Owner organization design for mega industrial construction projects

Owner organization design for mega industrial construction projectsJide Sun, Peiliang ZhangSchool of Economy and Management, Tongji University, Shanghai 200092, China Received 15 April 2011; accepted 19 April 2011AbstractThe characteristics of Mega construction projects bring great difficulties and challenges to project management, as in the aspects of complexity, uncertainty, integrated management, etc. Mega industrial construction is more difficult to managers. Traditional project management with even appropriate method and data can not meet mega construction projects, so with integrating projects objectives with strategic view, managers should design project organization on the basis of every project characteristics, establish good communication and cross-functional coordination mechanism, create unity and cooperation partnership culture in the project process. This paper has designed an owner organization of a mega industrial construction project according to relevant literature and determining factors of organization, and has also proposed that cross-functional and cross-professional coordination is key to continuous improvement and successful implementation of the organization.© 2011 Elsevier Ltd. and IPMA. All rights reserved.Keywords: Mega industrial construction project; Owner organization design; Cross-functional coordination; Cross-professional coordination1.IntroductionMega construction projects are usually described as substantial investment (more than 1 billion dollars) (Rodney Turner, 1999; Bruzalius et al., 2002; Flyvbjerg et al., 2003; Molenaar, 2005; van Marrewijk et al., 2008), long schedule (over two years) public infrastructures, which usually have long life time of 50 years and more, and generate multiple social impact (Bruzalius et al., 2002), and invested or commissioned by governments. In addition, some projects which have large scale or complex technology, such as underground civil engineering, industry plant construction and soon, are considered as Mega construction projects, due to their complexity on project implementation, integration on project management and consideration on operating during the process of design and construction phase (van Marrewijk et al., 2008).Mega construction projects bring great difficulties and challenges to project management (Rodney Turner, 1999; Bruzalius et al., 2002; Flyvbjerg et al., 2003; Molenaar, 2005; van Marrewijk et al., 2008). In the first place, huge investment and long construction period, as well as more uncontrollable factors during implementation may cause uncertainty to project management; Secondly, long designed lifecycle and complex construction process require high level construction method and quality; because of large amount of participate parterres and requirement of cross-professional works within them, the efforts on cross-functional collaboration and coordination within the projects will be far greater than conventional projects. Besides, Mega construction projects are often composed of many individual project groups, with its own objectives, each individual project of which is generally different from each other, So the conflicts and contradictions of resources, schedules and staff scheduling among these individual projects would be the main features of managing mega projects. Furthermore, with the social and public property, mega projects often generate high public attention and strong government intervention intensity, therefore, the external coordination is also a key to managing mega projects (Rodney Turner, 1999; Bruzalius et al., 2002; Flyvbjerg et al., 2003; Molenaar, 2005; van Marrewijk et al., 2008).Compared to conventional mega projects, it is more difficult and challenging to manage mega industrial construction projects in some sense. On the one hand, the whole life-cycle integrating conception is more emphasized in managing industrial projects. In the beginning or building process, the whole life-cycle profit and operational functionality after completion must be concerned and considered, and the schedule objective would be closely linked to financial objective during industrial projects process. On the other side, industrial construction projects involve more specialized fields, especially involving lots of specialty related to industrial equipment and machinery. Consequently, multi-disciplinary collaboration will be more general inthe implementation process, and civil engineering specialty works must be coordinated with them, which requires managers to conduct in a more strategic and comprehensive way. According to mega projects and project management literature, this paper presents a case study of organization design of an industry construction project, where determining factors and design methods has been concerned. The objective of this paper is to present the process of organization design of a mega project, to discuss internal elements and continuous improvement in the operation of this organization, and to provide reference value for future projects with similar complexity and challenge.2. Literature reviewOwing to these characteristic, most mega construction projects overrun on cost, fall behind schedule and fail to deliver in terms used to justify the need for the project. In much literature, researchers used to interpret the reason of such overruns in operational level. Flyvbjerg B, etc. contend that a main cause of such overruns is a lack of realism in initial cost estimates, motivated by vested interests (Flyvbjerg et al., 2003). The length and cost of delays are underestimated, contingencies are set too low, changes in project specifications and designs are not sufficiently taken into account, changes in exchange rates between currencies and price changes are undervalued, as are expropriation costs and safety and environmental demands. Many major projects also contain a large element of technolog- ical innovation with associated high risk. Such risk tends to translate into cost increases, which are often not adequately accounted for initial cost estimates. To sum up, they consist that inappropriate data and methods is the main reason of mega projects overruns (van Marrewijk et al., 2008; Flyvbjerg et al., 2003).Recent years, more and more researchers tend to study mega projects management in a strategic view, focus on project design, decision making, cooperation and cross-functional collaboration, etc. they have realized the limitation of traditional project management and defined programme management to managing complexity, mega or a portfolio of projects. Burke R defined programme management as the management of large capital projects (Burke, 2003), while Reiss G, etc. andGAPPS considered programme management involve directing a portfo- lio of projects (Reiss et al., 2006; GAPPS, 2008), one huge projects (mega projects), and managing a series of projects for the same client. Programme management can only be success- fully designed and implemented in any organization if there is commitment from the business leaders (Williams and Parr, 2006). Fowler andWalsh cite that if projects affect a large part of the organizational resources, the involvement of senior man- agement is crucial (Fowler and Walsh, 1999). The alignment, planning, coordination and execution of the functional projects in a programme are carried out with a high level of precision, as a problem from one project is likely to affect the other projects, which in turn can affect the entire programme. Cooperation and cross-functional collaboration in projects process has been stated as other key challenges to mega projects success (Williams and Parr, 2006). Additionally, project (or programme ) is character- ized as uncertain, dynamic and change process, as an agency for change (Rodney Turner and Muller, 2003). OGC state that communication is central to any change process (OGC, 2007). The greater the change, the greater the need for clear communication about the reasons and rationale behind it, the benefits expected, the plans implemented and its proposed effects. Thus, cross-functional communication is essential for programme management. Nils Bruzelius, etc. focus on institu- tional aspect of mega projects, and consider that inadequate institutional approaches and regimes are the major causes for wrong assessment of mega projects (Bruzalius et al., 2002). Alfons van Marrewijk, Stewart R. Clegg, etc. conclude that project design (including contractual arrangements) and project cultures play a role in determining how managers and partners cooperate to achieve project objectives to a greater or lesser extent (Alfons van Marrewijk et al., 2008). Project design involves project organization design, regimes design and project delivery etc., Dirk Pieter van Donk and Eamonn Molloy state that Every project has a specific structure, and contingency factors need to be reflected in project structure (van Donk and Molloy, 2008). Within the field of project management studies, attention for a cultural perspective on project management has increased significantly in the last decade. Increasingly, project culture is related to successful collaboration in complex projects (Hastings, 1995;Jaafari, 2003; Maya et al., 2005). Martin's fragmentation perspective on organization culture, which focuses on ambiguity, power and situationality, is more helpful in shedding light on the daily practices in mega projects (Martin, 2002). J. Rodney Turner and Ralf Muller recognize the important of partnership between project owner and project manager, and a collaborative working relationship should be maintained between them, with both viewing the project as a partnership (Rodney Turner and Muller, 2004; Rodner Turner,2004).Based on a critical review of existing literature in mega projects, programme management, and project management, this paper can conclude that traditional project management with even appropriate method and data can not meet complexity, specificity and uncertain of mega construction projects, which is the main course of the overruns of mega projects. Consequently, at the beginning of mega construction projects, integrating projects objectives with strategic view, managers should design organizational structure on the basis ofthe characteristics of project, establish good communication and cross-functional coordination mechanism, create unity and cooperation partnership culture in the project process.3. Organization design3.1. Project description: the tobacco industrial plantThis tobacco industrial plant project is the “11th Five-Year Plan” technological transformation projects invested by Hangzhou manufacturing department, and the production capability will be annual output 1 million boxes (50 billion cigarettes) after competition, and considering development factors, the production capability is designed to 1.6 million boxes. This plant involves varieties of buildings, and most single buildings cover large area. As a core buildings of the industry projects, joint industrial workshop is located in the centre of the factory and layouts as a letter of “U” shape, from east to west 453.8 m, from north to south 375.45 m, covers an area of 127,100 m2 , total construction area of 179,750 m2 , building height 23.8 m (2 floors above ground); production command center (19,558 m2, 5 floors above ground, 1 floor under ground), service center (19,628 m2,5floors above ground, 1 floor underground), production inspection and test center (19,389 m2, 5 floors) and central laboratory (6900 m2,3 floors) as the main factory building, located in the west side of the plant; power-assisted area is located north of the joint industrial workshop, and integrated logistics area as well as the green landscape areas are separately located north and south of the joint industrial workshop of the north and south. Many complex and high technology applied in this project will bring difficulty and challenge to project management, including the classification and particular process technology, the application of wire overhead pool model, the application of green building technology, etc.3.2. Method and determining factors of owner organizationAccording to an important conclusion of organization theory, a system objective determines the system organization, while organization is the decisive factor which determines whether the objective could be achieved (You, 2004). A construction project organization system usually involves these components as following: project structure, project management organizational structure, task division, function division and work flow organization. Project management organization structure reflects the relationships between the various subsystems and between the various elements in the system, and reflects the relationships between the various work units, departments and employees within the system (Ding, 2006). Owner organization is the key organization in project management, because of the central status of owner management in project management. Owner organization structure is determined by several factors described on Fig. 1:(1) owner management models in projects are usually divided into three models: 1) the owners rely on their own human resources; 2) the owners consign to one ormoremanagement consulting companies (consultants); 3) the owners consign to one or more management consulting companies (consultants), and the owners also involved in the management.(2) characteristics and scale of the projects;(3) project work break-down structure is closely related to owner organization, different work break-down structures correspond to different organizations;(4) contracting model and contracts structure of the projects affect owner organizations greatly;(5) human resources of owners.。