Organisation & Governance

Organisation & Governance Requirements

for a Civil Infrastructure Project
Lecture 1
Prepared by Peter Bishop C.P.Eng.

421-502 Engineering Project Implementation

Governance & Organisation 1

Definitions:
Governance is the process of managing & controlling a
project with proper checks & balances at all stages.

Who will
approve this
pipe
connection ?

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Governance & Organisation 1

Definitions:

The governance process must take into account the

requirements of all key stakeholders to ensure that
the project delivers optimum outcomes including
those of the project owner.
We will incorporate
your requirements
into the approval
process

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Governance & Organisation 1

Definitions:

The primary stakeholder is the project owner & one of

its objectives is to ensure that the project is accepted
by key stakeholders. (accepted by, not
necessarily acceptable to)

They havent
used our good
idea !!

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Governance & Organisation 1

Establishing Good Governance:

The Owner (Project Manager) can initiate the

governance process by setting up an appropriate
organisation structure involving relevant
stakeholders.

The governance (managing & controlling process) is

superimposed by defining the relationship between
participants (stakeholders) in the proposed
organisation for project implementation;

This relationship can be a defined and applied by

law, by contract or by mutual agreement;
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Governance & Organisation 1

Statutory
obligation

Informal
Obligation

Owner/Principal

External
Stakeholders A

Principal
Designer

Construction
Contractor

Specialist
Technical
Advisors

Suppliers &
Sub-contractors

External
Stakeholders B

Construction
Superintendent

Individual
contracts

Accountant

Design
Reviewer

Insurer

Lawyer

Banker

Typical Contract Organisation for a Project

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Governance & Organisation 1

Stakeholders
Owner/Principal &
Project Manager

Owners Advisors

Contract
Superintendent

Principal
Designers
Manager

Construction
Contractors
Manager

Specialist
Technical
Advisors

Suppliers &
Sub-contractors

Conventional Project Management Organisation:

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Governance & Organisation 1

Stakeholders
Owner/Principal
Banker

Insurer

Accountant

Lawyer

Independent
Auditor
Principal
Designer
Alliance
Agreement

Sub-Alliance
Partners

Owner/Principal

Construction
Contractor

Project Manager

Specialist
Technical
Advisors

Suppliers &
Sub-contractors

Alliance Project Management Organisation

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Governance & Organisation 1

Governance Control Measures:
The governance process can be used to apply mandatory
requirements or discretionary requirements. For example:
A contractual obligation is a mandatory form of
governance;
A statutory obligation is a mandatory form of governance
such as environmental legislation, or OH&S legislation;
A Steering Committee or Community Reference Group can
provide opinions that are used to provide confidence that the
Project direction is generally satisfactory.
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Governance & Organisation 1

Governance Controls :

Direct
Approve
Certify
Endorse
Recommend
Check
Review
Advise

Increasing Power of Action

The governance process is provided by

participants having powers or authorisations
within the organisation to:

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Governance & Organisation 1

Governance Controls (contd) :
A direction is a binding and high level control measure
reserved for the most impactive issues during
implementation. (Board of Directors).
Approval is the most powerful process in the
governance arrangement & is reserved for major
financial & technical gateways during implementation.
Certification is a powerful control involving a
professional signing off (personal or corporate
liability) that a process or outcome complies with
contractual or statutory obligations.
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Governance :
It is important to include governance gateways along the
delivery path of the Project.

Why ?
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Impacts of Change During Project Development & Project Delivery
6
Ability to make a
change to the
project scope

Degree of Impact

0
Strategy or
Pre-feasibility

Feasibility

Business Case

Procurement

Construction

Commissioning

421-502 Engineering Project Implementation

Governance & Organisation 1

Impacts of Change During Project Development & Project Delivery
6
Ability to make a
change to the
project scope

Cost to make a
change to the
project scope

Degree of Impact

0
Strategy or
Pre-feasibility

Feasibility

Business Case

Procurement

Construction

Commissioning

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Governance & Organisation 1

The time needed to exercise the governance controls
can be time consuming and may slow down the
implementation by having too many gateways ;

Request

Review
Comments

For
Approval

Recommendation

Approval Bottle-neck

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Governance & Organisation 1

Delegation:
This can be improved by delegating the powers
(authorisations) to lower levels in the organisation.
The delegated powers may be to certify or approve
matters up to a certain value, risk level, or complexity.
The delegation may also be to empower less
experienced personnel to review, check and recommend
certification or approval.

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Governance Action Examples

Authorisation Above $1M or

High Risk Level

Authorisation below $1M or Low

Risk Level Delegated to:

Direct:

Owner's Board of Directors

Owner's General Manager

Approve: Example 1, Change of Project

Scope

Owner's General Manager

Project Manager

Approve: Example 2, An increase in the

depth of foundations

Construction Manager

Senior Engineer for Foundation Area

Approve: Example 3, An extension of time

to a critical program activity

Contract Superintendent

Superintendents Representative

Certify: Example 1, Contractors monthly

payment from the Owner

Contract Superintendent

Superintendents Representative

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Governance Action Examples (contd)

Authorisation Above $1M or

High Risk Level

Authorisation below $1M or Low

Risk Level Delegated to:

Endorse or Recommend: Example 1, The

design of a crane foundation.

Contractors temporary works

designer.

Sub-contractor responsible for crane

supply and erection.

Endorse or Recommend: Example 2, A

change to the project cash-flow.

Project Construction Finance

Manager

Site Cost Engineer

Check: Example 1, A claim from a

Contractor for extra costs from the Owner

Superintendents
Representative

Site Engineer

Check: Example 2, A change to the quality

standard of material.

Chief Design Engineer

Senior Engineer for each discipline.

Review, comment & advise

High Credibility Specialist

Recognised Specialist

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Governance & Organisation 1

Governance for External Stakeholders:

The lecture about stakeholders describes how to

determine the importance of particular stakeholders
in the organisation. based on a simple risk
assessment (mapping) process.

Using the stakeholder map and the implementation

work breakdown structure, the organisation can be
developed to engage the stakeholders to the degree
warranted by their importance to the achievement
of the Owners project objectives.

The governance for internal stakeholders is usually

more definitive than for some external stakeholders.
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External Stakeholders:
The Project Owner may wish particular external
stakeholders to review and comment on some proposed
decisions.
Governance can be applied to this involvement by
forming the stakeholders into a "Steering Committee
that may represent several interest groups.
The Steering Committees decisions may have
sufficient weight to influence project decisions or even
the direction of the project.

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External Stakeholders (contd):
The comments from an external stakeholder may be
taken by the Project Owner as an opinion to be
considered on its merits and adopted or not based on a
judgement of associated risks and benefits.

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Conflict of Interest:
Individuals may adversely affect project implementation
because of personal or corporate interests that are different
from those of the project organisation or different from those
of others in the organisation.
The organisation and governance arrangements must avoid
conflicts of interest and they must include methods to manage
conflicts of interest if they arise.

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Conflict of Interest (contd):
Conflicts of interest are dealt with at the time of entering
into a contract arrangement (contractual obligations);
Less rigorous agreements with committees or advisors
( voluntary members particularly) are less explicit in the
conflict of interest obligations.
Typically committee members will be asked to sign a
confidentiality agreement and a conflict of interest statement.
Actions by organisation members may not show a blatant
conflict of interest but behaviour may adversely influence
others in the organisation.
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Documentation of Governance Arrangements:
To implement effective governance, the roles and responsibilities
of all members of the organisation must be clearly documented,
including the relationship between each.
The project management plan must include:
roles and responsibilities;
Authority levels;
Dispute resolution method;
Reporting obligations.
Reference documents (contracts, agreements, statutes)

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Governance Role of the Professional Engineer:
As a professional Engineer, you may be operating in a project
organisation as an employee of the Owner, or as an employee of
one of the entities participating as a service provider or as an
external stakeholder.
Your employment conditions will include obligations to your
employer including respect for confidentiality and notification of
any conflict of interest risks.
Project- specific responsibilities may be added to your employee
obligations.

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Governance Role of the Professional Engineer:
Stakeholders **
Owner/Principal &
Project Manager

Owners Advisors

**

**
Contract
Superintendent

**
Principal
Designers
Manager

Construction
Contractors
Manager

**

**

Specialist
Technical
Advisors

Suppliers &
Subcontractors

**

**

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Professional

** Engineer

Governance & Organisation 1

Governance Role of the Professional Engineer:
In all roles in the organisation you will be expected to behave
ethically as an individual professional engineer.
I am not
a
Professional
Engineer

End of Lecture 1

421-502 Engineering Project Implementation