revised lcce case

8/10/2019 Revised LCCE Case

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REHABILITATION OF LOWER CHENAB CANAL EASTERN:

CHALLENGES IN PROJECT PERFORMANCE MANAGEMENT

On 9th September, 2004, Mr. Khalid Ahmed Khan, Head of the Project Management Unit

Planning and Development Department, Government of Punjab, was preparing for the

meeting of the Provincial Steering Committee for Project Management. This Committee

comprised of five Secretaries1of different departments. This meeting was planned the next

day, to review the progress of the Lower Chenab Canal Eastern (LCCE) project. At the time

of its initiation, the project was expected to be completed by 31stJanuary, 2005. In a recent

meeting (which was held on 5th August, 2004 to review the status of the LCCE project),

Major (Retd.) Javed Majid, Secretary, Irrigation and Power (I&P) department, had indicated

that the project would be completed on time. However, in Khalids opinion, the project

would not be completed before the canal closure in October 2005.

Khalid had made a presentation to the Chief Minister (CM) of Punjab, Ch. Pervaiz Ellahi, in

June 2003 on the benefits of implementing the Earned Value for monitoring projects. The

t ti h d b t d b th CM t k d i f Kh lid i i


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t ti h d b t d b th CM t k d i f Kh lid i i

[Type text] [Type text] 03-851-2013-1

As Khalid took a final look on his numbers, he recollected what he had learned during his

experiences with the public sector, on the pressures on the bearer of bad news. For example,

these were mistakes and delays on part of the government in finalizing and awarding

contracts; while there were contractors who based on their connections were too hot for

any corrective action. In fact one of the contractors, who had been awarded the contract for

two of the sectors on this project, was known to have close relationships with the President;

who in turn was politically aligned with the CM himself. But, Khalid wondered, if theproject was heading for delays, and no decisions are taken, who will lose eventually. Could

project monitoring data be used for a win-win situation for the different stakeholders.

MANAGEMENT OF PUBLIC SECTOR PROJECTS IN PUNJAB

Punjab was Pakistans largest province with a population of 72 million. The public sectordevelopment budget for Punjab was approximately $ 4 billion (US) in 20032. The major

development sector areas included civil infrastructure, irrigation system, education and

health. The Planning and Development Department, Government of Punjab, was the

custodian of all the public sector projects in Punjab. Public spending in Punjab had increased

by almost 30%, since 2002. This increase in public spending was challenging the present

capacity of the government to effectively plan and execute over 1200 projects in the public

sector portfolio. Keeping these challenges in mind, a review of existing project management

practices was carried out by the government of Punjab in July 2003. This exercise was


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Provincial Steering Committee for Project Management (PSCPM)

This was planned to be the principal policy-making forum to guide the

implementation of new project management in the provincial government. This body

was headed by the Chief Secretary, Government of the Punjab, who was the senior

most bureaucrat of the province.

Project Management Unit (PMU)

This unit was planned to be the execution body. It was responsible for turning thepolicy guidelines issued by the PSCPM into tangible deliverables (templates,

guidelines, best practices, trainings, etc.). The PMU was to be headed by a project

management professional who had hands on experience of managing projects. This

unit was incorporated into the Planning and Development Department.

Capacity building efforts by individual departments were guided by the PSCPM and PMU.The physical implementation of the guidelines in terms of hiring of manpower, acquisition of

project management tools, and the development of the Project Management Offices was the

responsibility of the line departments. Internationally recognized PMI standards were used as

the base standard for project management. This was in line with the PSCPM policy of the

adoption of these standards.

Mr. Khalid Ahmed Khan joined PMU in November 2003, as its first head. He had worked on

projects in IT (National Database and Registration Authoritys Computerized National


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According to the Asian Development Bank (ADB)3review in 2002, cost overruns and project

implementation delays were a common feature of project portfolio management in Pakistan.

The data from the Monitoring and Evaluation (M&E) department, Government of the Punjab

verified this trend. The data suggested that on average, each large scale project was

completed at 155% of its planned cost (Exhibit 1). The data further suggested that against

the planned completion time of 30 months, an average large scale project took about 38

months to be completed, a delay of about 27% (Exhibit 2). Cost and schedule variance in

public sector projects resulted in several failed projects. According to the M&E departmentsdata, only 19% of the completed projects were characterized as successful projects, whereas

the rest of the 81% of the projects were declared as partially successful or failed projects

(Exhibit 3). This was not just true for a certain class of projects, but could be seen across the

board from major projects like Islamabad-Peshawar Motor Way (36 months behind

schedule), Ghazi Brotha Hydro Project (36 months behind schedule and Rs. 10 billion 4over

budget), Lahore International Airport (12 months behind schedule) all the way down to smallprojects like primary schools and health units.

The existing Performance Management Framework was based on the financial progress of

projects against the annual budget allocations. The Management Information Systems (MIS)

were either non-existent or too weak to provide the quantum or quality of information

required for efficient decision-making. A table taken from the Government of Punjabs

Annual Development Program 2000 report, issued by the Planning and Development Board,

exemplified the practical outcome of the Project Performance Management approach (see


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Table 1

Calculation Method for Physical Progress of Projects

Parameter Calculation

Estimate Cost Col 7 + Col 8

Expenditure up to June 1999 Col 9 + Col 10

Physical progress up to June 1999 Expenditure up to June 1999/Estimated cost

Provision for 1999- 2000 Col 11 + Col 12

Physical progress expected during 1999-2000 Provision for 1999-2000/ Estimated Cost

Source: Project Management Office, Planning & Development Department.

THE LOWER CHENAB CANAL EASTERN (LCCE) PROJECT

The Lower Chenab Canal Eastern (LCCE) project was one of the main projects that was

under taken after the creation of the PMU, in November 2003. Thus, this project was

considered critical in terms of measuring the performance of the PMUsteam and held a lot

of importance for Khalid. Previously Khalid had worked as a consultant for some of the

public sector projects (such as NADRA Electoral Roles project), but this was his first major

assignment as a civil service officer and the head of PMU. He was enthusiastic about

improving the performance management systems for large scale projects in the public sector.

The rehabilitation of the LCCE project consisted of 12 sectors A through L Of these 10


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ample availability of water in the rivers, i.e. summer season and could not be managed

without implementing a "Rotational Program"7. The LCCE complex was constructed in 1968

for the conveyance, regulation and control of 14,500 cusec in Qadirabad - Balloki Link canal

and 12,000 cusec in Lower Chenab Canal Upper, and for a diversion of 4,100 cusec through

the Lower Chenab Canal Feeder. It was expected that due to the rehabilitation of the LCCE

system, the water losses due to seepage and other wastages would reduce significantly. Water

losses resulted in lesser water availability along with irregularity in supply of irrigated water,

causing an estimated loss in yields of ten percent. Given the entire irrigated area of 3.03million acres under the LCCE complex, the total improvement in agricultural yield due to the

project, had an estimated value of Rs 12 billion per year8.

Types of Work

The project objectives were expected to be achieved by implementing the following physical

works:1. Raising and Strengthening of the Canals Banks

2. Construction and Repair of Head Regulators (mechanism to control the height of

water flow)

3. Stone Lining of the Banks of the Canals in the Segments of Friable Soil

4. Constructing Spurs (water channels) in Abnormally Widened Parts of the Canal

5. Renovation of the Gates and Gearing System (mechanism to stop/regulate water

flow)

6. Streamlining Flow at Existing Bridges


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10. Rehabilitation / Replacement of Century Old Hydraulic Structures

THE LCCE PROJECT PERFORMANCE MANAGEMENT

The primary objective of the PMU in the LCCE project was to assist the Irrigation and Power

(I&P) department in developing their in-house project management capacity. A weekly

reporting format was introduced by the PMU to keep Mr Javed Majid, the Secretary I&P and

Mr Salman Ghani, the Chairman Planning and Development (P&D) departments, updated onthe status of the project. In addition to the data collected from the LCCE project team, the

PMU team had conducted eight onsite visits to various project locations to monitor the

progress of the project.

At the time of initiation, the LCCE project was expected to be completed by 31st January,

2005 (1st

base line). However, progress on the project was behind schedule from the start dueto delays in design and mobilization of the contractors. The LCCE Project had 12 sectors

with an approximate value of Rs 1.73 billion. The original plan called for the project to be

started on 10thJanuary 2004 and completed by 31stJanuary, 2005. Out of 12 sectors, 10 were

initially awarded after a delay of about two months from the initial schedule. Two packages

(A&E) were reported to have been awarded on 3rd July 2004 with a delay of almost six

months. Current and projected delays had created the risk of claims9by the contractors. It

was not known if the claims had already been filed or were likely to be filed. Additionally,

there was no assessment of the possible cost escalation due to project delays.


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date for project completion was around October, 2005. Achieving that completion would

require the LCCE team to achieve very high productivity during closure. In the closure

period the supply of water to the canal and cultivated lands was stopped temporarily in order

to complete a few works that could not be performed during the water supply period. The

duration for this closure could not be prolonged for more than the specified period of time, as

any further delay in the closure period would cause tremendous loss to the farmers of the

region.

After the project alert, issued on 31stJuly 2004 by PMU, a meeting of the Provincial Steering

Committee for Project Management (PSCPM) was called by Mr. Kamran Rasool, the Chief

Secretary, Punjab. This meeting was held on 5thAugust, 2004.

AUGUST REVIEW MEETING

During the meeting on 5th August, Chief Secretary Kamran had enquired about the design

issues, financial progress and the overall scope of the project accomplished till that date.

Kamran: Can you (Javed) please update us on the performance and the physical

progress of the LCCE project. We would also like to know about the steps taken by

the department to resolve the design issue, given the impact of this issue on the

project. I fail to see why we started the project without completing the design; in fact,

all I can say is that it is plainly, either bad planning or over ambitious planning.


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progress achieved so far in terms of budgeted cost, actual cost and percentage

completion of work is shown on this sheet (Javed passes copies of Table 2 to the

Committee).

Table 2

Data I&P August 2004

Sectors Budgeted CostBC (Rs)

Actual CostAC (Rs)

% ageCompletion

A 173,256,140 31,460,401 18%

B 145,315,150 32,191,709 22%

C 128,625,820 33,974,036 26%

D 163,301,830 15,455,149 9%

E 146,555,360 19,611,663 13%

F 152,951,830 49,018,210 32%

G 151,738,500 47,838,965 32%

H 77,111,960 16,852,744 22%

I 147,718,380 21,650,797 15%

J 135,336,820 21,366,667 16%

K 122,521,140 10,749,246 9%

186 630 310 34 091 762 18%


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included). Although the I&P department had achieved a load of Rs 300 million /

week on a previous project, considering the project specifications of the LCCE

project, they could go upto a work load of Rs 75 million per week. I assure you that

the project would be completed on time with this estimated work load.

Khalid: The progress of the project till August 2004, shows that the project has been

in suspension for the last seven months. The biggest mistake in my opinion, that led

to many other problems was that Sector A was handed over to the contractors without

finalizing the design issues. We do this just too often in the public sector to start

getting the project related financial incentives. I also have concerns regarding the

work load estimates. Keeping in view the previous performance and the potential

problems (such as contractors claims and design issues)with the project, a target of

above Rs. 50 million per week would be unrealistic. I would suggest that we start

working on making a revision in the estimated cost and duration of the projectwithout further delay.

Both Kamran and Javed, however, disagreed suggesting that it would be too early for such an

exercise, and that instead of making revisions, they should try to complete the project within

the estimated time and cost. They decided to meet again at the start of next month.

EARNED VALUE


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was termed as EV. This system enabled project managers to calculate both the cost and

schedule variance of an ongoing project10.

Khalid and his team spent the next two weeks in digging up the planning documents of the

project, to identify the tasks that should have been completed till date. They also identified

the tasks that were actually completed. Khalid, along with some of his team members also

visited the project site to assess the physical progress of the project. This extra work enabled

them to calculate the planned value (the planned cost of work that should have been

completed by then) and the EV (the planned cost of work that was actually completed by

then) for each sector of the project. The actual cost data was already available to him (the

data that Javed had shared in the meeting).

Khalid looked at the data collected (see Table 3), and wondered how to present it to the

senior Secretaries in PSCPM the next day, to convince them that he was right; and withoutstepping on too many toes, to motivate them to take appropriate corrective action.


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Table 3

The Planned Value, Actual Spending and Earned Value, as on 4th

August, 2004

Sectors Total Budgeted

CostPlanned Value Actual Cost Earned Value

B.C (Rs.) PV (Rs.) A.C (Rs.) EV (Rs.)

A 173,256,140 37,064,340 31,460,401 17,875,614

B 145,315,150 33,380,370 32,191,709 25,253,576

C 128,625,820 33,266,450 33,974,036 26,275,164

D 163,301,830 17,394,690 15,455,149 13,614,146

E 146,555,360 39,663,380 19,611,663 13,739,982

F 152,951,830 50,384,680 49,018,210 32,669,884

G 151,738,500 41,785,820 47,838,965 33,932,470

H 77,111,960 18,478,150 16,852,744 12,116,794

I 147,718,380 21,039,960 21,650,797 16,799,022

J 135,336,820 20,699,440 21,366,667 15,437,050

K 122,521,140 13,192,700 10,749,246 9,126,480

L 186,630,310 49,666,210 34,091,762 24,811,940

Total 1,731,063,240 376,016,190 334,261,346 241,652,123


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Exhibit 1



Public Sector Project Performance 1998

Sr # Name of Project Approved

Cost

Revised

Cost

%

Increase

1 Third KV Jamshoro- Multan Second 500 KV Multan-Lahore Gilgit

Transmission Line

9806 18,727 91%

2 Left Bank Outfall Drain (LBOD) Stage-1 8594 31,040 261%

3 Bulk Water Supply From Khanpur Dam To Islamabad/Rawalpindi 3606 6,819 89%

4 Balochistan Primary Education Project 3010 4,460 48%

5 3 x 30 MW EB.Clakhra 2651 5,730 116%

6 Additional 415 MW Combined Cycle Power Unit At Guddu 2586 7324 183%

7 On-Farm Water Management Project 2016 3327 65%

8 Chashma Right Bank Irrigation Projects 1570 13870 783%

9 Development Of Sector I-16 Islamabad 1188 2212 86%

10 132 KV Transmission Lines And Grid Station In Makran Area

Phase- 2

781 879 13%

11 Construction of Parliament Lodges at Islamabad 700 1157 65%

12 Family Health Project NWFP 684 843 23%

13 Tarbell Watershed And Management Project (Phase- 2) 574 753 31%

14 Second SCARP Transition Project Punjab 531 696 31%


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Exhibit 3



The Evaluation of Public Sector Projects


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Source: Punjab ADB 2000 Report

Exhibit 4



Public Sector Project Monitoring and Evaluation Framework

Name of the schemeLocation of the

SchemeStatus of

the SchemeEstimated cost

Expenditureup to 1998-

1999

Revisedallocationfor 1998-

1999

Provision for 1999-2000

ForeignAid for1999-2000with

source

Physical ProgressPercent

Column 3 4 5 6 7 8 9 10 11 12 13 14 15 16

District TehsilForeign

ExchangeComponent

TotalCost

Capital Revenue TotalUptoJune1999

Expectedduring 1999-

2000

ON-GOING SCHEMES MEDICAL EDUCATION

Replacement of damagedroof of patiala Block in the

Department of Pathology,KEMC, Lahore

Lahore Lahore Approved 5.98 5.60 0.98 0.98 94 110

Establishment of AllamaIqbal Medical College,Lahore

Lahore Lahore Approved993.9433.0580.9

867.6350.7517.1

0.950

0.961 1 87 88

Construction of Admin.Block in FJMC, Lahore


Construction of 70-students Hostel at 1- Road,FJMC


ROADS & BRIDGES ON GOING SCHEMES

W/I of Attock Pindi Gheb

road (Tarbela- Hattian-Talagang road) L= 76.00KM

AttockFatehJang

Approved 99.1 19.39 15.34 2 2 35 37

W/I of Attock Fateh Jang toJang Bhater Brehma roadL= 18.50 KM

AttockH.Abdal/

FatehJang

Approved 40.15 17.21 5.30 3.69 3.69 56 65

Const. of high level bridgeover river Harro NearSanjwal

Attock Attock Approved 19.93 15.63 4.18 0.11 0.11 99 100

revised lcce case

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