As Saudi Arabia implements its new PMO law, representatives from the advising board met in Dubai to explain how the new legislation will help one of the world’s largest construction markets overcome its delivery challenges
As a global best practice framework, the Project Management Office (PMO) is an integral, albeit often overlooked element of project management.
While there are tangible benefits, the concept itself can at times be quite abstract.
With a near two decade history globally, in its current form, the PMO is a combination of consulting, mentoring and managing deliverables, while establishing a culture of compliance, cooperation, efficiency and sustainable working.
Around 18 months ago, following several years of discussion, Saudi Arabia made a commitment to implement a new PMO law, which could be applied to all its infrastructure projects with a view to maximizing efficiency and minimizing overruns in project costs and timelines.
But the kingdom couldn’t achieve this alone and so turned to key private sector stakeholders who formed a working group which advised on drafting the law.
Three representatives from that group (see box) met in Dubai last month to explain the PMO; its implication on private sector construction companies; and the potential domino effect it could initiate around the region.
The PMO is designed to be conducive to Saudi Arabia’s unique challenges – centrally controlled governance, a challenging and complex terrain and a seriously ambitious project pipeline, in the face of declining oil revenues, a growing population of young nationals and ever growing requirements for social and civil infrastructure.
Development of the PMO
Saudi Arabia is the biggest projects market in the region and has been so by a long way for a long time. But it has project delivery challenges, especially relating to mega-projects, many of which can be addressed though a PMO.
CH2MHill country manager for Saudi Arabia, Amer Khan, explains: “That was the genesis of this idea and with the delivery method that has been established over the last 15 to 20 years, across the globe. This will be an effective implementation method for the country, particularly due to its size and complexity. It also recognises an opportunity for centralised monitoring and control, which is conducive to the kingdom’s style of government.”
In 2014, a study by PwC concluded 95% of projects in the Middle East are delivered late and often over budget and this, along with achievable efficiencies in cost, planning and waste, has in part inspired the PMO law.
Continuity of best practice and standards has also played a part, as Nader Reslan, industry sales director for ME transportation and local infrastructure at Bentley Systems, explains.
He says: “Most of the projects come with very advanced processes but once the project is delivered they go for the next phase or project and have to start all over again. There is a lack of skills in the local industry as well as a growing need for those skills to be captured and for people to learn from the previous challenges.”
It is the intersection where this lack of continuation meets the scale of projects, at which problems begin to occur.
Referencing Riyadh Metro – a project he describes as “putting veins in a city once it has been built” – David Clifton, regional development director, Faithful + Gould, notes the lack of continuation also exists between municipalities, rather than simply between project stakeholders.
“Saudi Arabia is very centrally planned, however each central department has its own agenda and the fact is, that sometimes can be viewed as opaque. In countries like the UK and US, these models are established and understood and they actually help deliver. It might delay things for a while but overall it provides transparency.”
He adds: “What you will see with PMO is set parameters you can move within but no flexibility beyond that, so municipalities have to stick to a broadly similar set of frameworks, but we still need to see that brought to fruition. It’s a very different world for example between Jeddah Metro, Damam Metro, and Riyadh Metro, which is essentially like building two thirds of the London Underground from scratch in a city that already exists.”
The potential impact
PMO is not a new idea, but it can be revolutionary.
In essence it is a mechanism for feasibility and viability; it is a check and balance process to avoid necessary projects becoming runaway ideas, and it is a stringent tool in keeping the functional functioning.
Khan says: “PMO can help the decision makers of the country to assess and prioritise projects in an effective way. In terms of the oil price, I think this is where PMO can actually help the country because it will force itself to look at the programmes and find more efficient ways to achieve functional objectives while using technology to make things smarter.”
Echoing his point, Clifton explains: “We are living in a new world and while there is money coming in, everything is fine, but at other times you have to think of the functionality of the asset, rather than going purely on aesthetics. It may not be Zaha Hadid territory but the functionality can still be there.
As Khan says: “Being bigger isn’t better, being smarter is better. More emphasis on the economic impact of a project and creating smarter solutions through technology, procurement or collaboration, is better.”
In some corners there are concerns PMO could trickle down to the private sector balance sheet as procurement procedures change; if projects are suddenly reigned in, re-structured, or cancelled all together, the effects could be wide-reaching.
But the outlook is far more positive.
Advising that larger projects are currently under review, Khan predicts things will become clearer at the end of Q4 and beginning of 2016, in light of revised budgets and it’s a point Clifton and Reslan echo.
Clifton says: “It takes time to measure the impact and the breakeven oil price conversation we will have is that Saudi is going to look at [new] ways of raising funding for these projects. But when you talk about liquidity you will find liquidity wants transparency and governance and money will flow with these new measures in place. If the same systems are in place here as in the UK, for example, it will generate more business and talent.”
Khan echoes: “The terms and conditions are discussed in so many conferences, including how government procurement needs to be updated. The key terms are always transparency, fairness; that is absolutely key to our industry to allow the Saudi government to attract the best talent and providers, in order to achieve what it wants to.”
Technically speaking
In tightening up processes and procedures, technology will have a key role to play, specifically BIM which is set to enjoy new found applications under new working processes, both during and after construction.
As Reslan says, construction is five to ten years maximum, but the asset lifecycle could be up to 70 years; which is part of why BIM must become standard. Its implementation elsewhere has brought about stronger project returns, through efficiency and effective planning.
Speaking as a civil engineer, he says: “Working smarter means phasing projects and at the end of each phase assessing the success of the previous phase. To be frank, we haven’t always been as smart for example as the aviation industry. For some reason construction projects happen in a much more flexible way and then to increase the pressure on the project schedules and cost of these, reduces efficiency further.
“These observations are why governments in other countries are so advanced. The standards they work to, to create and handle information over the course of a project, are what we need to adopt. This isn’t a case of imposing, there is an objective here. If it is properly done everybody will see the benefits. Digital infrastructure isn’t just a 3D model, it’s everything behind that.”
The issue is, who takes the lead; should this be pioneered by the consultants or sponsored by the government?
“We are wondering if having an executive or steering committee can assist in that and while that is happening we are seeing that although construction is about building an asset, while we are doing that there is a lot of information and data created and we need to think of the best way for that to be controlled,” he responds.
Legacy
While the disparity between project stakeholders and departments to date, not to mention the very nature of the region’s “bigger and better” mindset, has been rooted in legacy, the take away from a PMO implementation is about creating a different type of legacy.
While PMO has existed in Doha, Dubai and Kuwait, it is expected the entire GCC could benefit from what Saudi Arabia is about to embark upon. The GCC-wide rail project is certain to become the first pan-region project for which PMO could be implemented, should other states choose to adopt it at the same level.
Khan says: “We know countries tend to learn from each other in this region and being GCC there is opportunity for collaboration anyway, as they do with trade, security and other aspects of governance. So there is no reason why similar initiatives won’t be rolled out elsewhere.”
Reslan adds: “The best thing about this PMO initiative is that once it is properly established we will have all the system to support it in areas like Kuwait, Dubai and Doha. I don’t see it being observed at a federal level right now but it is being recognised at the highest level and once it is being implemented it won’t just be related to a specific project or asset, like the metro. My observation is that’s fine but it’s better implemented across the industry, and not just applied to specific projects.
“It’s the more intelligent way of handling building information management and when that happens it makes it much easier when we all sit together and we all have very similar and accessible rules,” he adds.
As it improves the sustainability of projects, PMO could also boost nationalization efforts in the kingdom, as Saudi Arabia’s young engineers find opportunity to be involved in new areas of a project lifecycle.
And the working group of private sector advisors, on the back of recent success, will use their new relationship with the government to keep other industry issues at the forefront of government thinking, including labour conditions, health and safety, worker welfare and sustainability.
Although oil revenues have nosedived and GDP will take another hit at the end of this year, Saudi Arabia isn’t, in context, in financial trouble and the PMO law is not a knee jerk reaction to such. However, it does need to work more efficiently, not just for the sake of its own future finances but in order to attract investment moving forwards.
The effects of that on the private sector are yet to be felt. The bank of Saudi Arabia is under new management now, but it is far from closed and as long as the pipeline remains as buoyant as it has been, it is likely to be business as usual.
Clifton concludes: “Rationalising projects doesn’t necessarily mean cuts, it just means phasing things differently so we aren’t looking to do everything by tomorrow morning, but we are looking to create efficiencies and adjusting the balance sheets. That rationalization is about the economy moving forwards.
“In general I think this will be an incredibly positive step forward and there are many other steps to take in order to facilitate this but it’s a step in the right direction. Now it is time to do the work and there is a lot to be implemented and many challenges to overcome.”