We are publishing a series of articles on various aspects of value assurance, specifically during the front-end loading phase of a project. Each article will be independent, but linked by the association with value assurance.
This second article in the series deals with the gate decision review process in value assurance.
By Herman van Heerden
Globally skilled human capital is in short supply, impacting the quality, cost and scheduling of project delivery. This situation is exacerbated as experienced personnel retire, while projects become ever more complex. The end result for some organisations can be the inability of their projects to meet the delivery expectations set out in the business case, which directly impacts the financial and reputational health of the business concerned. It is, therefore, important to have the appropriate gate keeping process in place, with supporting tools, processes and resources to protect against these increasing levels of risk and assist in enhancing project performance.
When the term ‘gates’ is used in a typical project stage-gate model, Wikipedia (2015a) describes it as follows: “Gates provide various points during the process where an assessment of the quality of an idea is undertaken”. ‘Quality of an idea’ comprises three main issues:
- Quality of execution: Checks whether the previous step is executed in a quality fashion.
- Business rationale: Does the project continue to look like an attractive idea from an economic and business perspective?
- Action plan: Is the proposed action plan and the requested resources reasonable and sound?
Gates have a common structure and consist of three main elements:
- Deliverables: What the project manager and team deliver to the decision point. These deliverables are decided at the output of the previous gate, and are based on a standard menu of deliverables for each gate.
- Criteria: Questions or metrics on which the project is judged in order to determine a result (go/kill/hold/recycle) and make a prioritisation decision.
- Outputs: Results of the gate review—a decision (go/kill/hold/recycle), along with an approved action plan for the next gate, and a list of deliverables and date for the next gate.
Value assurance (VA) on capital projects can be seen as the process of checking that projects make the right commitments to the business and then deliver on these objectives. Assurance provides an independent, objective view of project delivery with the goal of identifying issues early in a stage before they become major problems. When deployed at the right time, by the right people, using the right methods, value assurance gives confidence to project and business stakeholders that the right decisions are being made, and that projects are being delivered safely, on time and to budget.
The front-end loading (FEL) phase is when the owner needs to ensure that the opportunity that he wants to capitalise on is fully defined and specified and still remains viable (be it economically or whatever other measure is used). As the work progresses through the FEL stages, the owner project team needs to ensure that the project that is being developed stays focused on meeting the business intent and that the definitions/specifications produced are complete. If the project proves to be no longer viable, it should be stopped.
During the FEL stages it is expected from the owner project team to consider all alternatives, risks, internal and external influences, as well as all stakeholder requirements. This is required to ensure that by the end of FEL, an optimised proposal with acceptable risk is presented and approved by all stakeholders.
Failure to achieve approval leaves the project open to very costly delays and rework during the execution stage.
Gate keeping process
The purpose of the gate keeping process is to provide a final recommendation at the conclusion of a stage, such that an informed decision can be made by the mandated decision making body to continue with the project or not. If the decision is to continue, then under what conditions, and to agree on whether more resources should be allocated to the project for a next stage. The first four steps in the gate keeping process are shown in Figure 1.
Figure 1: Gate keeping process
Each of these is discussed in more detail below.
The main purpose of the consistency review is to ensure that the business case accurately reflects viability and economics. It ensures consistency of assumptions and approach across all projects of a company, in terms of the business case, technical and execution aspects, such that project portfolio optimisation can be done correctly.
The gate review process cannot proceed until is has been agreed that the basis of the business case is sound.
The stage deliverables are reviewed to ensure that they meet the required quality as per the stage definition requirements. The quality reviews should precede the gate deliverable readiness assessment.
Conformance to the quality requirements are indicated in the Value Assurance Report.
For the purpose of the quality review two main types of deliverables are recognised:
- Functional deliverables produced by the project team like the business plan, the operations plan, the engineering package and the project execution plan.
- Critical decisions made include for example site selection, technology selection, contracting strategy selection.
The required quality reviews would have been agreed as part of the framing and alignment process at the start of the stage.
Portfolio optimisation helps to strategically manage the project portfolio. It contributes to making the right investment decisions, optimising the value of the portfolio, and optimally allocating resources.
Gate Decision Readiness
Once the above three steps have been completed, the Gate Decision Readiness assessment can be done. The typical sequence is shown in Figure 2.
The review team considers the level of development against the agreed norms, any gaps and therefore risks associated with incomplete work, the quality of the final proposal and viability of the project to recommend whether the project can proceed, be put on hold, be recycled, stopped or changed.
Figure 2: Sequence of the gate keeping process
Value Assurance Report
The Value Assurance (VA) Report is the final step and consolidates and summarises the findings and conclusions from the four steps in the gate keeping process for the particular stage (refer Figure 1). The focus areas differ from stage to stage. In the prefeasibility stage the focus is on the appraisal of the business case; in the feasibility stage the focus is on the selection of the technology option and in the planning stage the focus is on defining the project execution plan.
VA Report Framework
The findings, conclusions and recommendations of the different VA sub-processes will be considered and covered in the value assurance report framework as per the following index:
- The gate review executive summary should reflect a clear, final recommendation by the VA review team whether the project should go ahead or not. In addition, the review team should express their opinion on the viability of the business case, technical case and project execution approach. The review team should give a high level dashboard summary of the soundness of all the processes carried out in the gate keeping process. Finally a list of the key project gaps, risks and issues emanating from the gate keeping process should be shown.
- The background to the project should at least contain a project overview and brief description of business objectives, project objectives and review objectives.
- More detail can be shown in the appendices of the report to substantiate the major findings of the review team.
Value assurance in the context of a project stage-gate process takes the form of structured assessments prior to key stage gates. The focus of assurance changes throughout the project life cycle, but its underlying purpose is to determine whether projects are delivering on their objectives at each stage for gate keeping purposes. The gate keeping process ensures that decisions are supported by risk management controls, and subsequently suggesting remedial steps, where necessary, to address the risks identified during the value assurance process.
Note that gates are not merely project review points, status reports or information updates. Rather, they are tough decision meetings, where the critical go/kill and prioritisation decisions are made on projects. Thus the gates become the quality control checkpoints in the process, ensuring that you do the right projects and also do the projects right. (Wikipedia 2015b)
Gates must have clear and visible criteria so that senior managers can make go/kill and prioritisation decisions objectively.
Wikipedia, 2015a, Phase-gate model – 3: Gates. Available on https://en.wikipedia.org/wiki/Phase-gate model Accessed on 15 June 2015.
Wikipedia, 2015b, Phase- gate model – 5: Effective Gating. Available on https://en.wikipedia.org/wiki/Phase-gate model. Accessed on 28 September 2015.