Babcock Infrastructure Network Engineering drives project delivery margins up 2% by using Predict!
Posted 11 March 2015 by admin | 0 Comments
Babcock’s Infrastructure Network Engineering business unit undertakes time-critical infrastructure projects for customers operating in the Communications Infrastructure, Power and Rail industries. Although the markets in which they operate are very different, their skilled team shares a common focus – successfully delivering complex programmes for customers operating within regulated environments.
With a large number of projects and programmes on the go varying in size from £2-24M, Babcock Infrastructure Network Engineering’s existing Excel-based risk management system was no longer working for them. Paul Pring, Director, Infrastructure (Rail) at Babcock International’s Network Engineering Business Unit explains: ’Under the old system, we were building a margin of risk into project estimates, giving the project manager the discretion to use it as a cost and therefore spend it all. Profitability was compromised, and one of the main areas identified for improvement was risk management.’ Babcock set a goal to increase the number of bids won, and to increase the margins on those they did.
There was consensus that the most important way margins were going to improve was to manage risk by adopting a risk management software solution. The Board committed to have a working system within two years.They opted to start small, with one business unit only. Based on this, Babcock embarked on an extensive study to evaluate all available options, resulting in the selection of Risk Decision’s Predict! suite of risk management software. Babcock then worked with Risk Decisions to come up with a robust plan for installation and training programmes, resulting in an implementation in the first half of 2014.
Paul Pring: ‘We chose Predict! over several competitors because it offers the functionality and flexibility we need as a project based organisation, now and in the future. Predict! is also a widely used and trusted tool, which I had used myself in the past.’
Once they switched to Predict!, Babcock were able to move away from the old system of building in a margin of risk when setting the project managers’ budget. Under the new system, they use Predict! to determine the 80% confidence level of the cost impacts for the risk identified. The project manager is then given control of the risk budget, but for the amount corresponding with a 50% confidence level, with the project director holding on to the remaining 30%.
Paul Pring explains: ‘Holding on to 30% of the risk budget at project director level makes it less likely the project manager will require it, as there’s an incentive for them not to ‘overspend’ on the budget they have been allocated to control. This can lead to savings of as much as £15K on a £1M project. Since we started implementing Predict! to manage risks during the project delivery phase, our gross margins have increased by around 2%.’ The Babcock Infrasructure Network Engineering Board was impressed, and as a result, Predict! is now being rolled out company wide.