2.6 MAXIMISING VALUE
2.6.2 Learning from the past
BHP Billiton wants to ensure that its project development processes and practices represent best industry practice and provide a source of competitive advantage for the corporation. BHP Billiton has established a set of project fundamentals for the development of projects, which are listed and described earlier in Table 2.5.1.
These fundamentals have been developed from project benchmarking outcomes, studies of the processes and systems used by other companies and from BHP Billiton’s own lessons learnt. The fundamentals apply to the development of all types of capital projects including greenfields and brownfields projects, minerals projects and petroleum projects and include capital projects to implement new systems or make business changes.
The fundamentals are underpinned by the BHP Billiton Charter, specifically “an overriding commitment to health, safety, environmental responsibility and sustainable development”.
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PROJECT DEVELOPMENT MANUAL
CHAPTER 3
GROUP LEVEL DOCUMENTS
Document No: PDM-001
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Table of Contents
3.0 GROUP LEVEL DOCUMENTS ...1 3.1 GLD OVERVIEW...1 3.2 MAJOR CAPITAL PROJECTS GLDS...3 3.3 MANDATORY DELIVERABLES...4
Tables
Table 3.3.1 Key mandatory deliverables (in alphabetical order) ...4
Figures
Figure 3.1.1 GLD Phase II timetable ...2
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3.0 GROUP LEVEL DOCUMENTS
3.1 GLD OVERVIEW
All project activities carried out within BHP Billiton must be in executed in accordance with the minimum requirements as stipulated by the group level documents (GLDs). The GLDs are generally ordered by function, so the various functions within a project team can readily identify the GLDs appropriate for their work activities.
Projects, by their very nature, effectively recreate the business, or parts of it, in either new greenfields operations or extensions to existing operations via brownfields expansions. As a result, a number of different function GLDs also apply either to the development phases of the project, its execution or in establishment of the new or modified operation.
As a result, project teams must be aware of the applicability (or not) of all GLDs to their specific functional area.
The BHP Billiton portal (link: https://inside.bhpbilliton.net/irj/portal) provides details of the status of the new Phase II GLDs that are being rolled out during 2010. Where a Phase II GLD is not yet available, project teams must refer to the existing Phase I GLDs until the new Phase II GLDs are available.
In developing and executing of projects, project teams must achieve the minimum requirements identified in all relevant GLDs. Included in Figure 3.1.1 is the roll out timetable for all 65 of the Phase II GLDs.
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Figure 3.1.1 GLD Phase II timetable
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3.2 MAJOR CAPITAL PROJECTS GLDS
The minimum performance standards, for all major capital project undertaken within BHP Billiton, are detailed in GLD Major Capital Projects (Minerals) and GLD Major Capital Projects (Petroleum).
These are mandatory.
The GLD documents available on the portal contain the minimum requirements broken down by phase. In order to assist project teams with understanding the increasing level of detail and definition required as the project proceeds through the various project phases, the same GLD requirements are shown in an “all phases on one page” format in:
Toolbox 9.3.2B Study Phase GLD Requirements (Minerals)
Toolbox 9.3.2C Study Phase GLD Requirements (Petroleum)
If there is any discrepancy between the Major Capital Projects GLDs and these toolboxes, the formal GLDs available on the portal must be followed.
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3.3 MANDATORY DELIVERABLES
A list of the key deliverables mandated in the Major Capital Projects GLDs is included at Table 3.3.1, along with either a reference to a section of the PDM or another Group document where more information on the requirement is available.
Table 3.3.1 Key mandatory deliverables (in alphabetical order) GLD referenced deliverable PDM or external reference
Basis of design Section 5.1 Engineering Management
Basis of estimate (capex and opex) Section 6.5 Cost Estimating Basis of schedule Section 6.4 Schedule Development Business objectives for the investment
opportunity
Section 4.1 Business Objectives and Strategic Fit
Board papers, Board presentation, draft Media release and Media Q&As
Refer to corporate eRoom for templates:
https://eroom.bhpbilliton.com/eRoom/Facility31/CorporateCalendar Contracts and procurement plan Section 5.2 Contracts and Procurement Management
Close out evaluation report Section 5.6 Project Close-out Section 6.1 Study Management
Prepared by IPA - examples are provided in Section 6.1.
Closure and rehabilitation plan Section 4.3 HSEC Management
Commissioning management plan Section 5.4 Commissioning Management Communications plan Section 4.5 Stakeholder Management
Conditional agreements Refer to CSG specific contracts and procurement management processes and procedures.
Contracting strategy Section 5.2 Contracts and Procurement Management Control action plan Section 4.2 Risk Management
CSG funding approval document Refer to CSG specific investment processes and procedures.
E&SIA Section 4.3 HSEC Management
Engineering management plan Section 5.1 Engineering Management Estimate (capex/opex etc) Section 6.5 Cost Estimating Exploration and appraisal program
(selection or definition phase)
Refer to RBO Group Function processes and procedures.
HSEC management plan (selection or definition phase)
Section 4.3 HSEC Management
HSEC management plan (execution phase) Section 4.3 HSEC Management
HSEC risk register Section 4.2 Risk Management and Section 4.3 HSEC Management IM management plan (definition or
execution phase)
Refer to CSG specific IM processes and procedures.
Investment approval request
Investment committee notification (ICN) Investment evaluation model
IPR summary and functional reports
Refer to I&VM eRoom for templates:
https://eroom.bhpbilliton.com/eRoom/Facility30/InvestmentOffice
Joint venture interface plan Section 4.5 Stakeholder Management Legal and regulatory approvals plan Section 4.5 Stakeholder Management
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GLD referenced deliverable PDM or external reference Legal and regulatory approvals register Section 4.5 Stakeholder Management
Marketing – strategy & other documentation
Refer to Marketing Group Function specific processes and procedures.
Mineral resources statement (JORC compliant)
Refer to JORC code:
http://www.jorc.org/
Monthly project progress report Section 6.2 Project Management Monthly study progress report Section 6.1 Study Management Operations plan Section 5.5 Transition to Operations Operational readiness and handover plan Section 5.5 Transition to Operations Operations strategy Section 5.5 Transition to Operations Ore reserves statement Refer to JORC code:
http://www.jorc.org/
Ownership register Section 4.5 Stakeholder Management Petroleum resource and reserves
reporting
Refer to US Securities and Exchange Commission website:
http://www.sec.gov/
Post investment review Refer to I&VM eRoom for templates:
https://eroom.bhpbilliton.com/eRoom/Facility30/InvestmentOffice
Procedures Refer to CSG specific processes and procedures.
Program management hub strategy Section 2.4 Program Management Hubs Project close-out plan Section 6.2 Project Management Project close-out report Section 5.6 Project Close-out Project execution plan Section 6.2 Project Management
Project execution strategy Section 4.1Business Objectives and Strategic Fit Section 6.2 Project Management
Project master schedule Section 6.4 Schedule Development
Project objectives Section 4.1Business Objectives and Strategic Fit Project operations resources plan Section 5.5 Transition to Operations
Project resource (or HR) plan (selection, definition & execution phase)
Section 4.4 People and Teams
Project review and audit plan Section 6.8 Audit and Review Quality management plan Section 6.7 Quality Management Prospective Evaluation Report Section 6.1 Study Management
Prepared by IPA - examples are provided in Section 6.1.
Resource model Refer to RBO Group Function processes and procedures.
Risk register Section 4.2 Risk Management
Risk management plan Section 4.2 Risk Management
Scope of work Section 6.3 Scope Definition
Stakeholder management plan Section 4.5 Stakeholder Management Stakeholder register Section 4.5 Stakeholder Management Statement of requirements Section 6.3 Scope Definition
Study budget Section 6.1 Study Management
Section 6.5 Cost Estimating
Study objectives Section 6.1 Study Management
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GLD referenced deliverable PDM or external reference
Study report Section 6.1 Study Management
Study Work Plan (SWP) Section 6.1 Study Management Value improvement plan Section 4.7 Value Improvement Work breakdown structure Section 6.3 Scope Development
PROJECT DEVELOPMENT MANUAL
CHAPTER 4.0
STRATEGIC PROCESSES
Document No: PDM-001
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Table of Contents
4.0 STRATEGIC PROCESSES ...1 4.1 BUSINESS OBJECTIVES AND STRATEGIC FIT ...2 4.1.1 Stage 1 - Business objectives...3 4.1.2 Stage 2 - Project objectives ...3 4.1.3 Stage 3 - Phase objectives...3 4.1.4 Stage 4 - Industry attractiveness ...4 4.1.5 Stage 5 - Strategic rationale & fit...5 4.1.6 Stage 6 - Project execution strategy...5 4.1.7 Stage 7 - KPIs...5 4.2 RISK MANAGEMENT ...8 4.2.1 Risk management, leadership and accountability...9 4.2.2 Risk management system ... 10 4.2.3 Risk management process... 11 4.2.4 Risk management plan ... 14 4.2.5 Risk management workshops ... 15 4.2.6 Reference materials and the risk champion eRoom ... 16 4.2.7 Materiality and tolerability... 16 4.2.8 Risk register... 17 4.2.9 Risk control action plan ... 17 4.2.10 Maximum foreseeable loss and residual risk rating... 18 4.2.11 Changes arising from risk management ... 18 4.2.12 Range analysis ... 18 4.3 HSEC MANAGEMENT ... 19 4.3.1 The zero harm roadmap ... 20 4.3.2 Zero harm culture... 22 4.3.3 Management leadership and commitment... 22 4.3.4 Operating discipline ... 23 4.3.5 HSEC risk assessments... 23 4.3.6 HSEC management plan (study phases)... 25 4.3.7 HSEC management plan (execution phase) ... 28 4.3.8 Environmental and social impact assessment ... 32 4.3.9 Environmental Management Plan ... 33 4.3.10 Closure and rehabilitation ... 36 4.3.11 Lessons learnt... 36 4.4 PEOPLE AND TEAMS... 37 4.4.1 Organisation design & structure ... 39 4.4.2 Project human resources management plan... 41 4.4.3 Operations human resources management plan ... 47 4.4.4 Skills and experience profiles... 48 4.4.5 Endorsement of key resources... 48 4.4.6 Capability development program... 49 4.4.7 Organisational development ... 50 4.4.8 Demobilisation ... 52 4.5 STAKEHOLDER MANAGEMENT ... 54 4.5.1 Types of stakeholders... 55 4.5.2 Stakeholder management plan... 56
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4.5.3 Stakeholder register... 57 4.5.4 Communications plan ... 58 4.5.5 Statement of roles and responsibilities... 59 4.5.6 Ownership, legal and regulatory approvals plan ... 59 4.5.7 Key contracts list... 60 4.5.8 Joint venture interface plan ... 60 4.6 OPPORTUNITY REALISATION... 62 4.6.1 Introduction... 62 4.6.2 Opportunity realisation process overview ... 63 4.6.3 Opportunity framing process... 66 4.6.4 Opportunity selection process... 71 4.7 VALUE IMPROVEMENT... 79 4.7.1 Value improvement plan ... 79 4.7.2 Value improvement process... 80 4.7.3 Value improving practices... 80 4.7.4 Technology planning ... 87 4.7.5 Benchmarking ... 89 4.7.6 Lesson learnt ... 90 4.8 INVESTMENT PROCESS... 92 4.8.1 Investment phases ... 92 4.8.2 Approving authority... 94 4.8.3 Engagement with IPR team... 94 4.8.4 IPA engagement ... 94 4.8.5 Execution phase review ... 94 4.8.6 Supplementary approval requests... 95 4.8.7 Project close-out review... 95 4.8.8 Post investment review... 96 4.8.9 Investment evaluation... 96
Tables
Table 4.1 Chapter contents...1 Table 4.1.1 Key business objectives and strategic fit requirements...2 Table 4.1.2 Project KPI template (from IAR)...6 Table 4.1.3 Typical project KPIs ...7 Table 4.2.1 Key risk management requirements...8 Table 4.2.2 Structure and content of the risk management plan ... 14 Table 4.3.1 Key HSEC requirements... 19 Table 4.3.2 The zero harm roadmap... 21 Table 4.3.3 Structure and content of a study phase HSEC management plan(s)... 26 Table 4.3.4 Structure and content of the execution phase HSEC management plan(s)... 29 Table 4.4.1 Key people and teams requirements ... 37 Table 4.4.2 Section 4.4 contents ... 38 Table 4.4.3 Characteristics of organisation structures... 40 Table 4.4.4 Structure and content of the project HR management plan... 41 Table 4.4.5 Key project resources endorsement ... 49 Table 4.5.1 Key stakeholder management requirements... 54 Table 4.5.2 Stakeholder management plan key elements... 56 Table 4.6.1 Issue categorisation... 68 Table 4.6.2 Sample decision grouping table ... 69 Table 4.6.3 Sample strategy table ... 70
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Table 4.6.4 Sample strategic themes... 70 Table 4.6.5 Key inputs into the opportunity selection process... 72 Table 4.6.6 Economic evaluation summary ... 76 Table 4.6.7 Risk evaluation summary... 76 Table 4.6.8 HSEC/sustainability evaluation summary... 76 Table 4.7.1 Key value improvement requirements ... 79 Table 4.7.2 Structure and content of the value improvement plan ... 80 Table 4.7.3 Value improving practices... 82 Table 4.7.4 VIP use by phase ... 86
Figures
Figure 4.1.1 Typical industry cost curve ...5 Figure 4.2.1 Elements of the BHP Billiton risk management process... 10 Figure 4.2.2 Project risk management system ... 11 Figure 4.2.3 Project risk management process... 12 Figure 4.3.1 Zero harm – key elements... 21 Figure 4.3.2 Diagrammatic representation of the HSEC risk assessment process... 24 Figure 4.3.3 HSEC risk assessment process steps ... 24 Figure 4.3.4 Hierarchy of controls ... 25 Figure 4.3.5 EMP based on the ISO14001 principles... 35 Figure 4.4.1 Example of an execution phase Owner’s team greenfields project >US$1bn... 41 Figure 4.4.2 Project management competency framework ... 50 Figure 4.4.3 Tuckman’s Four Stages of Team Development ... 51 Figure 4.4.4 Resource continuity via Hub resource management... 53 Figure 4.5.1 Contents of the stakeholder management plan... 56 Figure 4.5.2 Core steps for stakeholder management... 56 Figure 4.6.1 Overall selection phase opportunity realisation process ... 64 Figure 4.6.2 Sample decision hierarchy ... 69 Figure 4.6.3 Opportunity selection - fundamental questions ... 72 Figure 4.6.4 Project type ... 73 Figure 4.6.5 Project workflow example ... 75 Figure 4.6.6 Example of alternative selection summary... 77 Figure 4.6.7 Example of alternative selection summary table ... 77 Figure 4.6.8 Typical selection phase decision tree... 78 Figure 4.7.1 Proposed timeline for VIPs application... 86 Figure 4.7.2 Identification of novelty or innovative technology... 88 Figure 4.7.3 Thinking aid for formal technical risk analysis... 89 Figure 4.7.4 Technology novelty matrix... 89 Figure 4.8.1 Investment Phases ... 92 Figure 4.8.2 Investment process map ... 93
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4.0 STRATEGIC PROCESSES
Strategic processes are aimed at delivering the maximum value to the business, ensuring alignment and effective communication with all project stakeholders and teams and delivering projects in a manner that has minimal impact on the health and safety of project personnel, the environment and to communities impacted by BHP Billiton’s operations and projects.
The contents of the chapter are summarised in Table 4.1.
Table 4.1 Chapter contents
# Title Details
4.1 Business objectives and strategic fit
How to ensure a project meets its business objectives, determine the level of strategic fit and developing project and phase objectives which are in alignment with the business objectives.
4.2 Risk management
Outlines the risk management framework.
Details the process for risk management planning.
Details the process for risk identification, assessment and control.
4.3 HSEC management
Provides details on BHP Billiton’s zero harm culture and other requirements.
Details the process for HSEC management planning.
Outlines E&SIA and EMP requirements.
4.4 People and teams
Details the process for human resources planning and management.
Covers human resources issues such as organisation structures, skills and experience profiles and organisational development.
4.5 Stakeholder management
Explains the process for identification and management of communication with project stakeholders.
Details the process for ownership, legal and regulatory approvals planning.
4.6 Opportunity realisation Details the opportunity framing, selection and realisation process.
Details the requirements of Gate 2A.
4.7 Value improvement
Details the process for value improvement planning.
Details the various value improvement methods including (value improving practices) VIPs, technology planning and benchmarking.
4.8 Investment process
Outlines the gating process.
Provides an overview on the minimum governance requirements, the independent peer review (IPR) and Independent Project Analysis Inc. (IPA) requirements.
Provides a high level overview of the key investment evaluation issues to be addressed on a project.
Should be read in conjunction with the Investment Process GLD.
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4.1 BUSINESS OBJECTIVES AND STRATEGIC FIT
The key business objectives and strategic fit requirements through the investment phases are shown in Table 4.1.1.
Table 4.1.1 Key business objectives and strategic fit requirements
Identification Selection Definition Execution
Develop and clearly strategic fit and any required exit strategy.
Identify how this project fits into the reasons for selecting the preferred investment alternative.
Ensure that the preferred investment alternative will meet the agreed business objective(s).
Provide a concise description of the strategic fit and any required exit strategy for the preferred investment alternative.
Show how the preferred investment alternative fits in the context of the on the agreed business objective(s).
Ensure that the project objectives are clearly measurable, cover all required areas and will demonstrably meet the business objective(s).
Confirm that there has been no significant change to the external or internal business drivers for the investment.
Update the description of the strategic rationale, strategic fit and any required exit strategy for the preferred investment alternative.
Show how the selected investment alternative fits in the context of the development potential
Starting in the identification phase the customer sector group (CSG) needs to clearly articulate the business case for the investment opportunity and how this fits within the overall CSG strategy.
This business case is again re-visited in the selection phase to ensure that it is still valid (the market may have changed for example) and that the proposed investment alternative will meet the business need.
At the end of the selection phase, the business objective is translated into a clear set of project objectives (scope, cost, schedule, opex, production etc) and these are then firmed up during the definition phase and then delivered on during the execution phase.
There are several key steps in this process as follows:
Stage 1 – develop clear business objectives
Stage 2 – develop project objectives
Stage 3 – develop study phase objectives
Stage 4 – confirm industry attractiveness
Stage 5 – ensure strategic rational & fit
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Stage 6 – detail project execution strategy
Stage 7 – develop project execution KPIs.
4.1.1 Stage 1 - Business objectives
As maximising the investment return for the opportunity against a clear set of business objectives is one of the primary focuses of the identification and selection phases, it is important to have a project fully aligned with the short/long term growth plans of the CSG.
These growth plans in turn are aligned with BHP Billiton’s corporate objectives and annual letter of intent (LOI). The source information for this alignment are the 2 and 5 year plans for the CSG growth strategy i.e.
brownfields, greenfields or combination of both. These documents establish the CSG targets for new growth.
The investment opportunity business objectives must include the overall strategic intent of the investment from the CSG's perspective (rather than the investment objectives for each phase for example). As an example, for an underground mining project like Perseverance Deeps, the overall business objective might be to "Develop the Perseverance resource below 11 level, to meet the shortfall in smelter capacity at KNS from 2012 onwards".
Very few of BHP Billiton’s investments have this clarity from the project sponsor up front and this has been shown through industry benchmarking to be a critical success factor in ensuring that projects deliver on their investment objectives.
Once an investment opportunity has proceeded through the selection phase and the preferred investment alternative has been identified, then the project objectives can be developed from the business objectives.
The project objectives for the same underground mining project might be to "Develop the Perseverance resource between 11 and 14 levels, to deliver xx tonnes/day of Nickel at an overall Cost of US$800million by 30 Sept 2009 with an HSEC performance of 2.0 LTIFR”.
Toolbox 9.4.1B IPA Institute Gatekeeper - Mod 4 Business Objectives, from IPA outlines the detailed benefits of having clear business objectives for investments and gives an example of what a good business objective statement looks like.
4.1.2 Stage 2 - Project objectives
Once the business objectives have been established and there is a clear preferred investment alternative identified (Gate 2A) then the development of the project objectives can be initiated in order to provide additional clarity around how the project will meet the overall business need.
The project objectives need to be a clear statement of the key performance areas including HSEC, cost (capex), schedule, ramp up and operations factors like capacity, reliability and opex. The project objectives need to be clearly measurable and achievable.
4.1.3 Stage 3 - Phase objectives
The phase objectives provide a clear focus for the study or project teams on the requirements of each of the project phases i.e. identification, selection, definition and execution.
In the identification phase, the key considerations are:
Is the resource of a size to meet the growth needs of the business?
Is it in a location that can be operated in successfully?
Is there a technical process that can produce a saleable product?
Is there a market for the produced product?
Can mine and process operations be permitted in this area (baseline site conditions)?
In the selection phase, the key considerations are:
confirm the extent of the resource for proven and probable reserves
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develop a list of alternatives to evaluate options to develop the reserve
start the permitting process with engineering support
at Gate 2A select and then obtain endorsement from the IPR with CSG president approval for the preferred investment alternative
perform sufficient engineering to support selecting the preferred investment alternative at Gate 2A
develop to a Class 3 standard a cost estimate and schedule for the selected investment alternative (only)
establish the need for pre-commitments of long lead items and timing to release
establish the need for pre-commitments of long lead items and timing to release