Page 203 - Global Project Management Handbook

9-8 COMPETENCY FACTORS IN PROJECT MANAGEMENT

to produce a viable project (Miller and Olleros, 2000). The results of the IMEC clearly
indicate that the strategic shaping process is the most critical aspect of the management of
major projects. If this process produces a satisfactory result, the project has considerable
chance of success.

The Design and Execution Period

In most major projects, a time can be identified when most, if not all, the pieces come
into place and when significant and irreversible commitments are made. This is typically
the time when major contracts are signed and financing is secured. This point marks the
end of the strategic structuring phase and the beginning of the design and execution
phase.
From this point, the management of the project is more in line with conventional proj-
ect management theory and practice, which does not mean that it is issue-free but that the
issues and their management are more in line with well-established project management
practice.

Commissioning and Ramp-up Period
Ramp-up is the moment when assumptions become reality and revenues flow in as
expected or not. At the time the artifact is put into service, many projects face severe
crises because revenues are unable to cover capital and interest payments. By assuming
more responsibility for the operational success of their projects, many have discovered
that building the artifact is only part of the task to be mastered and that other, sometimes
more challenging tasks are associated with early operation after delivery.
Under traditional procurement practices, the functioning of the artifact after com-
missioning has been of little or no concern to those responsible for design and delivery.
However, more and more often, those executing major projects are taking on the
responsibility for the effective operation of the projects in service. In concession and
BOT projects, the project developer and builder also have the role of owner and opera-
tor, at least for several years. In these types of projects, the financial viability relies on
early positive market reaction. Transportation infrastructure projects that rely on toll

revenues and projects that depend on demand in a market that has historically been
cyclical or unstable, such as the energy and natural resource sectors, are examples of
capital-intensive projects that are vulnerable to low demand in the period immediately
following commissioning.
In many transportation concession projects built over the last 15 years, usage levels
have been lower than forecasted, particularly during the first few years of operations.
Users often take time to adopt the new service. Early market responses to this type of ser-
vice in areas where tolls have not been an established practice are very hard to predict. In
extreme cases, the shortfall in early revenues has lead to insolvency. Many times the state
has had to step in because of the bankruptcy of the concessionaire and the obvious social
value of operating the artifact.
In many infrastructure projects, problems have come from adjacent systems. In some
instances, the feeder systems that other parties were committed to install were not fin-
ished as planned. In other situations, a competing system was built alongside the conces-
sion. In yet other situations, governments have reneged on their commitments because of
protests by pressure groups. In some cases projects have been taken over by the state
because the project was too successful and the concessionaire was seen as making unrea-
sonable profits from a public service.