World Business and Economic Analysis
World Business and Economic Analysis
Sena Gbedemah, Delay and Project Governance expert for Ankura in Saudi Arabia, outlines how good project governance can help to avoid common pitfalls and ensure optimum project performance.
As the Kingdom of Saudi Arabia embarks on some of history’s most ambitious construction programmes, effective project governance is essential to success. Gigaprojects are so-called for a reason: everything is supersized, from the scale of the developments to the pace of delivery, not to mention the budgets.
However, the greater the ambition, the higher the stakes. With the world’s eyes watching, KSA must uphold its reputation as well as protect the $3 trillion it has dedicated to realising Vision 2030, its socio-economic restructuring plan.
Why projects fail
Ankura’s expertise in project governance and acting as delay and quantum experts in arbitration and litigation on capital projects has helped hundreds of clients turn around projects and resolve disputes.
This observation is confirmed by countless thought leadership articles, as well as the findings of enquiries following the failure of large public projects.
For example, the UK’s National Audit Office cited a lack of project governance, amongst other factors, for the failure of the c. $20.6 billion London Underground PPP contracts.
Governance defined
What do we mean by governance? Project governance has developed from the broader concepts of corporate governance. The Association of Project Management defines governance as: “The framework of authority and accountability that defines and controls the outputs, outcomes, and benefits from projects, programmes, and portfolios.”
Zooming in
We can split project governance into four areas:
1) Alignment of the project portfolio with the organisation’s profitability, customer service, reputation, and sustainability objectives. We have seen, for example, that NEOM has embedded its objective of creating a new model for sustainable living by specifying that it will be powered entirely by renewable sources.
2) Project sponsorship is the integration of project objectives with the organisation’s strategy. Project sponsors develop the business case and scope of the project, report progress and issues to the board and obtain authority and/or decisions.
3) Project management effectiveness, i.e. a team’s ability to deliver a project. This depends on having experienced and competent personnel and equipping them with the right resources, processes and management systems, such as planning, cost, risk management, and change control systems.
4) Reliable and timely disclosure and reporting by project management and the supply chain. With a regime of timely disclosure, the board will be able to make appropriate decisions, like authorising additional funds for changes and claims to the project.
Introducing giga-governance for gigaprojects in Saudi
The question for gigaprojects is not whether but how to embed the four elements of project governance throughout the organisation and the supply chain.
The good news is that there are plenty of frameworks for project governance. The Association for Project Management’s (APM) ‘guide to governance of project management’ is a good start.
The better news is that most available frameworks are scalable — the same factors apply no matter the project size. However, good project governance also requires resources, buy-in, and planning.
At Ankura, our project governance model is based on our experience advising and acting on disputes on some of the world’s largest capital projects.
It also draws from industry-recognised protocols and codes of practice on disputes and project management, including:
Association of Project Management Body of Knowledge
Society of Construction Law – Delay and Disruption Protocol
Association for the Advancement of Cost Engineering – Forensic Scheduling Protocol
Publications by the UK’s Office of Government Commerce (OGC) – The OGC was responsible for improving value for money by driving up standards and capability in government procurement.
Rising demand
In KSA, Ankura has seen an uptick in demand for project governance auditing and other services. This shows that the construction sector realises the benefits of getting frameworks in place early.
We are also increasingly playing an active part in the governance process itself. For example, we are involved in reviewing, recommending and implementing (including training) processes from inception to delivery to help projects stay on track.
Other in-demand services include contract reviews, which help identify opportunities and risks at an early stage to maximise success and avoid disputes.
Meanwhile, our forecasting service is helping to drive project management effectiveness by providing independent schedule forecasts, simulations and capital cost projections for individual projects or entire portfolios.
A ticking clock
With ambitious projects come ambitious timelines. With seven years to go, effective project corporate governance is imperative for the successful delivery of the Vision 2030 gigaprojects.
With good project governance, KSA will not only set a global example by what it has achieved but will provide a good practice guide to the industry as a whole.
Sources:
https://www.constructionweekonline.com
Seyyed Shamsiddin Hosseini said about the performance of the National Development Fund, One of the issues faced by oil-rich countries and economies, or countries where part of their incomes are in foreign currency and even their governments' incomes are dependent on oil, is the fluctuation of these incomes, because the so-called economists of these countries They are price takers, that is, the prices of these countries are determined in the world markets by mechanisms that these countries do not have much influence on, so they are not price takers and are price takers.
The representative of the people of Tankabon, Ramsar and Abbas Abad in the Islamic Council explained the problems caused by the fluctuations of foreign exchange income, for example when these incomes increase, it can cause problems such as Dutch disease, that's why even decades ago Historically, before the Iranian Islamic Revolution, oil exporting countries tried to create mechanisms to protect themselves from the negative consequences of these fluctuations, which has led to the formation of funds and institutions, for example in our country IFIC ( Foreign Investments Company) which is available in the Ministry of Economic Affairs and Finance was created almost with such a philosophy.
He added: This issue was also done in most of the oil-producing or oil-exporting countries, and one of the most important successful examples of that country is Norway.
The foreign exchange reserve account was created for this purpose, on the one hand This fluctuation should be prevented and on the other hand, a spare (additional) fund should be created that can cover the future with the view of sustainable development and preserving inter generational resources,he said.
A member of the Program, Budget Commission in the parliament, saying that in general, it can be said; The foreign exchange reserve account was unsuccessful, he continued: One of the damages that were mentioned for this account was that the foreign exchange reserve account did not have a legal personality and it was an account, which caused the issue of the foreign exchange reserve fund to be raised, which eventually ended up in the National Development Fund. Became.
Pointing out that if we want to evaluate in this area, we must have a relative evaluation, he clarified: In my opinion, the National Development Fund mechanism is more successful than the currency reserve account mechanism because it has a legal personality. There is a board of trustees, an executive board, and a supervisory board, and their effort is to preserve the fund's resources, despite the fact that the foreign currency reserve account is in some way oppressed among the accounts of the central bank.
Hosseini added: "In this respect, the National Development Fund has been more successful than the foreign exchange reserve account. Currently, we know that this fund exists and has resources, and in some cases, the board of trustees or the executive board rose against some perceptions of this fund and with They deal with it, but what needs to be addressed now is the greater role of the National Development Fund.
The head of the special commission for growth and production growth of the parliament stated: In the 7th development plan, we must make a diagnosis, in the sense that now that we have such resources, how to use them in two directions; First, not only these resources remain for future generations, but also increase, secondly, if these resources are going to increase, how should they be compatible and in line with national development.
Investment in Oman plays a major role in all developing economies; as it drives its dynamic basics of growth, development, and structural changes. Despite the prevailing economic, political and social circumstances at the Omani renaissance in 1970, the intensive programs on investment during the past four decades along with his majesty prudential guidelines have been able to transfer the modest oil revenues to a developed economic and social infrastructure, essential for leading sustainable development.
In fact, the Sultanate has the infrastructures that encourage and facilitate the national and foreign investment in Oman. Its geographical location that overlooks international and regional sea lanes along with the existence of Omani ports open new horizons for investment and free trading. Moreover, the Sultanate is characterized by its stable economy, strong infrastructure, and qualified human resources that guarantee the easiness of investment in Oman. Not to mention the regulations issued to support this open economic direction and to encourage foreign investments, which are gradually increasing by the Sultanate's engagement in international organizations, international trading organization, and free trading agreement with USA. Oman seeks attracting foreign investment through a number of incentives (Arabic only) such as:
Within the framework of economic diversification based on exports, the Sultanate aims at the exploitation and industrialization of its natural resources; especially natural gas, and the increase of added value to those resources as the government had concentrated its efforts for marketing theses resources. The constant efforts resulted in signing agreements to establish some big industrial projects with the partnership of foreign capitals such as Polypropylene, Urea and Ammonia, Methanol, and Aluminum Smelter, Steel and Iron projects besides to other projects such as fertilizers project in Sur, and Qalhat Company for Natural Liquid Gas.
Investment Opportunities in Oman
Stressing on the importance of economy variation and magnifying the benefit of the strategic position of the Sultanate, besides to the consideration of the benefits gained by the foreign investment, the Government has adopted the idea of establishing some free zones in different parts of the Sultanate. These free zones are:
You can find information in the portal on the Free Trading Zones or you can have a look at this document on the investment opportunities in Oman (Arabic only). These zones are considered to be great attractive zones, due to the completed infrastructures. Also, there are a lot of various opportunities in the field of infrastructures services projects, educational projects, oil, gas, health, tourism, and information technology.
In this regard, the Ministry of Commerce and Industry the Public Announcements service which helps to predict the trends and make strategic decisions improving the business environment for the good of Oman.
Exports and Imports in Oman
As one goal of the Sultanate first development plan states:" Working on finding a new national income that supports oil revenues and supersedes it in the future," the Sultanate deems it essential that it develops its non-oil exports and achieves the benefits expected from contacting the world through multi-national network by opening new markets for Omani products.
The Public Authority for Investment Promotion & Export Development is considered the main source of information about exports and imports in Oman. It pursues the Export Development Strategy (Arabic only) that will help to develop the non-oil exports in Oman. You can read more on the industrial exports in Oman through this paper that was presented at the Industrial Conference 2014 in Muscat.
Prizes
The Public Authority for Investment Promotion & Export Development got the UN trading and development conference prize (ONCTAD) as the Best Institution for Promoting Foreign Investment Directed to Exports in 2012.
