National Academy of Construction Executive Insights

Environmental, social, and governance (ESG) is a term used to represent a corporation’s financial interests in ethics and sustainability. ESG is used in capital markets to evaluate a company’s future financial performance. Even though ethical, sustainable, and corporate governance are nonfinancial performance indicators, the role of ESG is to ensure that systems are in place to manage a corporation’s impact, for example its carbon footprint. The emergence of ESG has led to an increased focus on a company’s performance in these areas by securities agencies, investors, debt providers, auditors, clients, stakeholders, and corporate staffs. Investors in particular are applying nonfinancial factors such as ethics and sustainability to identify material risks and growth opportunities. As such, ESG risks are a key component of any enterprise risk management (ERM) program. Companies are increasingly making disclosures regarding their approach to ESG in annual reports or in stand-alone sustainability reports. These disclosures and reports in turn are of increasing interest to clients, regulators, and staff

Uncertainty in projects is often conflated with risk, and the two terms are used interchangeably. All too often uncertainty is then treated in the same way as risk, or worse ignored. In large complex projects, large pools may exist that are associated with project complexity. This Executive Insight, published by the National Academy of Construction, looks at uncertainty in projects and contrasts it with risk; identifies sources of uncertainty in projects; and outlines strategies for managing project uncertainty.

Complex projects are often described as being large and most large projects face increasing levels of complexity. Scale, however, is not the only determinant of complexity as there are many scientific and research projects much smaller in scale that are equally complex. This Executive Insight, published by the Nationl Academy of Construction, focuses on: • defining project complexity, providing an easy-to-understand visual analog. • identifying potential sources of complexity in engineering and construction projects. • providing a reference to one potential measure of project complexity.

Life cycle asset management is an area of growing focus and importance across all industries. This life cycle focus must not only be “cradle to grave,” but also holistic, addressing each of the triple bottom lines. This Executive Insight, published by the National Academy of Construction, looks at one aspect of this life cycle asset management approach and reflects a growing focus on infrastructure asset management that is driven by roles in planning, designing, building, financing, and operating and maintaining road and rail systems that are delivered under a public-private partnership (PPP) model. Under PPPs, the provider assumes many of the life cycle roles and responsibilities traditionally and solely within the purview of the public sector. The introduction of this broadened triple bottom line perspective is starting to shift life cycle considerations from a good business practice to a significant business imperative. One other dimension that is increasingly coming into play and that is totally reliant on strong asset management practices is a system performance dimension that manifests itself as business continuity in the private sector, but is more closely akin to resilience in public, and for that matter, privately owned infrastructure. This Executive Insight focuses on five questions: 1. What is asset management? 2. What are the characteristics of a sound asset management system? 3. What are the impediments or obstacles with respect to achieving its strategic intent? 4. What tactical challenges exist? 5. How is success defined and achieved? While there is a primary focus on infrastructure asset management, many of the conclusions and recommendations here are more broadly applicable. Effective asset management arguably begins at the planning stage, but in new assets the population of the initial asset database begins in the engineering and construction phase.

Large, complex engineering and construction programs may be found in all industry sectors. Such projects range from extractive industries such as oil, gas, and mining to infrastructure programs for transportation, water, and power. Common to all of these is the potential to influence financial, social, and environmental performance of the implementing organizations, as well as the communities and stakeholders they touch, either positively or negatively. Together, financial, social and environmental outcomes define the three elements of sustainability or a program’s “triple bottom line.” The triple bottom line is a phrase coined by John Elkington in 1994 and introduced in his 1999 book, Cannibals with Forks. An owner or program manager has many reasons to practice sustainability including: • Reduced costs and waste. • Reduced liability, emissions, and environmental hazards. • Efficient and effective management and disposal of materials. • Enhanced image in communities and a role model for others. • Short-term and long-term corporate responsibility as it safeguards the interests of society and the environment. Large programs, comprised of multiple inter-related projects, present challenges and opportunities from a sustainability perspective driven by scale, complexity, and the opportunity for leverage of the efforts over the collective. The life-cycle focus encouraged by good sustainability practice reinforces the approach discussed. In this Executive Insight, some of the challenges and opportunities programs present are examined, as well as a look at a framework for application of sustainability principles in a program management approach.

An essential question is: What are the roles and responsibilities that project and program managers have with respect to global climate change? This is a challenging question. Likely, it will be an increasingly important one for the next 50 years and beyond. The question can be posed to reflect the efforts needed to address climate change and even to reverse it. Hopefully, some fraction of the damage already done can be reversed. This reframing of the question reflects the engineering roots of project execution and the post-disaster experience that has already occurred such that building back even better is an essential tenant. Outlining some of the systems of systems challenges that society will likely face can provide a framework to discuss the emergent nature of both the challenges and the potential resultant outcomes. Drawing attention to some of the driving forces acting on this system of systems as well as the national and sectoral programs that may emerge as a result will provide insights on how to respond. Highlighting some of the feedback loops that may exist or emerge from both apparent and hidden coupling also may provide an increased understanding about the system of system risks, from which current perceptions are derived. Outlining some challenges for program managers regarding climate change will provide direction and insight as to where the efforts are moving. The work that results from this exercise is far from complete and not intended to represent an endpoint, but rather one potential starting point. Much remains to be done by industry and by the broader society in general.

The planning and management of construction execution is a key driver of project success. It begins with project initiation and arguably earlier at the proposal stage. The emphasis of construction execution activities changes as the project progresses through various phases. This Executive Insight, published by the National Academy of Construction, also identifies engineering activities occurring during the various construction phases as might be encountered in a design/build, EPCM (engineering, procurement, and construction management), or EPC (engineering, procurement, and construction) project delivery model. In addition to the direct planning and execution of construction, several other activities must occur in parallel and enumerated in the Executive Insight.

The industry collectively accounts for 39 percent of global greenhouse gas emissions with construction (versus facility lifetime operations) accounting for 11 percent globally. If true greenhouse gas reduction is to be achieved, the construction industry will have to lead the way. The growing focus on ESG (environmental, social and governance) has put reducing greenhouse gases (GHGs) front and center. The construction industry is at the heart of this focus. Reducing greenhouse gases associated with capital projects requires a comprehensive life-cycle analysis that addresses traditional economic drivers as well as the range of ESG considerations that are increasingly being called for. This begins with decisions on facility need, sizing, siting, and an expanded basis of design that addresses construction and operations and maintenance (O&M). Two key factors stand out in consideration of the greenhouse gas component of environmental life-cycle analysis: (1) the materials of construction and associated means and methods and (2) energy choices during construction and operations. As electricity use in construction increases, the electricity system must decarbonize significantly. This Executive Insight focuses on the construction phase, recognizing that many decisions made during engineering will impact both construction and operations. Some strategic thoughts also are included to help guide industry actions as well as those of both owners and constructors.

This Executive Insight looks at the traditional responsibilities assigned to project administration and how emerging technologies may change or even eliminate many of the activities currently performed. The first section segregates responsibilities between a home office function and a site-based function. This construct is arbitrary and, on large complex projects, many if not all of the home office functions move to the project office, which in some instances may be based at the site.

Knowledge management is the process of creating, sharing, using, and managing knowledge and information. It refers to a comprehensive, holistic, and multidisciplinary approach to achieving organizational objectives by making the best use of knowledge. This Executive Insight looks at: • What knowledge is. • Telltale signs indicating the need for knowledge management (KM). • Benefits of knowledge management. • Knowledge communities, emerging knowledge, and their readiness, operation, and administration. • Knowledge platforms. • The emerging concept of knowledge assemblies. • Success factors and challenges. This Executive Insight seeks to convey many core concepts and observations and is presented in a highly outlined versus narrative form to ensure key thoughts are not lost in text

Construction productivity has been a perennial problem faced by the construction industry. In this Executive Insight the following topics will be addressed: • What is productivity? • What are the challenges productivity creates and how have those challenges changed? • What are strategic actions to take to improve productivity? • What are tactical actions to take to improve productivity?

Previously, an Executive Insight entitled Barriers to Productivity provided a view on some of the barriers to productivity that exist, especially in large complex projects. More granular, field-level viewpoints on productivity were not covered in that Executive Insight and instead are the subject of this Executive Insight, which enumerates many factors impacting productivity on engineering and construction projects. No treatment of such factors will ever be exhaustive and the factors applicable will vary project by project. A table provides an organized listing of factors based on the author’s experience and observations. The first column broadly organizes factors affecting productivity into four categories encompassing internal and external factors.

This Executive Insight provides a view on some of the barriers to productivity that exist, especially in large complex projects. More granular, field-level viewpoints, on productivity are equally important, but are not covered here. The listing that follows is most certainly not complete, but reflects the author’s experiences

This Executive Insight, published by the National Academy of Construction, focuses on enterprise risks and their management in the engineering and construction (E&C) industry. The industry has lagged in the adoption of strong enterprise risk management systems and processes. Many of the ERM systems the industry put in place fail to recognize the features that make the E&C industry unique. This uniqueness arises from the project nature of the industry and the firms operating in it. This project nature is contrasted with the continuous operational nature of many of the early adopters of enterprise risk management (ERM).

This Executive Insight illustrates the range of innovations that are possible. They range from incremental innovations, focused on optimizing current systems and processes, and extend to breakthrough innovations, which have the effect of disrupting business models and markets. Incremental innovations include both unplanned improvements as well as incremental innovation based on intentional efforts. Unplanned improvements reflect incremental change with low to medium revenue and efficiencies potentials, and are often characterized as being either accidental or uncontrolled. By contrast, intentional innovation differs in that it is initiated within the organization or directly by the organization. Said another way, innovation is intentional and focused. At the other end of the spectrum, breakthrough innovations range from serendipitous to strategic. While both result in disruptive changes and have high to medium revenue potentials, serendipitous is accidental and uncontrolled, similar to unplanned improvements, while strategic is initiated by the organization and is similar to the intentional innovation associated with incremental innovations.

This Executive Insight focuses on broader, more systemic opportunities for innovation. The same processes and thought patterns, however, will also deliver meaningful and important incremental innovations, some of which can be quite valuable. The hope is to view the universe of ideas and potential solutions more broadly upon completion of the reading of the Insight.

Across industries, digital transformation is changing the supply chain more than any other functional area. It is driving efficiency and resiliency to disruption. The supply chain is transitioning to a "thinking" supply chain, one broadly and tightly connected to all data sources. In industry after industry, it is enabled with Big Analytics, providing collaborative efforts through cloud-based networks, and with a focus on cyber threats. This transformation has yet to be realized in the engineering and construction (E&C) industry. Supply chains face two major gaps. The first, an analytics gap where even AI capabilities are not keeping up with the growth and diversification of data sources. Available data must be fully leveraged―structured, unstructured, and dark data (defined as data that is not yet visible to the organization). Organizations have a great deal of data buried in contracts and transactional systems and externally, among regulators, that could be applied for intensified procurement insights. Using cognitive computing capabilities to parse through unstructured data such as news feeds and social networks can augment learning for supply risk-scoring and supplier performance. The second gap is one of attention and knowledge. Supply chain organizations have pursued cost reduction and lean practices. While this may be productive in the short term, as data analytics capabilities grow there likely will not be enough "eyeballs" to act upon the resulting insights. The role of AI and machine learning is critical. Big data can create information overload; AI can help filter the insights from big data and make it actionable, allowing iterative decisions faster than a human could.

Large corporate organizations typically employ some form of matrix organization to share resources and ensure a consistent approach in key areas across the organization. The nature and extent of this matrix or functional organization will be driven by: • Common approaches to human resources • Consistent application of legal approvals and reviews of significant actions • Common financial functions related to accounting, cash management, insurance, and claims and legal suits • Common managerial, technical, and support functions which accrue benefits from a consistent and coordinated approach. Within a project setting, required resources generally reside at the project level. Corporate functional activities extend into the project environment only to the extent required to protect the parent organization, consistent with client requirements and practices. The situation in large programs, however, is different. A functional organization more akin to the corporate functional organization is often created within the program team. This program-level functional organization acts much in the same way as the corporate functional organization, but its role and emphasis evolve throughout a program’s life.

Cross-cultural research, methodologies, and studies abound and readers are encouraged to peruse the enormous resources available to gain an informed view of this important aspect of the engineering, design, and construction industries. From a strictly personal perspective, I will describe how I have seen cultural differences enter into negotiations and other business dealings with a client, partner, or supplier. I’ve also come to acknowledge that regional cultural differences within a culture can be equally important. This topic is broad, crossing national, regional, and various subcultures. This Executive Insight is far from exhaustive.

Cross-cultural factors are increasingly important in the conduct of the engineering and construction business and the execution of projects. Opportunities are global and the labor force increasingly multi-cultural. It is impossible in this Executive Insight to cover all cultures of interest, but hopefully the cultural factors laid out provide a guide. It is important to seek out advisors who can bridge the cultural gaps and provide insight. One point to highlight is that while cross-cultural factors are described from a U.S. perspective, remember that within U.S. project teams there may be many cultures managing, supervising, and interacting with each other. Cross-cultural sensitivity becomes even more important. Finally, cultures evolve. Intergenerational cultures need to be accounted for. Emerging generations are connected across cultures in ever deeper ways. The implications of this connectivity are yet to be fully recognized.

Change orders are an inevitable part of construction projects. Change orders are revisions or additions to an existing construction or engineering contract and are used to modify the original agreement of the parties. Typically change orders are used to adjust scope, price, and/or schedule after the contract is executed. Change orders must meet prerequisites for valid formation (offer and acceptance). Each change order must: • Identify the contract section being changed. • Specify the change in the work or services. • Specify what each party will provide/promise as part of the change. • Specify the authority of the parties signing the change order. Change is defined as “an alteration or variation in scope or schedule for completing the work required for the project.” Two common categories of scope change include directed changes by the owner and constructive changes identified by the contractor as a result of the action or inaction of the owner. Directed changes can become constructive changes if the contractor believes they are impacted by the directed change. A change also can include revisions to the contract’s terms and conditions as well as changes to various management and administrative processes.

Event contingency is an event, such as an emergency, that may―but is not certain to―occur. This Executive Insight focuses on this important element of an engineer’s or a constructor’s price. While event contingency is often considered from a provider’s perspective, it is equally important from an owner’s perspective in order to understand probable project costs, the event-related uncertainties a project may face, and strategies to best manage any emergent risks. In this Executive Insight, six elements involved in event contingency are examined: 1. Various financial components of a project’s price 2. Event contingency as distinguished from cost contingency 3. Preferred method of addressing event contingency from a provider’s perspective 4. Potential event risks warranting consideration (event risk checklist) 5. Events typically excluded from event contingency 6. Modeling of event risk in large complex projects

This Executive Insight looks at escalation, which affects both current and yet to be issued construction contracts. It is intended to provide a framework for providing immediate relief to ongoing contracts and also as an outline for strategies for owners and contractors on yet to be issued contracts. Key materials of construction susceptible to escalation are called out and potential indexes for any agreed to adjustments are suggested. The selected indices are U.S. focused and others are available.

Large complex projects require a degree of management and granularity not often found in more traditionally sized projects. Often these projects, because of their scale, are in location-challenged settings. These may range from the North Slope of Alaska to the Outback of Australia to the urban core of major cities around the world. These location challenges are often first reflected in estimate and budget development that is based on factoring or adjusting estimates or actual costs from similar projects in order to establish a budget for a new project. While these estimating and budgeting approaches can be a useful for many projects, this technique breaks down as scale and complexity grow in nonlinear ways. Large complex projects located in more extreme environments are further challenged to find relevant exemplars because of the numerous location factors touched upon in the descriptions that have been presented here.

This Executive Insight focuses on the design of modules. Modularization and preassembly are construction techniques in which all or part of sections or facilities are prefabricated or assembled in one location and then transported to the site. The term modularization as used in this Executive Insight is intended to encompass a wide range, from preassembly to full modularization of significant systems, structures, and components. This Executive Insight compliments the Executive Insight on Modularization

Parkinson’s Law can be seen in project performances where many tasks complete exactly on schedule with no real early finishes noted. This disparate behavior is even more significant in program settings where numerous multi-month or multi-year projects all finish exactly on schedule. Late finishes, however, do in fact occur. Parkinson’s Law also is evident in organizations that have been known to operate at a relatively constant throughput, but over time the organization requires more resources for the same outputs.

Modularization represents a fundamentally different approach to project delivery compared to the more traditional "linear" stick-built approach to facility design, procurement, and construction. • The principle modularization driver is often schedule. • Focus on construction driven project execution by breaking traditional program precedence and concurrently designing, procuring, building, and commissioning to the maximum degree possible. • The modularization frontier can be thought of as a function of the attractiveness of modularization and the degree to which it is readily achievable on a given program. • A number of factors to be comprehensively considered in modularization are laid out. • Lessons learned in modularization are provided from four perspectives: project management; fabrication yard management; procurement/logistics; and engineering. • Modularization requires the management of new risks. • Lack of on-site workforce availability is a key driver for increased modularization that is fabricated off-site.

Potential acts of corruption during the project execution phase encompass a range of actions by a host of potential offenders. The various acts may carry criminal and civil penalties and include both the offending individuals as well as their organizations. Table 1 provides a set of examples to help readers understand the range of corrupt actions that may occur. The table also serves as an aid in designing effective corporate level anti-corruption measures beyond the training that is discussed in the Executive Insight, “Corruption.” For completeness, examples of corrupt actions during dispute resolution are listed in Table 2.

Potential acts of corruption during the tender phase encompass a range of actions by a host of potential offenders. The various acts may carry both criminal and civil penalties and include both the offending individuals as well as their organizations. Table 1 provides a set of examples to help readers understand the range of corrupt actions which may occur and to aid in designing effective corporate level anti-corruption measures beyond the training discussed in the Executive Insight, “Corruption.”

The National Academy of Construction has launched a new audio podcast series, “Get the kNACk”. The podcasts share NAC members’ collective wisdom and experience in solving some of the thorniest issues in construction. In this episode, Bob Prieto shares insights curated over 30 years in the construction industry. This episode is the first in the “Get the kNACk” podcast, and a great introduction episode to begin with.

This Executive Insight focuses on raising awareness and reinforcing attention to corruption, which may be one of the most corrosive factors impacting the construction industry. Corruption has been recognized as a significant concern and a recurring practice throughout the industry on a global scale. The industry has done much to raise awareness and increase focus on eliminating these practices. Often ranked as one of the top two industries for corruption, along with the extractive industries (those involved in extracting minerals such as oil, gas, iron, gold, and copper through drilling, mining, and quarrying), much remains to be done. Importantly, this is not simply an owner or contractor side issue, but rather a much broader problem. In this Executive Insight, the following topics are included: • define corruption. • assess where the U.S. is currently perceived to stand. • discuss how prevalent corruption is in the industry today. • examine some factors that make construction prone to corruption as well as motivating and facilitating factors. • examine company-level efforts that are important in addressing the risk of corruption

Major contributors to claims include lack of alignment (owner-contractor; owner's team; contractor's team); failure of owners to meet their obligations; unforeseen site conditions; inadequate change control; and poor contractor performance.

One of the keys to strong client relationships, starting with marketing and selling and continuing throughout the project life cycle, is having a clear understanding of the client's wants and needs. This is not something you guess at or feel in your gut. Rather you need to "ask your clients." Having asked your client, it's important to listen to your client. Listening takes practice and requires skill and ability (I should point out that after asking and listening, one must still understand and act―promptly.) Let's look at some tips on "how to listen."

Fragility in project execution networks is defined as the ability to remain stable after perturbations at the "edges" of the project or to the internal network structure. • As fragility increases, the project's robustness or ability to handle a wide range of significant variations decreases. • Fragility emerges from increasing correlation across the project execution system. • Fragility of construction execution networks is realized in several ways, ranging from management frustration, extensive rework, and the inevitable increased owner's oversight. • Factors impacting productivity are leading indicators of potential future fragility. • Reducing fragility starts with a recognition that quantification of outcomes through probabilistic risk analysis provides a false sense of confidence. • Resistance to fragility must be built into the project. • Fragility in project execution is realized by the interaction between normal activity duration uncertainties and management actions to respond to schedule slippage. • Failure emergence can be detected in pattern formation that is detectable using today's artificial intelligence (AI) tools. • As stakeholder engagement increases, the boundary conditions of the project change and the new expanded system (system of systems) exhibits increased robustness.

With a President-elect recently declared in the U.S. to conclude the 2020 election, I thought it now appropriate to reflect on four tends that are likely to strengthen or accelerate. This is not to suggest this acceleration results from a change in leadership, but the change undoubtedly represents some element of contribution. On the U.S. political front, I would expect a tumultuous couple of months.

Materials management is focused on the planning and control of both the quality and quantity of materials and equipment procured and installed on a construction project.

• Turnarounds are a real element of the engineering and construction industry. • Many of the actions taken during a turnaround are in reality long overdue. • The responsibility of boards is brought into sharp focus during a turnaround. • The lessons learned from this turnaround are broadly applicable.

In his book, The Improbability Principle, David Hand, former president of the Royal Statistical Society, provides a tour de force treatment of uncertainty and how improbable events happen, over and over again. It is a highly recommended read but not for the faint of heart. In this Executive Insight the lenses described by Hand are used to look at large projects and their unacceptably high failure rates. Application of best practices would suggest these failures should be improbable or at least less frequent than reported failure rates suggest. If the industry repeatedly experiences the improbable, it is perhaps better that the improbable be understood. This will only become more important as our projects and their settings become ever more complex. The lenses can best be described as comprising a set of laws. Each will be examined here and how they shape the views on the failure of large projects.

On 23 February, Bob Prieto, NAC, presented “Systemic Risks in Large, Complex Programs.” This webinar drew 1,907 registered students; another record-breaker for the AMA webinars. The format is a short presentation followed by a Q&A session which is highly recommended.

Key Points - Large complex projects require strong foundations. • A day at the beginning of a project is just as valuable as a day at the end. • Strong project foundations are built during project kick-off, which typically is considered the first 90 days of a project. • Vertical kick-off is enabled by the use of a dedicated kick-off team. • Project kick-off should consider lessons learned on other projects.

Key Points - Contingent execution is a key element of large complex project delivery. • Distributed and decentralized planning and execution, albeit with centralized consistency checking, is an essential element of contingent execution. • The view of time must take into account the temporal nature of time itself in project management. • Management information needs change in support of contingent execution.

Over the years I have read all too many project closeout reports, reports from turn-around managers on troubled projects, audit reports and project post-mortems. These reports have recurring findings that can be used to either guide effective management of a project or serve as a findings checklist for the auditor or other manager looking at a troubled project. Clearly an ounce of prevention is the desired course of action.

Key Points • Historically, lessons learned processes have been founded on three elements: collection, documentation, and communication. • A more robust and effective lessons learned process includes a number of additional steps and avails itself of the deeper insights enabled by artificial intelligence (AI). • Lessons observed do not become lessons learned until one routinely does something different. • Lessons―positive or negative―are gained only from experience.

This Executive Insight looks at large complex programs from a systems perspective recognizing that such programs are not as well bounded as classical project management theory, as espoused by Taylor, Gantt and Fayol , would have us believe. Rather, they behave in both independent and interconnected ways in a dynamic systems environment. They demonstrate the evolutionary nature of all complex systems. They face uncertainty and emergence that comes with human actions and interactions. Large complex programs struggle from insufficient situational awareness, treating the program to be more well-bounded than reality would suggest and using simplified models to understand the complexity inherent in execution. Best practices from project management were typically not derived from such environments and, worse, have fallen short on other large complex programs. Large complex programs are characterized by boundaries that change in response to changing environments; emphasize coping with challenges and change; go beyond uncertainty and require a change in perspective; face a high level of unknown unknowns and unclear/incompatible stakeholder needs. Systems theory represents a different way of seeing, thinking and acting Systems are viewed as greater than the sum of their parts. A system’s holistic properties can never be completely known. Different perspectives will provide different views that may overlap and not be completely compatible.

This Executive Insight looks at the emerging nature of Construction 4.0. It provides an overview of what comprises Construction 4.0. We will examine some of the opportunities it may create and the challenges it will likely face. We start by defining Industry 4.0, which provides the framework for Construction 4.0. We also relate how Industry 4.0 is evolving from Industry 3.0 Similarly, we will define the scope and attributes of Construction 4.0 and discuss how it has evolved from Construction 3.0.

Tight coupling creates new risks in large scale projects and such risks are not well understood. • Nine classes of coupling in large complex projects are defined. • The greater the coupling between activities, the greater the complexity and likelihood of propagating disruptions. • Classes of couplings that tend to forward changes from other classes are more disruptive. • A key strategy to manage complexity is through systematic decoupling of activities. • Temporal coupling (simultaneous undertaking of two or more activities) represents a new risk.

This Executive Insight will resist the temptation to just highlight a range of current and emerging technology innovations relevant to the engineering and construction industry. Instead it will attempt to provide a framework that might help understand where future innovation might emerge from and perhaps to suggest some fertile ground for examination by others.

Large complex projects differ in many aspects from more traditional projects. • Megaprojects differ from more traditional projects in more dimensions than just scale. • Scaling up in size has the concomitant effect of "unfolding" unseen dimensions. • Precepts and assumptions differ for megaprojects. • Large complex projects require fundamental changes in focus. • Leadership behaviors change in large complex projects.

Corporate culture that is quality driven is essential for longer term success. • Culture change consists of three overlapping phases. • A common belief system is essential to transform to a quality driven organization. • Transformation to a quality driven organization requires us to modify, expand, and create new processes while simultaneously streamlining and simplifying existing work processes. • A three-phase implementation plan is laid out to systemically unlock the current paradigm and execute as a quality driven organization. • Key activities are identified to support cultural change in an engineering and construction organization, i.e. communication, engagement, and developing a learning organization. • In order to successfully achieve the transformation desired, we must address both tactical and organizational change. • Specific change dimensions to be addressed in the transformation plan are identified. • Three sets of barriers typically encountered in such transformations are described.

This Executive Insight looks at defining quality within the design, engineering, and construction industry, moving beyond the textbook definitions.

This Executive Insight provides for self-assessment by project and construction managers in how they assess problems and make decisions. • Two dozen logical fallacies encountered in the management of large complex projects are described. • A confidence test is offered for the reader's self-assessment. • Project leadership is all too often overconfident considering project complexity and uncertainty of large complex projects. • Project leadership is all about people, not process. • Project management costs are non-linear and grow with scale and complexity. • Large projects are complex, do not try to simplify and rush to judgment.

Design-build project delivery is a growing project delivery model. • Design-build project performance has created new challenges for owners, contractors, and engineers. • This Executive Insight provides advice to each of these three parties that should improve individual and collective project success.

The classical theory of project management focuses on the “transformational” processes which occur in discrete activities, strung together such that the output of one or more is the input to others. This simple transformational view is no longer adequate in considering large complex projects. This activity based focus, memorialized in work breakdown structures, neglects the importance of “flows” within the project context. As we more tightly link supply chains into project processes, we begin to see some of the flow considerations that are core in the realm of logistics as being analogs for efficient project management. Precedence’s and unnecessary coupling of activities may harm a project’s performance in ways that may not be evident on initial inspection. Additionally, these “transformational project flows” are no longer static or predictable.

This Executive Insight focuses on Indirect Field Costs (IFC) but does so in the context of all indirect costs that a construction project may experience. In developing this Executive Insight it became apparent that terminology for similar costs varied across industry segments and even between firms in a given industry segment.

White space risks are those risks that fall in between well-defined organizational, policy, process, and scope elements (for example, discrete projects or tasks). They also are not otherwise reflected in risk assessment and management activities.

Large complex projects require strong foundations if they are to be successful. Arguably, these are the same foundations any project would require, but experience suggests otherwise. When we look at recurrent weaknesses in foundations for success of large complex projects, we see several recurring themes. These include: • Weaknesses in strategic business objectives (SBOs) • Incomplete overall project scope • Inadequate owner readiness 2 • Optimism bias in estimates • Poorly founded risk assessment and modeling • Unconsidered risk classes – Black Swans; “White Space” risk; Black Elephants • Assumption migration • Inadequate understanding of complexity • Constraint coupling • Inadequate decision frameworks • Inadequate valuation of time • Lack of startup granularity • Incomplete basis of design

Proper reliance on artificial intelligence (AI) in project management requires strong AI predictive tools. • Data-Project management AI systems require measures to assess the quality of the domain populations (training and testing).-AI data validation and model selection require rigorous attention.-Individual users who contribute data to a multi-enterprise training data set must retain sufficient rights over their data while the broader (multi-enterprise) insights gained are derivative. • Project management AI is founded on predictive analytics, at its best diagnostic, but with an expert viewpoint. • Verification and validation-The process of verification and validation (V&V) is about establishing trust.-AI does not lend itself to checking using conventional V&V methodologies.-AI V&V will increasingly rely on model checking and measurement. • Bias-We can identify several types of bias with potential impacts on project management AI, among them sample, exclusion, observer, and prejudice.-Verification and validation of PM-employed AI need to include an important element of bias testing. • Project management AI will benefit from an anomaly detector. • Verification must ensure that the developed intelligent system conforms to its specifications and that its knowledge base is consistent and complete within itself. • Validation is the process of ensuring that the output of the intelligent system is equivalent to those of human experts given the same inputs. • We must remain cognizant that a learnt model in one domain may not apply to another. 2

Tight coupling creates new risks in large scale projects and such risks are not well understood. • Nine classes of coupling in large complex projects are defined. • The greater the coupling between activities, the greater the complexity and likelihood of propagating disruptions. • Classes of couplings that tend to forward changes from other classes are more disruptive. • A key strategy to manage complexity is through systematic decoupling of activities. • Temporal coupling (simultaneous undertaking of two or more activities) represents a new risk.

Owner readiness is a primary contributor to the success of large complex programs. • Owner readiness is separate and distinct from project readiness. • Owner readiness with respect to an individual program and associated decision frameworks and processes begins with clearly articulated Strategic Business Objectives (SBOs) supported by a reinforcing strategy. • Program objectives and criteria must be reflected in the program’s scope and the embedded assumptions transparent and tracked. Articulation and integration of owner’s philosophies across a wide range of areas is essential. • Program planning and execution approach begins with completeness of baseline documents pre-sanction.

This paper focuses on “construction” education versus engineering education since I believe it presents some special challenges and opportunities. It begins by looking at the role of education in society and recognizing certain characteristics and objectives including: • Role in broadening awareness of society and its current and emerging challenges • Improving the health and well-being (economic and otherwise) of society through a range of activities including research, platform for debate of a variety of views, education and training at multiple levels • Values development and reinforcement • Development of identities (national and professional) • Curation of knowledge • Preparing individuals to positively contribute, through knowledge and skills training and development, to meeting the needs of society and the organizing elements (governmental, non-governmental, private) that comprise it.

The National Academy of Construction, founded in 1999, has continued to grow its focus and membership in ways that become increasingly relevant to the United States in the years ahead. Originally focused on honoring key individuals in the profession, the very nature of its members as leaders soon drove it to seek to proactively contribute to the industry in which they have served with distinction throughout their professional careers. Initial contributions focused in the area of safety, a perennial industry challenge. Over the last 15 years nearly 50 safety white papers have been published and shared broadly throughout the industry with NAC often acting as a convener around this topic and also workforce development. More recently the NAC has intensified its efforts to support the generational transfer of construction related knowledge while at the same time sharing their insights based on decades of senior executive experience and involvement in emerging challenges and opportunities the industry is facing. Today the National Academy of Construction (NAC) drives this increasingly important sharing of knowledge through two primary vehicles. The first of these vehicles is Executive Insights. Executive Insights captures the knowledge, experience, and wisdom gained through individual NAC member's leadership roles in the construction industry. To date sixty insights have been published by NAC and are freely available to clients, engineers, project and construction managers, and contractors, worldwide. Executive Insights cover a broad range of areas, reflecting the breadth and depth of its over 300 members. The major topical areas addressed include: • General topics, encompassing strategies to improve large project delivery; the nuts and bolts of engineering and construction; capital project execution in an operating environment; and post disaster engineering and construction. Improving large project delivery is a theme that runs through many of the Executive Insights and reflects the ongoing imperative to improve project performance which has now risen to a generational imperative.

Systemic risk drivers may be divided into those internal to the owner organization and program team and to those external to the program.  Systemic risk analysis must consider common risk drivers, interdependencies beyond the first order, and constraint coupling. Systemic Risks in Large, Complex Programs We have examined some of the factors that drive a changed risk environment for large engineering and construction programs and some of the new tools and risk assessment approaches that must be added to our standard risk management techniques. Concomitant with this changed awareness and new framework is a more comprehensive and structured consideration of the various types of systemic risks that large engineering and construction programs are susceptible to: in effect, providing a new lens specifically focused on those types of risk that represent the greatest threats to large, complex, long duration programs. We can think of these systemic risks as encompassing those internal to the program team and those external to the program. Frameworks exist for considering each of these, but in large programs the internal risks are fundamental to putting into place the people, processes, and systems commensurate with the challenges and opportunities the program will encounter. Our expanded look at risk must increase our awareness of and attention to common risk drivers, second and third order interdependencies, and growing risks associated with constraint coupling. Systemic risk drivers may be divided into those:  Internal to the owner organization and program team  External to the program Systemic risk analysis must consider:  Common risk drivers  Interdependencies beyond the first order  Constraint coupling

Key Points  Safety must begin long before construction ever starts.  Safety is best achieved by eliminating hazards, not just managing and mitigating them.  Expanding our basis of design to eliminate hazards holds great promise.

Safety is best achieved by eliminating hazards, which should begin at the design stage. • Expanding the basis of design to eliminate hazards and providing actionable suggestions to designers hold the promise of reducing hazards. • Seven categories of suggestions regarding safety by design, encompassing 82 total suggestions, are identified in this Executive Insight. • These suggestions represent a starting point, but much more is possible. Please submit to NAC your suggestions for improving safety by design.