Many organisations, one project: mapping the team and its interfaces

A project team is rarely one organisation. The people who design, build, supply and commission a capital project work for different businesses, each with its own managers, cash flow, margin and idea of a good result. They are brought together for a year or two by contracts, and they separate again when the work is done. Whether they behave as one team for that time decides much of what the project costs and when it finishes.

This chapter introduces the running case and maps it: who the organisations are, what each is paid for and what each wants, how many communication paths their people create, and where their work touches. The touching points, the interfaces, are where most coordination failures start. The chapter counts them, sets out a register to manage them, and ends with a racking change that crossed four interfaces without anyone checking them.

The project and its budget

This is an illustration. A family-owned Australian food manufacturer that makes sauces, soups and pantry goods has outgrown its warehouse and two leased third-party stores. It plans a new distribution centre on land it already owns in Melbourne’s west: an 11,500 m² warehouse with 800 m² of office and amenities, 14,000 pallet positions of selective racking 11 m high, case-picking conveyors and controls, and a new warehouse management system (WMS). The board has approved A$18.00m excluding GST, and all amounts in this chapter exclude GST.

The approved budget has five lines. The works allowance of A$15.60m covers the contract payments for the building, racking and conveyors, plus the external cost of administering those contracts. Design consultants take A$0.85m, WMS and IT A$0.60m, the owner’s own project team A$0.55m, and the owner’s contingency A$0.40m. The works allowance is 86.7% of the budget, which is why most of this book is about how the works are let and paid for.

The contractors’ own cost of the works, their direct cost before overhead and profit, is estimated at A$13.50m at the median: building and civil A$9.9m, racking A$1.4m, and conveyors and controls A$2.2m. Racking at A$1.4m works out at A$100 of direct cost per pallet position.

Figure 1The distribution centre at a glance

A$18.0mapproved budgetworks allowance A$15.6m

78 weeksapproval to operationend of month 18

A$80kowner's cost of each week of delayleases, shuttle freight, labour

20people in the core teamfrom six organisations

190person-to-person communication paths161 cross an organisational boundary

The programme runs from approval in month 0. Design takes months 1 to 4 and the works are awarded at the start of month 5. The building is constructed in months 5 to 14, racking is installed in months 13 to 15, conveyors in months 14 to 17, and commissioning fills months 17 and 18. The distribution centre is due to operate at the end of month 18, 78 weeks after approval.

Every week of delay costs the owner about A$80,000: A$38,000 in leases on the third-party stores it cannot yet leave, A$27,000 in shuttle freight between its sites, and A$15,000 in labour inefficiency from running three buildings. That number does not appear in any contractor’s price, which is the first sign that the organisations on this project are not exposed to the same consequences.

Six organisations, six businesses

Six organisations deliver the project. Their core management team, the people who plan, decide and coordinate rather than the trades on site, is 20 people.

• The owner, 4 people: the sponsor, who is the manufacturer’s chief operating officer; a project director; a contract administrator; and the manager-designate of the new distribution centre. The owner pays for everything and keeps the result. It wants a working building on time, within A$18.0m, that ships orders at the rate its business case assumed. Stating that outcome as measures every organisation can see is the subject of From a request for new plant to the outcome behind it in Outcome-First Projects by the Numbers; Chapter 9 of this book turns it into a shared scorecard.
• The designer, 3 people: a design manager, a structural and civil engineer, and a fire and services engineer. It is paid a fee for design and is exposed mainly to its reputation and its professional liability. It wants a design that is approved, built as drawn, and not the subject of a claim.
• The builder, 6 people: project manager, site manager, contracts administrator, project engineer, safety adviser and foreman. The builder carries the largest share of the works and the largest workforce. It wants its margin, steady cash flow, a safe site and a client who will invite it to tender again.
• The racking supplier-installer, 2 people. It wants a clean slab, clear access in months 13 to 15, and no redesign after its steel is cut.
• The conveyor and controls integrator, 3 people. It works last, after everyone else, and absorbs everyone else’s lateness in its commissioning window.
• The WMS vendor, 2 people. It sells software and services, has many other customers, and wants the configuration fixed early so its consultants are not held on standby.

None of these aims is unreasonable, and none is the same as the owner’s. A builder with a fixed price gains from finishing under cost; a designer gains from not reopening an approved design; an integrator gains from a programme that leaves its window intact. Whether those interests line up with the project’s interest depends largely on how each organisation is paid, which is the subject of How contracts shape behaviour: who keeps a dollar saved, the next chapter.

Figure 2The six organisations and their core team

• Distribution centre projectcore team of 20
  • Owner, 4sponsor (chief operating officer), project director, contract administrator, DC manager-designate
  • Designer, 3design manager, structural and civil engineer, fire and services engineer
  • Builder, 6project manager, site manager, contracts administrator, project engineer, safety adviser, foreman
  • Racking supplier-installer, 2project lead, installation supervisor
  • Conveyor and controls integrator, 3project lead, mechanical engineer, controls engineer
  • WMS vendor, 2project lead, implementation consultant

The owner’s four people are not all charged to the project. The project director is full time for 18 months, and the contract administrator is half time from month 5. Together they are 25 FTE-months, which at a blended A$22,000 per FTE-month is the A$0.55m budget line. The sponsor and the DC manager-designate are existing staff whose time is recorded but not charged. The contractors’ and designer’s people are paid inside their fees and prices. The readiness and authority questions that come with fractional people are covered in Who controls the people on a project.

Counting the communication paths

In a group where every member may need to talk to every other, the number of separate two-person paths is n(n − 1)/2, a count Brooks used in The Mythical Man-Month (1975) to explain why adding people adds coordination work faster than it adds capacity. For the core team of 20, that is 20 × 19 ÷ 2 = 190 paths. Each person has 19 possible contacts.

The same formula applied to the organisations gives 6 × 5 ÷ 2 = 15 organisation pairs. Not every pair has technical work in common, but every pair can affect the other through the programme, the site or the money.

The more telling number is where the paths lie. Inside each organisation, the paths are: owner 6, designer 3, builder 15, racking 1, integrator 3 and WMS vendor 1, a total of 29. The other 161 of the 190 paths, 84.7%, cross an organisational boundary. On average, each person has about 16 contacts in other businesses, with other managers, other priorities and other email systems. A message that crosses a boundary is more likely to be delayed, filtered or misunderstood than one inside a business, because the sender and receiver answer to different people.

No one manages 190 paths. The team’s structure decides which paths are used. If the seven members of the coordination group talk to each other, that is 7 × 6 ÷ 2 = 21 paths, and if each of the other 13 people reports through their own organisation’s lead, that adds 13, for a hub structure of 34 paths in place of 190. The hub is cheaper to run but relies on the leads passing information on accurately and quickly. Chapter 7, Team size and communication paths, prices the meetings that each structure needs.

The interface register

A communication path joins two people. An interface joins two pieces of work: a point where one organisation’s design, product or activity depends on another’s. The slab must be flat enough and strong enough for the racking base plates; the racking must leave space and fixings for the conveyor; the conveyor’s controls must exchange messages with the WMS; the IT network must reach every scanner. Each of those is a place where two organisations can each believe the other has it in hand.

This is an illustration. During design, the owner’s project director and the designer’s design manager built an interface register for the works. It lists 38 interfaces across eight organisation pairs. Nine of them involve three or more organisations, such as a conveyor passing through a fire-rated wall, which involves the builder, the fire and services engineer and the integrator.

Figure 3Interfaces in the register by organisation pair

Builder and designer9 interfacesstructure, services, drainage, fire

Builder and conveyor integrator7 interfacespower, supports, penetrations, access

Builder and racking6 interfacesslab, joints, anchors, access

Conveyor integrator and WMS vendor5 interfacesmessages, scanners, sortation logic

Racking and conveyor integrator4 interfacesheights, transfers, guarding

Owner and WMS vendor3 interfacesdata, processes, training

Builder and WMS vendor, IT network2 interfacescabling, switches

Designer and racking, fire and slab2 interfacesfire assessment, slab design loads

The builder is a party to 24 of the 38 interfaces, which is one reason a head contractor’s coordination role is valuable and why its contract terms matter so much. Seven of the fifteen organisation pairs have no registered technical interface, but they still share the site and the programme.

A useful register entry has six parts:

1. What the interface is, in one line: “racking base plates to slab, anchor positions clear of saw-cut joints”.
2. The parties, every organisation whose work depends on it.
3. A named owner, one person responsible for keeping the interface closed, not an organisation.
4. The information needed, from whom and by when, tied to the programme.
5. The status: open, agreed, built or tested.
6. Change triggers: which design parameters, if changed, reopen it.

The last field is the one most registers leave out, and the error at the end of this chapter shows why it matters. The register is best started during front-end planning, when the interfaces are still cheap to settle, not after award.

Shared safety duties

Work health and safety law does not wait for the contracts to sort out who coordinates whom. Under the model WHS Act, where more than one business has a duty in relation to the same matter, each must, so far as is reasonably practicable, consult, cooperate and coordinate activities with the others (model WHS Act s 46). Safe Work Australia’s model Code of Practice on consultation, cooperation and coordination gives guidance on doing so. On this site, the builder, racking installer, integrator and WMS vendor’s technicians all work around forklifts, elevated work platforms and live conveyors at once during months 13 to 18, so the duty is real and daily.

Under the model WHS Regulations, a construction project is one whose construction work costs A$250,000 or more, and it must have a principal contractor with extra duties, including the WHS management plan for the site. The works here are about 60 times that threshold. The principal contractor is normally the builder, appointed in writing by the owner. The model laws are adopted by each state and territory, with variations, and Safe Work Australia lists Victoria, where this project is, as the one jurisdiction that has not implemented them: it has its own Occupational Health and Safety Act 2004, which is structured differently and sets its own thresholds. The regulator in the relevant jurisdiction is the authority on what applies. The model provisions are used here to show the kind of duties that arise when businesses share a site. The point for this chapter is that the safety interfaces between organisations are legal duties, and a coordination structure that does not cover them is incomplete.

The error: a taller rack and a sprinkler nobody priced

This is an illustration. In month 6, a month after the works were awarded, the owner’s DC manager-designate reviewed the five-year volume forecast and asked whether the racking could be taller. The racking supplier confirmed that raising the top beam from 9.5 m to 11 m would lift capacity from 12,000 to 14,000 pallet positions, an increase of 16.7%, for A$200,000 of extra racking at A$100 a position. The building’s clear height allowed it. The project director approved the change as a racking variation, and the supplier revised its drawings.

The change was checked against one interface: Builder and racking, for slab loads, which the structural engineer confirmed in a week. It was not checked against the others it touched. The fire and services engineer’s assessment had assumed the lower storage height, and the revised height took part of the racking beyond what that assessment covered.

Nobody noticed until month 12, when the fire and services engineer reviewed the racking shop drawings and saw the new top level. The revised fire assessment required in-rack sprinklers to part of the racking. By then the fire services were let, the sprinkler mains were installed, and the racking steel was on order.

Figure 4How the racking change travelled

1. Month 6Racking raised from 9.5 m to 11 m12,000 to 14,000 positions, A$200k, approved as a racking variation
2. Month 6Slab loads checkedBuilder and racking interface only
3. Months 7 to 11Fire services let and installedto the original storage height
4. Month 12Shop-drawing reviewfire and services engineer finds the new height
5. Months 12 to 15In-rack sprinklers designed, supplied and installedA$420k and 3 weeks of delay

The late fix cost A$420,000 for in-rack sprinklers, designed, supplied and fitted around racking already being installed, plus 3 weeks of delay to racking completion and therefore to conveyors and commissioning. At A$80,000 a week, the delay cost the owner A$240,000. The total was A$420,000 + A$240,000 = A$660,000, more than three times the cost of the racking change that caused it.

Had the height change been checked across every interface in month 6, the in-rack sprinklers would have been designed into the fire services before they were let, for about A$310,000 and no delay. The avoidable cost was A$660,000 − A$310,000 = A$350,000. The extra pallet positions may well have been worth the sprinklers; the owner simply never had the chance to decide that with the right number in front of it.

Notice what the failure was not. Every organisation did its own job competently: the supplier priced the racking correctly, the structural engineer checked the slab, the fire engineer found the problem as soon as the drawings reached that desk. The failure lay in the gaps, in the 161 cross-boundary paths and the interfaces no one person owned.

The correction

The project director made two changes, both cheap.

First, every change request is checked against the interface register before approval. The change form now lists the register’s change triggers, so a change to storage height automatically reopens the fire assessment, slab design, conveyor transfer heights and sprinkler clearances. Each reopened interface’s owner signs off or prices the effect within five working days. The wider discipline of controlling change once a plan is approved is covered in Locking in the plan: long-lead orders, readiness and change after approval in Front-End Planning by the Numbers.

Second, each interface has one named owner, a person, not an organisation. The two Designer and racking interfaces, fire and slab, were assigned to the fire and services engineer and the structural engineer by name, with the racking supplier’s project lead as the other party.

Figure 5Change-impact check against the interface register

• Do: List the design parameters the change altersheight, load, position, capacity, timing
• Do: Find every interface whose change triggers include those parametersfrom the register, not from memory
• Do: Send the change to each interface's named ownerpriced response within five working days
• Do: Add the full cost, including delay at A$80k a week, before approvalnot only the requesting package's price
• Avoid: Approve a change as a single-package variation because only one contractor prices itthe racking change touched four interfaces

Exercise: splitting the integrator

The conveyor and controls integrator proposes, late in tender, to split its scope: a conveyor supplier would provide and install the mechanical conveyors, and a separate controls firm would provide the controls, the panels and the software that talks to the WMS. The two together would field one more person than the integrator’s three. Work out the new number of organisation pairs and person-to-person paths, and explain which new interfaces enter the register.

Worked answer. Seven organisations give 7 × 6 ÷ 2 = 21 organisation pairs, up from 15, an increase of 6: the new controls firm pairs with each of the other six. Twenty-one people give 21 × 20 ÷ 2 = 210 paths, up from 190, an increase of 20, because the new person can reach each of the other 20. If the four people split two and two between the firms, the paths inside organisations fall from 29 to 28, so 182 of 210 paths, 86.7%, now cross a boundary, up from 84.7%. The register changes more than the counts suggest. A new Conveyor and controls pair appears, covering motors, sensors, emergency stops and the panels’ power. The five Conveyor and WMS interfaces move to Controls and WMS, because the messages, scanners and sortation logic belong to the controls firm. The Builder and conveyor interfaces split, with power supply, cable routes and network outlets going to the controls firm, while supports and penetrations stay with the conveyor supplier. Interfaces that were inside one business, such as matching a motor to its drive, are now between two, and need named owners on both sides. The owner should ask who carries the risk of the conveyors and controls not working together, because under a split scope neither firm can achieve that alone.