Hello, my name is Christopher J Toomey. And I'm the senior vice president for global programs at AECOM. And today, I want to talk to you about cost control for large programs. I have had the opportunity to serve as a director in large programs and megaprojects across the globe. And I will tell you that this is a very, very important topic that you need to fully understand. First, a note about AECOM. AECOM is a global Fortune 500 firm, providing integrated services in design, construction, operations, and maintenance and financing of capital infrastructure. We've been rated the number one engineering and design firm for 2016 by Engineering News Record. And we look to provide sustainable solutions for our clients across the globe. First of all, why is this important? Well, program costs, notably for large capital programs, many of those that are run by governments, represent a significant commitment, often several billion dollars over multiple years. Because many capital programs are complex, we have to effectively understand the costs, where they come from, and how to control them can be very difficult. So a comprehension in that area is quite important. Next, the risk associated with a lack of effective cost control is great. Multiple unknowns make it challenging to discretely quantify. Because of the large costs associated with a capital program, the impact of any single risk can be great. Cost overruns, when they occur, have a serious ripple effect that can impact beyond just the financial cost of the work at hand. They can have economic impacts for the country. They can have social impacts. And they can have political impacts. An effective cost control will optimize that all program objectives are achieved. But first, I think it's important that we understand about the nature of programs and program management. So really, what is a program? Well, from the Project/Program Management Institute, there you can see the definition. A group of related projects managed in a coordinated way to obtain benefits and control not available from managing them individually. I think it's important to understand this issue of being managed in a coordinated way. It is not just the mere stringing together of projects that make a program. They have to be related. And they need to go to a greater good and a greater benefit than individually. If we look at program key characteristics, we can identify several. First, the deliverables have a strategic intent, not just technical. As an example, a program could be an interstate highway system. There are many different deliverables associated with it, to include signalling, and to include the highway and various bridges. A project within that program would be the technical focus on a section of the highway or perhaps a single bridge. The success criteria for a program is not just merely measured in the successful completion of the works. It could include growth or political gain. Going back to our highway system example, it could include that there is going to be a greater economic benefit gained from that highway system over a number of years. There also could've been political capital invested in order to build the highway system. So there would be gain for that political group that was involved in promoting that program. Program characteristics also account for market and business change. Because programs are so large in their value, because they're so open-ended and long-reaching, they have to account that the market conditions and business systems will change over time. Consider, for example, the recent price of oil. As the oil has fluctuated, those programs that use oil as a significant part of that program have had to adapt to those business changes. They also consider the political, social, and economic forces that are affecting the region or the area or the nation that they're being constructed in. It includes organizational impacts. This could include the organization of, for example, the part of the government that the program is working for, or for the large business element that the program is working for. Additionally, include organizational impacts associated with the government itself. And as I said, they're typically of an extended duration, often open-ended. Benefits accrue throughout the life of the program. They're not simply put at the end. And there are broad risks which affect all of the above. And because of the nature of programs, the risks are often unknown. Where, say, in a single construction project, the risks are well-known and can be quantified. Program management really comes from our understanding of the key characteristics. It's the creation, planning, integration, coordination, and oversight of a set of projects that contribute to the achievement of an organization's vision, strategic objectives, and desired results. Purpose is fairly straightforward. Top-down planning and management and coordination of the projects. But it also ensures that the overarching goals are met, that there is value for investment and risks are minimized. Some typical responsibilities of program management include the oversight of all aspects of the project in construction management, for multiple projects. It includes the development of standards and guidelines for safety, quality, procurement. It includes a thorough understanding of program costs and schedule. And we're going to be talking about costs in a second. It also includes stakeholder management and engagement and public information. Those are two major areas where the program management team will be intimately involved. But let's take a look at the program cost control challenge. First, we will look at defining costs. Then we want to look, from a program perspective, what is the impact of cost overruns? Then we'll discuss the nature of the capital infrastructure program budgets, causes of those cost overruns, and program cost control measures. And then we'll discuss a useful way to perhaps look at these program costs and how to analyze them.
