1.1 CVEN 90045LMS - Governance 1 2018

Organisation & Governance
Organisation & Governance Requirements

for a Civil Infrastructure Project
Lecture 1 – 2018
Prepared by Peter Bishop C.P.Eng.
CVEN90045 Engineering Project Implementation

Governance & Organisation 1
Definitions:
Governance is the process of managing & controlling a
project with proper checks & balances at all stages.
Who will
approve this
pipe
connection ?

The following Lecture Notes and Other Reading have covered the
following key points:
•The project owner establishes governance by:
•Establishing an organisation structure
•Defining relationships between participants in the organisation structure
•Relationships can be defined by law, by contract or by agreement.
•Relationships may include controls by law or by contract or by informal agreement.
•Controls are needed to avoid failures and unexpected changes during the project.
•Controls may delay the project so use delegation of authority.

•Matrix management organisations assist the delegation process.
Have you read the notes?

Any questions??

Definitions:
The governance process must take into account the
requirements of all key stakeholders to ensure that
the project delivers optimum outcomes including
those of the project owner.
We will incorporate
your requirements
into the approval
process

Definitions:
The primary stakeholder is the project owner & one of
its objectives is to ensure that the project is accepted
by key stakeholders. (“…accepted by…”, not
necessarily “…acceptable to…”)
They haven’t
used our good
idea !!

Establishing Good Governance:
• The Owner (Project Manager) can initiate the
governance process by setting up an appropriate
organisation structure involving relevant
stakeholders.
How would you then use the organisation

structure to control decisions (checks &
balances) during the implementation of
the project?

Establishing Good Governance:
• The governance (managing & controlling process) is

superimposed by defining the relationship between
participants (stakeholders) in the proposed
organisation for project implementation;
• This relationship can be a defined and applied by

law, by contract or by mutual agreement;

Statutory Informal
obligation Obligation
Owner/Principal
External External
Individual
Stakeholders A Stakeholders B
contracts
Principal Construction Construction Design Accountant Lawyer

Designer Contractor Superintendent Reviewer
Insurer Banker
Specialist Suppliers &
Technical Sub-contractors
Advisors
Typical Contract Organisation for a Project

Stakeholders
Owner/Principal & Owner’s Advisors

Project Manager
Contract
Superintendent
Principal Construction
Designer’s Contractor’s
Manager Manager

Technical Sub-contractors
Advisors
Conventional Project Management Organisation:

Stakeholders
Owner/Principal
Banker Insurer
Accountant Lawyer
Independent
Auditor
Principal Owner/Principal Construction

Designer Contractor
Alliance Project Manager

Agreement
Sub-Alliance Specialist Suppliers &

Partners Technical Sub-contractors
Advisors
Alliance Project Management Organisation

Alliance contracting
Alliancing is a method of procuring, and sometime managing, major capital assets. Under an alliance
contract, a state agency contractually works collaboratively with private sector parties to deliver the
project.
Alliance contracting is characterised by a number of key features, which generally require the parties to
work together in good faith, act with integrity and make best-for-project decisions. The alliance
participants work as an integrated, collaborative team to deal with key project delivery matters.
Under alliance contracts, risks of project delivery are often jointly managed by the parties, although
financial exposure lies mostly with the State.
Normally, alliancing is used to deliver the larger, more complex and high-risk infrastructure projects (with
capital costs exceeding $50 million) and where the client has particular capability to contribute its skills
and expertise to deliver the project.
Read more at:

www.dtf.vic.gov.au/Infrastructure.../Alliance-and-traditional-contracting
Alliance Project Management Organisation

Governance Control Measures:
• The governance process can be used to apply mandatory
requirements or discretionary requirements. For example:
A contractual obligation is a mandatory form of

governance;
A statutory obligation is a mandatory form of governance

such as environmental legislation, or OH&S legislation;
A Steering Committee or Community Reference Group can

provide opinions that are used to provide confidence that the
Project direction is generally satisfactory.

Governance Controls :
The governance process is provided by
participants having powers or authorisations
within the organisation to:
•Direct
Increasing Power of Action

•Approve
•Certify
•Endorse
•Recommend
•Check
•Review
•Advise

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

Governance :
It is important to include governance gateways along the
delivery path of the Project.
Why ?

Impacts of Change During Project Development & Project Delivery
6
Ability to make a
change to the
project scope
5
4
Degree of Impact
0
Strategy or Feasibility Business Case Procurement Construction Commissioning
Pre-feasibility

Impacts of Change During Project Development & Project Delivery
6
Ability to make a Cost to make a
change to the change to the
project scope project scope
5
4
Degree of Impact
0
Strategy or Feasibility Business Case Procurement Construction Commissioning
Pre-feasibility

The time needed to exercise the governance controls
can be time consuming and may slow down the
implementation by having too many “gateways” ;
Review
Request Comments
For
Approval
Recommendation
Approval “Bottle-neck”

How can you reduce the potential

bottle neck caused by the
governance process?

Delegation:
•This can be improved by delegating the powers
(authorisations) to lower levels in the organisation.
• The delegated powers may be to certify or approve

matters up to a certain value, risk level, or complexity.
•The delegation may also be to empower less

experienced personnel to review, check and recommend
certification or approval.

Governance Action Examples Authorisation Above $1M or Authorisation below $1M or Low
High Risk Level Risk Level Delegated to:
Direct: Owner's Board of Directors Owner's General Manager
Approve: Example 1, Change of Project Owner's General Manager Project Manager

Scope
Approve: Example 2, An increase in the Construction Manager Senior Engineer for Foundation Area
depth of foundations
Approve: Example 3, An extension of time Contract Superintendent Superintendents Representative

to a critical program activity
Certify: Example 1, Contractor’s monthly Contract Superintendent Superintendents Representative

payment from the Owner

Governance Action Examples (contd) Authorisation Above $1M or Authorisation below $1M or Low
High Risk Level Risk Level Delegated to:
Endorse or Recommend: Example 1, The Contractors temporary works Sub-contractor responsible for crane
design of a crane foundation. designer. supply and erection.
Endorse or Recommend: Example 2, A Project Construction Finance Site Cost Engineer

change to the project cash-flow. Manager
Check: Example 1, A claim from a Superintendents Site Engineer

Contractor for extra costs from the Owner Representative
Check: Example 2, A change to the quality Chief Design Engineer Senior Engineer for each discipline.
standard of material.
Review, comment & advise High Credibility Specialist Recognised Specialist

Governance for External Stakeholders:
• The lecture about stakeholders describes how to
determine the importance of particular stakeholders
in the organisation. based on a simple risk
assessment (mapping) process.
• Using the stakeholder map and the implementation
work breakdown structure, the organisation can be
developed to engage the stakeholders to the degree
warranted by their importance to the achievement
of the Owners project objectives.
• The governance for internal stakeholders is usually
more definitive than for some external stakeholders.

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

External Stakeholders (contd):
Does the Project Manager have to adopt

all the proposed recommendations or
resolutions put forward by
external Stakeholders?

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

the decision to adopt or not and be given reasons for
this.

Conflict of Interest:
• Individuals may adversely affect project implementation
because of personal or corporate interests that are different
from those of the project organisation or different from those
of others in the organisation.
•The organisation and governance arrangements must avoid

conflicts of interest and they must include methods to manage
conflicts of interest if they arise.

Conflict of Interest (contd):
Conflicts of interest are dealt with at the time of entering
into a contract arrangement (contractual obligations);
Less rigorous agreements with committees or advisors
( voluntary members particularly) are less explicit in the
conflict of interest obligations.
Typically committee members will be asked to sign a
confidentiality agreement and a conflict of interest statement.
Actions by organisation members may not show a blatant
conflict of interest but behaviour may adversely influence
others in the organisation.

Matrix Management Definition:
Matrix management is a style of management where an individual has two
reporting superiors (bosses) - one functional and one operational.
• This is commonly seen in project management where an engineer, for example,

reports to the chief engineer functionally, but reports to the project manager on
operational project issues.
• Matrix management also is common in branch offices. The accountant in the

Melbourne office reports functionally to the Vice President of Accounting in
headquarters in Sydney, but reports operationally to the Regional Manager in
charge of the Melbourne office.
• Generally the functional reporting relationship is stronger, because the

functional manager controls the individual's compensation and evaluations.

Matrix Management Definition:
Matrix management is a style of management where an
individual has two reporting superiors (bosses) - one
functional and one operational.
Functional Functional Functional Functional
Manager Manager Manager Manager
Project Engineer 1 Engineer 2 Engineer 3 Engineer 4

Manager

Manager

Manager

Matrix Management Example:
Matrix management is a style of management where an
individual has two reporting superiors (bosses) - one
functional and one operational.
Managing Manager Regional OH&S Regional Regional Cost
Director Engineering Manager Construction Accountant
Manager
Project Design Safety Officer 1 Construction Site Cost
Manager 1 Engineer 1 Manager 1 Manager 1



Documentation of Governance Arrangements:
•To implement effective governance, the roles and responsibilities
of all members of the organisation must be clearly documented,
including the relationship between each.
•The project management plan must include:

roles and responsibilities;
Authority levels;
Dispute resolution method;
Reporting obligations.
Reference documents (contracts, agreements, statutes)

Governance Role of the Professional Engineer:
• As a professional Engineer, you may be operating in a project
organisation as an employee of the Owner, or as an employee of
one of the entities participating as a service provider or as an
external stakeholder.
How will you know what your obligations are in

the project Governance arrangements?

• Your employment conditions will include obligations to your
employer including respect for confidentiality and notification of
any conflict of interest risks.
• Project- specific responsibilities may be added to your employee

obligations.
•Your Employer will have signed a contract or agreement that

specifies governance obligations and you must be made aware of
these obligations to meet you personal obligations.

Stakeholders **
Owner/Principal &
Project Manager Owner’s Advisors
** **
Contract
Superintendent
**
Principal Construction
Designer’s Contractor’s
Manager Manager
** **

Technical Sub-
Advisors contractors Professional
** Engineer
** **

In all roles in the organisation you will be expected to behave

ethically as an individual professional engineer.
I am not
a
Professional
Engineer
End of Lecture Part 1 -2018

A Practical Example Will be
Developed During the Lecture

To show how organisation & governance works in practice we will develop,
during this lecture, an organisation structure for a Government road
authority:
The functions to be covered by the organisation include:
• Developing & publishing standards and guides for road materials, traffic
management, design and construction.
• Strategic planning for road network and new projects feasibility.
•Land acquisition for new roads.
•Asset management including contracts for major road works and road maintenance.
•Safety Management.
•Quality management
•Financial management
•Legal and insurance
•Vehicle registration and driver licencing. Practical Example:
Thinking process to develop the organisation structure for the Government
road authority:
1. Start with a Managing Director or Chief Executive.
2. Identify the features of the organisation: planning of the road system, capital
works design & construction , operation & maintenance of the road network,
services to road customers. What else?
3. What would be logical grouping of functions to achieve < 6 reporting to Managing

Director? Big budget activities, big risk activities, system-wide activities. These
could be called Group Managers because they are looking after a group of
functions, or a group of activities or geographical areas.
4. The next level down could be Managers responsible for a particular activity or
area or discipline.
5. These Managers will keep some important support positions reporting directly to
them and then establish positions below to manage a wider group of projects,
regional areas , or discipline-specific activities.
Practical Example (contd):

Try some
options !
Practical Example:
Q: What other factor would you take into account when
developing your organisation structure?
Think about how you would arrange players in a sporting team for a given organisation:
Practical Example (contd):

1.1 CVEN 90045LMS - Governance 1 2018

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Organisation & Governance

Organisation & Governance Requirements

Prepared by Peter Bishop C.P.Eng.

CVEN90045 Engineering Project Implementation

CVEN90045 Engineering Project Implementation

•Relationships can be defined by law, by contract or by agreement.

•Relationships may include controls by law or by contract or by informal agreement.

•Controls may delay the project so use delegation of authority.

Have you read the notes?

CVEN90045 Engineering Project Implementation

CVEN90045 Engineering Project Implementation

CVEN90045 Engineering Project Implementation

How would you then use the organisation

CVEN90045 Engineering Project Implementation

• The governance (managing & controlling process) is

• This relationship can be a defined and applied by

CVEN90045 Engineering Project Implementation

Principal Construction Construction Design Accountant Lawyer

Typical Contract Organisation for a Project

CVEN90045 Engineering Project Implementation

Owner/Principal & Owner’s Advisors

Specialist Suppliers &

Conventional Project Management Organisation:

CVEN90045 Engineering Project Implementation

Principal Owner/Principal Construction

Alliance Project Manager

Sub-Alliance Specialist Suppliers &

Alliance Project Management Organisation

CVEN90045 Engineering Project Implementation

Read more at:

Alliance Project Management Organisation

CVEN90045 Engineering Project Implementation

A contractual obligation is a mandatory form of

A statutory obligation is a mandatory form of governance

A Steering Committee or Community Reference Group can

CVEN90045 Engineering Project Implementation

Increasing Power of Action

CVEN90045 Engineering Project Implementation

CVEN90045 Engineering Project Implementation

CVEN90045 Engineering Project Implementation

CVEN90045 Engineering Project Implementation

CVEN90045 Engineering Project Implementation

CVEN90045 Engineering Project Implementation

How can you reduce the potential

CVEN90045 Engineering Project Implementation

• The delegated powers may be to certify or approve

•The delegation may also be to empower less

CVEN90045 Engineering Project Implementation

Direct: Owner's Board of Directors Owner's General Manager

Approve: Example 1, Change of Project Owner's General Manager Project Manager

Approve: Example 3, An extension of time Contract Superintendent Superintendents Representative

Certify: Example 1, Contractor’s monthly Contract Superintendent Superintendents Representative

CVEN90045 Engineering Project Implementation

Endorse or Recommend: Example 2, A Project Construction Finance Site Cost Engineer

Check: Example 1, A claim from a Superintendents Site Engineer

Review, comment & advise High Credibility Specialist Recognised Specialist

CVEN90045 Engineering Project Implementation

CVEN90045 Engineering Project Implementation

CVEN90045 Engineering Project Implementation

Does the Project Manager have to adopt

CVEN90045 Engineering Project Implementation

•However, the external stakeholders must be advised of