S-003 - Integrated Project Value Assurance or Stage Gate Review (VAR)
History and development of the process
Towards the end of the 1990s many IOC’s realised that projects often were already doomed to fail before they were even sanctioned; the root cause for failure is often found in the early phases. To remedy this the Value Assurance Review (VAR) was created. Such a review is an integrated and independent challenge, carried out at a number of decision gates prior to sanction. After project sanction a similar type of review is conducted. One could say that VARs executed early on in a project address the question “Are we doing the right project?”, whereas reviews around sanction time focus on the question “Are we doing the project right?”.
The VAR process recognises that reasons for cost and schedule overruns more often than not are found in Non-Technical aspects (this is also supported by institutions such as IPA). Hence the integrated TECOP (Technical, Economic, Commercial, Organisational and (Socio)-Political) approach is used. Over the years, the process has been extended to non-technical projects such as office refurbishments, setting up shared service centers, IT support and the like.
In general, the better understanding of the full range of aspects impacting project success resulting from VARs, assist in better management of risks and opportunities, but also in the realisation that “Unknown un-knowns” will also pop up and play a role.
Over time, reviews were elevated to a higher level. The main reason for this is the experience that shows that potential issues often found in the fundamental aspects of a project, rather than in the detail.
Mechanics and characteristics of VARs
In the VAR process a review lasting for a week is conducted by a team consisting typically of some 5 senior and experienced staff. The first day there are project team presentations, followed by two days of interviews, next the discussion of the integrated picture within the VAR team, creating the close-out presentation and finally the delivery of this presentation. Customers are senior executives governing the project. Other main recipients are those responsible for delivering the project.
Two characteristics of the process are fundamental:
Integration and Independence.
Integration is achieved by having an accredited and experienced team lead and a team of subject matter experts.
Independence is achieved by being external and impartial to the project team.
When a VAR has been completed, recommendations are given in the close-out presentation. Usually, the VAR team is not normally involved in following these up, but a different approach with a longer involvement of the reviewers may well be preferable.
History has shown that value is created, or destroyed, in the early days of a project. Therefore Front End Loading (FEL) of projects is crucial and this includes the external challenge provided by VARs.
In many cases it can be demonstrated that the review has enhanced project value: changes to the concept, alignment between project elements or advising to stop, suspend or accelerate work. Apart from this, in almost all cases significant value is already gained by the discipline and communication required to prepare for the integrated review.
Another valuable aspect is the learning in the organisation and between projects that results in understanding what helps achieving (or eroding) project success and better understanding risks.
What is often a surprise is that main findings are not so much in fine-tuning detail, but expose fundamental shortcomings or issues that can erode project value. The high level of the review and ability of team members to spot what later appears most obvious is what enables the creation of value, specifically when it is communicated constructively.
- Front End Loading is essential to optimise project value.
- Non-technical factors often have a larger impact than technical aspects
- Often, main findings concern project fundamentals rather than technical detail
- Nothing beats experience and common sense to identify issues and their consequences
- Preparing for an integrated review is in itself valuable and forces discipline
- Integration is essential to plan and execute a balanced project