulty in filtering relevant information
from vast amount of data generated
• Lack of regulations
© 2019 Protiviti Member Firm for the Middle East Region CONFIDENTIAL – This document is for your organization’s internal use only and should not be copied or distributed to any third party.
EMERGING TECHNOLOGIES IN CAPITAL PROJECTS
40
40
Artificial Intelligence
reads BIM Model
3D Printing in
Construction Robotics in
Construction
Allocates works
to 3D Printing &
Robots
Instruction to Rovers &
Drones to monitor Quality,
Progress and Safety
Violation
Monitoring Quality Monitoring Progress Monitoring Safety
BIM Model
Updates Project Management Information
systems (PMIS)
Information stored
in Cloud
© 2019 Protiviti Member Firm for the Middle East Region CONFIDENTIAL – This document is for your organization’s internal use only and should not be copied or distributed to any third party.
FUTURE OF CAPITAL PROJECTS AUDITING?
41
Virtual
Auditor?
Data driven
Decision Making?
Continuous Risk
Assessment?
Auditing
Disruptive
Technologies?
Say good-bye to
rotational audit
plans!
BUSINESS
INTELLIGENCE?
DATA, CAN YOU
HELP ME?
Internal Audit, Risk, Business & Technology Consulting
THANK YOU
Internal Audit, Risk, Business & Technology Consulting
Q&A
© 2019 Protiviti Member Firm for the Middle East Region
This proposal contains confidential and proprietary information relating to Protiviti Member Firm for the Middle East Region and Protiviti Inc. The contents of this proposal including the information, methodologies, approach and concepts contained herein are confidential and are intended solely for the use by persons within the addressee’s organization who are designated to evaluate or implement the proposal. The proposal should not be shared with any third party or used for any
other purpose or in any inappropriate manner.
Contact Us;
Varun Kharbanda, Director – Real Estate, infrastructure & Capital Projects
Email - [email protected]
Mobile - +971-565099207
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