Project Portfolio Management Helps E&C Firms Outperform the Competition


According to this 2021 KPMG study, engineering and construction (E&C) firms who invested in technology-driven project portfolio management (PPM) systems emerged from the pandemic in much better condition than their competitors without those systems in place.  

But that shouldn’t be surprising.

Even before the pandemic in 2019, KPMG reported that two-thirds (66 percent) of data-driven portfolio-managed projects came within 90 percent of their planned schedule.

The survey highlights the need for engineering and construction (E&C) to invest in an innovative culture, adopt technology, and use these resources to manage their businesses at the enterprise level.

The E&C firms that follow this advice outperform their competition in all regions and sectors across the globe.

KPMG Future-Ready Index 2019

What is project portfolio management (PPM)?

Project portfolio management (PPM) is a strategic approach to construction that enables companies to maximize resources, productivity, and ROI while mitigating risk across their entire enterprise.

Instead of silos, where firms manage projects and programs individually, PPM systems broaden the focus. Project portfolio management systems give leadership the big picture and the tools to manage resources holistically across the firm’s entire portfolio. 

PPM systems give project management officers (PMOs) the ability to oversee construction projects of all sizes, from small renovations to large-scale new construction.

Project portfolio management systems (PPM) also give the PMO flexibility to manage multiple portfolios of construction projects, such as projects grouped by owner, type, and category.

The need for project portfolio management (PPM)

“There are two ways for a business to succeed: doing projects right and doing the right projects. ”

Cooper, Edgett, & Kleinschmidt 2002

Construction projects involve various stakeholders, including owners, contractors, subcontractors, and suppliers. Each stakeholder is responsible for multiple projects of their own. 

Supply chain disruptions and labor shortages continue to plague the industry with no end in sight.

A failure on one project can have a devastating impact on the rest of the stakeholder’s portfolio. In turn, the shortcomings of one stakeholder can have a domino effect on the other stakeholders across multiple projects.

By systematically gathering and analyzing data, project portfolio management software can help firms better assess future projects, project partners, subcontractors, and suppliers. 

These superior insights give E&C contractors a competitive advantage when prioritizing initiatives, deciding who to work with, and where to allocate their resources for maximum effect.

Managing project portfolios to unlock trapped capital via McKinsey and Company.

What’s the difference between project management and PPM?

Project Portfolio Management (PPM) looks at the bigger picture of all the projects within a portfolio, whereas Project Management (PM) focuses on individual projects. 

Project portfolio management includes the identification, selection, prioritization, authorization, and control of all projects. In contrast, project management is the application of knowledge, tools, and techniques to individual project activities to meet the project requirements.

The four essential elements of successful project management:

  • Resource management: 
    • People,
      • Skills, experience, and availability
    • Materials,
      • Type, quantities, and availability
    • Tools and equipment,
      • Type, quantities, accessories, and availability
    • Hardware and software.
      • Project management information systems (PMIS)
  • Time management:
    • Task durations, 
    • Work breakdown structures (WBS)
    • Work packages
    • Project phases
    • Critical path (CPM)
    • Schedule management
  • Finance:
    • Costs, 
    • Contingencies, 
    • Change Orders, and
    • Profit.
  • Scope:
    • Project size, phasing, and duration
    • Design elements and specifications 
    • Goals and expectations,
    • Project requirements.

Project management focuses on executing individual projects within their allotted resource, time, financial, and scope constraints.

Project portfolio management (PPM), on the other hand, is focused on the overall coordination and management of the projects within the firm’s portfolio and the ancillary operations of the enterprise as a whole.

Strategic Innovation, Foresight, and the Deployment of Project Portfolio Management under Mid-Range Planning Conditions in Medium-Sized Firms via MDPI

Four fundamentals of successful project portfolio management (PPM):

PPM is a higher-level view of project management ensuring projects and supporting operations align with the organization’s overall business strategy and objectives.

  1. Organizational strategy
    1. Growth or stability?
    2. Specialist or generalist? 
    3. Deep or broad service offerings?
    4. Current market conditions and forecasting,
    5. Geography and satellite operational support
    6. Strategic partnerships with subcontractors and suppliers,
    7. Successful E&C enterprises have a strategic vision for their future and manage their operations accordingly.
  2. Project selection
    1. Owner
      1. Financial stability
      2. Values and vision alignment
      3. History and experience
    2. Design
      1. Tested or progressive?
      2. Inherently risky or predictable?
      3. Organizational vision and strategic alignment
        1. Sustainability
        2. Socioeconomic development
      4. Design team commitment throughout the project lifecycle is critical, as well.
    3. Delivery method
      1. Integrated Project Delivery (IPD)
      2. Lean Construction
      3. Advanced Work Packaging (AWP)
      4. Design-Build
      5. Traditional delivery methods, like Design-Bid-Build, are more familiar yet carry substantially more risk. 
      6. IPD, Lean, and AWP delivery methods are more successful overall and distribute risk more equitably in most cases. 
      7. E&C firms can optimize their capacity and manage risk exposure by choosing projects according to their delivery methods.
    4. Timing
      1. Coordinating projects across the organization’s portfolio allows firms to control their workflows, workforce, and resources across multiple projects for maximum efficiency.
    5. Technology
      1. Construction technology is driving innovation in the industry, but many owners, suppliers, and subcontractors have yet to invest. 
      2. Choosing projects and partners that share integrated and collaborative project management systems is easier and more productive than mandating participation.
  1. Resource management strategy
    1. Modular or off-site construction opportunities
    2. Supplier partnerships and supply chain management
    3. Material costs continue to rise, supply chain disruptions continue, and skilled labor availability is always a concern. 
    4. Strategically managed resources across a portfolio of projects reduce waste and create efficiencies that lower costs and risk. 
  2. Project information management system
    1. Project portfolio management relies heavily on the accessibility and accuracy of information.
    2. Successful firms have standard procedures, applications, and training for effectively sharing relevant information to drive portfolio analysis, decision-making, goal setting, project status, prioritization/ranking, and consumed and available resource capacity.
    3. Throughout the project lifecycle, from intake to closeout, successful PPM teams communicate risks, issues, decisions, changes, lessons learned, and the actions they take, and they document the reasoning for each.  
    4. They set up logs for each project to track the information and make it available to all stakeholders.
    5. An integrated project information management system is crucial.

Strategic Innovation, Foresight, and the Deployment of Project Portfolio Management under Mid-Range Planning Conditions in Medium-Sized Firms via MDPI

Critical components of a successful project portfolio management strategy:

Implementing the right technology and tools is vital to a successful PPM strategy. 

An integrated project management software is a must.

The project management software should include resource management capabilities, workflow templates, and other data collection tools that track project schedules, resource allocations, and tasks across the portfolio of projects.

Another critical component is having a clear understanding of what your goals and objectives are. Without this, it’s impossible to know which projects to pursue, which project partners to work with, and where to allocate their resources for maximum effect.

Finally, it’s essential to have a team of people committed to making the PPM strategy work. Everyone in the organization needs to work together to make portfolio management successful. Many PPM initiatives fail without this teamwork.

Minimizing risk exposure with project portfolio management

PPM software provides construction companies with a centralized platform to manage their projects, resources, and finances. 

Using PPM software, construction companies can save time and money while ensuring that all projects are completed on time and within budget. 

PPM software also allows construction companies to track progress and performance across all projects. The collected data identifies areas that need to improve and the necessary changes required to ensure that future projects are successful.

Linarc’s project portfolio management tools are ready. Are you?

E&C companies looking to improve efficiency and save time, money, and valuable resources benefit by incorporating an integrated project portfolio management system. 

The critical element of successful PPM systems is data. 

Linarc’s collaborative project management software provides,

  • Real-time collaboration
  • Superior data collection, 
  • Intelligent analysis, and 
  • Integrated reporting features.

Contact your Linarc representative today and see how cloud-based software built for the construction industry can help you take your construction firm to the next level.


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