Today's electric power industry, like many others, is challenged by change. New residential and business communities demand utility access and delivery. Utility requirements in existing communities increase or decrease as populations shift. Even without these changes, utilities must maintain generation and delivery systems on a planned-project basis.
Established more than 100 years ago, Allegheny Power (Greensburg, Pennsylvania, U.S.) is certainly no stranger to these challenges. Today, Allegheny Power provides low-cost energy to 3.5 million consumers, plus thousands of commercial and industrial customers, in an area that is centered in western Pennsylvania and spreads into parts of Maryland, Ohio, Virginia and West Virginia.
Allegheny Power underwent a major corporate restructuring in 1996 that reduced its work force by nearly 25% — from about 6000 employees to 4600 — as it prepared for the deregulated, competitive business environment looming on the horizon.
|Item||Total Cost||Annual Cost*|
|Initial Primavera software: PP (15), PR (50), PA (5)||$40,000||$4,000|
|Primavera software maintenance and support||NA||$19,100|
|Development by consultants: research, reports and training||$52,000||$5,200|
|* Annual cost assumes an overall system life of 10 years before a major changeover to a new system occurs. It does not include cost for internal AP development (core team, estimating system updates, interfaces and DWH reports.|
When the industry was indeed deregulated, Allegheny Power was no longer restricted to the generation, transmission and distribution of power. The utility could now compete competitively for projects in nontraditional areas — such as design, procurement and construction services — in the open marketplace.
Adapting to the New Environment
The result of restructuring, however, was a consolidation of various groups and an increased number of projects assigned to the remaining groups. Allegheny Power became motivated to focus on improving project controls and realized it needed to better align its project goals with its corporate goals: tighter cost control and cost reductions.
So Allegheny Power implemented several initiatives to position its restructured company for success in the deregulated industry. The initiatives included:
Centralizing the project management system for the Engineering and Construction Projects Group (E&C).
Setting companywide standards to put the company on common ground regarding desktop computers.
Implementing state-of-the-art design software, including: Computer Aided Design & Drafting; Computer Aided Protection Engineering; Current Distribution, Electromagnetics, Grounding & Soil Analysis; and Power Line System Computer Aided Design.
An intuitive menu-driven estimating system that generates complete cost estimates or bids based on input from team members.
Allegheny Power also deployed other initiatives such as the creation of a customer-service call center, centralizing functions formerly performed in division offices, and a data warehouse, or repository, for all corporate financial and accounting information.
Within just three years of the initial restructuring, Allegheny Power's commitment to success resulted in a 44% revenue increase, about 31% over the industry average.
Better Project Control
With the continued mandates to do more with less and to use every available resource to its maximum, the ability to manage the entire portfolio of programs — from the executive level down to the individual project level — became a priority objective. To reach this goal, E&C decided to pursue a more advanced project management software solution.
|Category||Savings per Average Project|
|Cost ($)||Time (man-hours)|
|During project initiation: No real savings as projects received from customers must be listed in some type of system (MS Access or P3e).||0||0|
|During project planning: Team leader's time saved using various templates available to develop a project baseline; also time saved in mapping the project cost created in company estimating system to the P3e budget resulting from new alignments between the two systems.||$350||4|
|During project execution: Team leader's time saved in mapping the actual project costs collected in company data warehouse into the P3e system due to new cost accounts set up in P3e that align with company corporate accounting; also time saved in analyzing data for variances and preparing progress reports via P3e reports rather than MS Word.||$850||10|
|During project closeout: Team leader's time saved summarizing, analyzing and reporting the project cost and schedule at completion, the result of having all data in one central location.||$350||4|
|During management of all departmental projects: Management's time saved by using the P3e system to track project goal attainment rather than duplicated data entry in MS Access database; also time saved on assigning personnel by using resource profiles.||$250||2|
|Total of all phases of an average project||$1800||20|
|Note: The costs listed represent labor savings, including the applicable payroll additives and overheads.|
After an intensive pilot run in April 2001, E&C implemented Primavera Project Planner for the Enterprise (P3e), an enterprise-level project management system. Primavera Systems' P3e replaced Primavera Project Planner (P3) and Primavera SureTrak, a client/server workstation-based system originally implemented with the 1996 restructuring. P3e enabled the group to view schedules and detailed project information to execute and manage projects, while providing management with the intelligence to make sound business decisions.
Because strong project oversight and resource control is essential to project efficiency, a goal of E&C is to define a profile of every man-hour. This helps ensure that the right skills are being assigned to the appropriate activities. Resource profiles allow the group to visualize and control resource allocation and usage to balance the department's workload. It also helps in determining if outsourcing resources are required.
P3e reveals which projects are under- or over-allocated so employees can be appropriately reassigned. On a recent large-scale project, for example, E&C was able to determine before the project started that its internal resources were fully scheduled, prompting it to outsource the work.
Issues can be encountered during the execution of a project that change its scope, schedule, resources or costs, and ultimately the overall project plan. In these instances, the program has risk and threshold features that alert the project manager of problems so that a series of alternative (or “what if”) scenarios can be developed and evaluated. For example, project activity data can be changed to see how it affects not only the individual subproject but also the overall project schedule, so a more appropriate course of action can be initiated.
A 10-to-1 Return
The migration to P3e enabled E&C to manage an increased volume of projects (now more than 300 annually) with fewer resources. P3e helped Allegheny Power gain tremendous value through improved time efficiencies and cost-effectiveness across programs. E&C also realized valuable timesavings in project planning, execution and reporting. The net effect was that many small improvements throughout individual projects have added up to big improvements at the overall program level.
How big? Even before a full year of experience with the new program, E&C estimated a reduction of 3000 project-related man-hours, even while planning and executing an increased volume of projects. Based on the data in the accompanying tables, the cumulative savings using P3e for project management on 25 large and 100 medium projects executed in a typical year is projected to be US$270,000. The additional 175 small projects not included in the tables assume an additional savings of about $30,000 (based on an estimate of two man-hours saved per small project). Thus, the projected cumulative annual savings can be rounded up to $300,000.
The cumulative costs of using P3e for project management on those same 300 projects is calculated to be $28,300 annually over a 10-year projected useful life of the system Rounding up for miscellaneous items, additional costs could bring the total to $30,000.
Therefore, the dollar-value ratio of the benefits, or savings accrued, versus the expenses incurred is projected to be 10-to-1:
Savings / Costs = $300,000 / $30,000 = 10/1
|100 Medium Projects||25 Large Projects|
|Cost ($)||Time (man-hours)||Cost ($)||Time (man-hours)|
|Total savings per individual project||$1800*||20*||$3600**||40**|
|Total savings on each project group||$180,000||2000||$90,000||1000|
|Note: The costs listed represents labor savings including the applicable payroll additives and overheads.|
|* Based on the data in previous table for average individual project.|
|** For this rough study, assume that the data are scaleable. A valid assumption is that a large project has at least twice the savings as a medium-sized project.|
|Cost ($)||Time (man-hours)|
|Total savings on all projects||$270,000||3000|
Project Examples with ROI Analysis
E&C addresses the continued maintenance and expansion of Allegheny Power's power grid lines and substations. Typical projects may call for replacing or adding a transformer, or adding a line terminal to a substation. A major project could entail installing a new high-voltage transmission line over a few miles or building a new substation. The following are a few key examples of how P3e contributed to the success of a project.
The Riverview-Corner Line Project. P3e was first put to the test in September 2000 with the Riverview-Corner Line. The project called for the rebuilding and reconductoring of 7.1 miles (11.4 km) of 138-kV wood H-frame transmission line, a capacity upgrade to maintain system stability under certain outage conditions. While the project plan was completed on schedule, the team encountered a major obstacle when the Riverview-Corner Line had to be put back into service to accommodate an unrelated major project, thus potentially delaying the reconductoring work.
Using cost-schedule “what if” analysis, E&C determined that by paying the contractor for four weeks of overtime, the project could be completed and in-service before the occurrence of the interfering project.
The Riverview-Corner Line Project was finished three months ahead of schedule with the total actual cost 3% below the original budget. Completing the project early delivered savings that offset the contractor's overtime.
The Sand Fork Substation Project was E&C's first major test for P3e. The scope of the project was to construct 1.7 miles (2.7 km) of 138-kV transmission line, a 138/12.5-kV substation, and two distribution circuits to provide service to a new federal prison in Glenville, West Virginia, U.S. The challenge was to complete the project before the inaugural opening of the prison. Again, the project design was completed on schedule, but like before, an obstacle arose.
While assessing the environmental impact of the project, the U.S. Fish & Wildlife Service indicated that a federally listed endangered species, the Indiana Bat, might be located within the line route. If the utility could not acquire and clear at least 13 acres (5 ha) of the 30 acres (8 ha) by March (the end of the species' hibernation period), the project's completion date would have been in serious jeopardy. Additionally, if these acres could not be cleared in time, a “mist net study” would have been required before clearing could begin, delaying the project several months or more if bats were actually found.
The team decided on an aggressive approach, acquiring and clearing 13 acres in the narrow three-month timeframe. Using the software's scheduling and resource-allocation features, while keeping focused on the most critical aspect of the project, the completion date, E&C was able to mitigate the problem and the project proceeded smoothly. Construction was finished in September 2001, 16 days ahead of schedule and 1.3% under the original budget.
The Mill Run Windmill Project was E&C's first non-utility generator interconnection project planned and executed in P3e. The scope of the project involved the construction of a 25-kV metered interconnection substation to tie the Mill Run Windmill LLC wind-powered generation into the Allegheny Power grid near Mill Run, Pennsylvania.
The project engineering was completed one month behind schedule and no isolated obstacles impeded the project's progress. Instead, all of the typical minor obstacles surfaced: permit delays; encountering more rock than anticipated during substructure work; not having enough Allegheny Power electricians available to man the construction crew; and data problems related to metering via supervisory control and data acquisition (SCADA).
Despite all of these obstacles, construction was finished in September 2001, three days ahead of schedule. The total actual cost of this project was 2% over the original budget, but this was because the original in-house estimate was too low. However, when factored into templates for future applications, this became a valuable “lessons learned” on how to make better estimates when using internal crews.
The South Bend Project. The largest P3e-managed project to date had a multimillion-dollar budget. The South Bend Project consisted of the construction of a 500-kV line and a three-breaker, 500-kV metered ring-bus interconnection substation to tie Dominion Energy's 650-MW CT generation into the Allegheny Power grid near South Bend, Pennsylvania. The project represented a major challenge because Allegheny had not designed and constructed an extra-high-voltage (EHV) substation since the mid-1980s. The project design was completed in April 2001, a few days ahead of schedule.
The challenge of this project was a result of the long lead time for the manufacture of the EHV equipment. Although groundwork ensued prior to finalizing the initial agreement and issuing the project plan, only 11 months were left to complete a project of enormously large scope, extremely high cost, excessively stretched resources and an exceptionally tight schedule. Additional unscheduled structural work and rock excavation pushed the actual cost 6% over the original budget. Still, construction was finished in December 2001, two months ahead of schedule. This was made possible by having a reliable vehicle for collecting, monitoring and reporting project data and progress, and knowledgeable resources that were committed to getting the job done right.
There is no single value that identifies the gain of having a project completed on time or ahead of schedule because E&C's projects are so variable in nature. However, cumulative timesavings do yield a corresponding gain in productivity. Having a project completed ahead of time lowers the overall time-related overhead costs that accumulate on projects, such as those for administration, support, materials storage, financing and interest. And one project's cost under-run (or savings) can help offset another project's overrun. Thus, E&C can better manage the overall department budget. Over the long term, this helps E&C to be more cost-conscious and more focused on its corporate financial goals, which was the group's goal in upgrading to P3e.
Robert Slebodnik is the manager of the Engineering and Construction Projects Group at Allegheny Power, an Allegheny Energy company. He is responsible for planning, directing and supporting the activities and personnel related to engineering and constructing various transmission and distribution projects. Slebodnik has 27 years of experience in the power industry, including 24 years as a transmission substation design engineer and team leader. He holds a BSEE degree from the University of Pittsburgh, and is a licensed professional engineer and a member of the Institute of Electrical and Electronic Engineers (IEEE).
Methodology Management: Templates that Track and Teach
One key to ensuring repeatable project quality in an on-going multiproject environment is to combine project and process management with the culmination of years of experience. With P3e, this is accomplished through the use of methodology management.
The Methodology Manager tool in P3e enables the user to write and store methodologies or project plan templates in a central location where they can be shared as project standards throughout the organization.
Because many projects at Allegheny Power are 80% similar, the use of templates has become an integral part of the project management process. The Engineering and Construction Projects Group (E&C) has developed 25 basic templates from which it can create an unlimited number of actual project templates or methodologies. Engineering teams can select a template to serve as the “skeleton plan” for a new project, then customize that plan to the particular project, rather than create a new plan for each project. This is key in expediting project planning. By using the templates, projects that once took several days to design are now ready in a few hours, and those that may have taken several weeks to design are prepared in only a few days.
Templates also help the group maintain best practices. E&C continually improves and refines its stored methodologies. Lessons learned from completed projects are incorporated into templates during the project closeout stage. The in-house estimating lesson learned during the Mill Run Windmill Project, for example, was implemented into the group's estimating system to refine and improve its estimating and bidding procedures and therefore its competitive advantage. This is particularly valuable in bidding for new contracts in the deregulated open marketplace.
These methodologies also have become valuable teaching tools. For an engineer who is new to the industry or new to the company, the templates provide the information needed to master Allegheny Power's project protocol and workflow. This is an invaluable way to teach people the basics of project management, to visualize how E&C's projects progress, and how to use the tool as a team member and eventually a team leader.
This is especially important in today's utility company climate. In the recent past, the average age of employees had been increasing as a result of hiring restrictions, but that trend has reversed, and the average age is decreasing as older workers retire and are replaced by younger workers The knowledge that a mature workforce has developed over the years must be captured and shared with new, younger employees. Often, this must be done in a short time, and having good engineering standards and project methodologies will go far in expediting this agenda.