PROJECT ADVISORY

Project organisation
and establishing
a programme
management office
Leadership Series 1

kpmg.com/nz

About the Leadership Series

KPMG’s Project Advisory Leadership Series is targeted towards owners of major capital programmes, but
its content is applicable to all entities or stakeholders involved with major projects. The intent of the Project
Leadership Series is to describe a framework for managing and controlling large capital projects based
on the experience of our project professionals. Together with our simplified framework, we offer a sound
approach to answer the questions most frequently asked by project owners.

Introduction

The first topic of the Project leadership
Series, Project organisation and
establishing a Programme Management
Office (PMO), is one of the most critical
components of managing programmes
and projects. It is one of the first activities
to occur during a programme/project and
significantly impacts on the likelihood of
success. There is also no clear “one size
fits all” leading practices, and because
actual practice varies greatly, the manner
of how to organise the PMO is one of
the more challenging decisions project
owners make. In this paper we explore key
concepts to consider when organising and »» How will we manage/leverage
staffing a programme or major project, as resources from various sources?
well as key considerations for establishing
»» Are all the key roles and responsibilities
a programme or project PMO. At the end
known and documented?
of this paper we hope that you will have a
better understanding of how to address the »» Should we establish a PMO?
following challenges: If so what skills do we need?
»» How should we organise a PMO?
»» Do we have the right number and
type of resources for the project? »» Should our PMO be responsible solely
for managing the project control
»» How do we effectively structure our
infrastructure or should it actively
organisation to manage large projects?
manage all of our major projects?
»» Do we have the required internal capabilities
and capacity to develop the project?
Project Advisory / Leadership Series 1
Key items to consider
when organising and
staffing a programme
or major project
A project owner has many things
to consider when evaluating the
organising and staffing of a programme
or major project. Project owners often
follow the practices of their industry
peers or make slight improvements
to a previous organisational structure
without considering alternative
approaches. In the following section
we will discuss some key items for
project owners to consider when
organising and staffing a programme
or major project including:
1. Centralised PMO vs.
organisational unit project teams
2. PMO involvement
3. Standardisation of the project
management framework
4. Delineation of small vs. large
and emergency projects
5. Internal vs. outsourced resources.
/02
1. Centralised PMO vs. organisational unit project teams
Even with a single owner entity, different »» Conducting a survey of project
organisation units frequently utilise their management teams in each organisational
own project management departments for unit can identify areas for improvement,
planning, delivering, tracking and reporting develop ideas for knowledge sharing and
their capital projects. This often leads to create potential teaming opportunities.
project management time and resource
If an entity has a small capital programme
inefficiencies. Developing and maintaining
with a large or unique project – or multiple
independent project management
stakeholders are involved – a dedicated
departments can also result in confusion
project-specific PMO should be considered.
for administrative support personnel,
For example, in joint ventures with multiple
vendors and other stakeholders that work
parties, a robust project-specific PMO
with multiple organisational units of the
is often used to address the following
entity. Whilst entity wide PMO’s may not
questions:
be the right project delivery structure for
all organisations, here are a few leading »» How will the different organisation’s
practices to consider when determining if project management policies and
a PMO will increase project performance: procedures be integrated?
»» How will those involved work together
»» PMO’s can facilitate sharing and leveraging
and provide input in a coordinated and
of leading practices among project team
integrated manner?
members via project manager share forums
and through other PMO driven activities. »» How will disputes between options be
resolved in a timely manner to avoid
»» Prior to implementing a PMO, it is
significant cost growth and project delays?
important to assess the strengths and
weaknesses of the various project
teams in different organisational units
and compare their project delivery
performance for base-lining purposes.
Project Advisory / Leadership Series 1 /03

2. PMO involvement 3. Standardisation of the project

If an entity has a small capital programme
and a desire to maintain project management
expertise within its particular business unit,
the entity may chose to implement a non-
executing PMO. Compared to an executing
PMO, the non- executing PMO exists
primarily to develop, maintain, support and
monitor compliance with capital strategies,
policies, procedures and tools. In a non-
executing PMO project team members
receive training and support from the PMO,
but the individual project teams remain fully
responsible for the results of their projects.
The goal of a non-executing PMO is to
increase the overall success of a programme
by enabling non-project managers with
support, increasing process consistency,
monitoring/tracking compliance and capturing
and sharing lessons learned.
Some organisations have been reluctant to utilise
a PMO on a consistent basis. Most PMO’s have
Entities with larger capital programmes
may choose an executing PMO. In the
executing PMO model, the PMO has a staff
of project managers who are engaged by the
organisational units of the entity where there
is a project management need. In addition
to the development of consistent policies
and procedures and the training benefits of
a non-executing PMO, the executing PMO
has the primary responsibility to develop the
skills of in-house project managers who are
utilised by the entity’s organisational units
on all large projects. Such expertise within a
dedicated group of project managers is likely
to increase programme success. Also, as
the formality of an executing PMO increases
so do the expectations of its customers,
the organisational units. The executing PMO
must consistently strive to add value and
take on a customer service mentality.
»» Records risk
management
management framework
Implementing a standard project
management framework can simplify the
standards for planning, delivery, tracking
and reporting capital projects. In addition to
reducing the time and resources required
to develop and maintain separate project
management frameworks, standardisation of
the project management framework clarifies
administrative supporting roles and simplified
vendor and other stakeholder relationships.
However, if a project owner must maintain
multiple project management frameworks,
we recommend the following steps:
»» Form a joint project management
standards committee with members
from each organisational unit
»» L
everage common guidelines and
standards as much as possible
»» C
entrally develop and maintain common
policies and procedures
»» A
gree to standard project cost tracking
and financial reporting process.

tip 01:
been established to help comply with regulatory
requirements or to help manage and mitigate
risks on major projects. While PMO’s can be
effective in improving performance they can
also be effective in helping manage and mitigate
risk through improving consistency, accuracy and
competency across business units in areas such as:
»» Cost reporting
and tracking
»» Procurement
4. Delineation of small vs. large
and emergency projects
Many organisations have different
procedures for managing small versus large
capital projects to align the level of control
and accountability with the associated
project risks. Requiring small or emergency
projects to adhere to multiple layers of
project management and controls can lead
to unnecessary paperwork and increased
overhead costs. When deciding on how to
address the delineation of projects and their
associated project controls, we recommend
that entities consider the following points:

»» Is there a natural delineation of small

and large projects based on current
requirements such as Board of Director
approval thresholds, signature authority,
regulatory requirements or breakdown
of project portfolios (e.g. 80/20 rule)?
»» If there is no natural delineation, we
recommend that the entity develop project
management processes and controls
targeted for large projects first, and then
identify areas to reduce the requirements
for smaller or emergency projects.
Project Advisory / Leadership Series 1 /04

5. Outsourcing programme / project management

Organisations with large and steady capital
programmes often benefit from the use of
internal project management resources.
Using internal project management resources
leads to increased capabilities, improved
knowledge sharing amongst projects and a
greater likelihood of continuous improvement
of project controls and project delivery
processes. During a capital programme
ramp up period, entities should carefully plan
their project management organisational
strategy to take advantage of various options
such as utilising temporary resources to
rapidly develop internal PMO’s. Leveraging
outsourced resources can increase an
organisations capacity to rapidly increase or
decrease project management resources.
Organisations with smaller or significantly
variable capital programmes may be better
off relying on outsourcing as a more useful
practice. Even so, certain key functions
cannot be outsourced without significantly
jeopardizing programme success. In one
case study, an owner-investor outsourced
its entire programme management function.
The outsourcing was ineffective, and the
owner failed to administer the contract with
Functions that an owner cannot entirely »» Document management
outsource are:
»» Value engineering
»» Project authorisation
»» Regulatory compliance
»» Development and delivery integration
»» Forecasting
»» Budgeting
»» Communications
»» Procurement
»» Material management
»» Contract administration
»» Reporting
»» Change management
Regardless of which functions are
»» Risk management
outsourced, the owner’s internal resources
Functions that an owner may be able should stay involved in key programme
to partially or fully outsource are: management functions. A basic level of
knowledge of common project management
»» Scheduling
processes is critical to ensure that controls
»» Quality management are intelligently outsourced, there is proper
»» Payment processing and administration administration of contracts and controls are
effectively monitored.
»» Environmental Health and Safety
»» Design standards and specifications
Many companies have separate and unique project management standards for
capital projects in each of their business units or subsidiaries. This is primarily

tip 02:
the programme manager. The programme
fell significantly behind schedule and the
costs increased due to a lack of effective
controls. The owner ultimately removed the
programme manager and created an internal
programme management function, which
took over the completion of the programme.
driven by the project characteristics for these business units. Also there is
often a perception that having common project management standards for
all capital projects will reduce project performance in some areas by adding
unnecessary controls or procedures that are not well suited for all projects.
However, it is possible to have a common project management framework
with project controls and processes customised for specific business units.

1. Assess the overall capital programme and set goals

Considerations for
establishing a PMO
There are several steps that project
owners should consider when
implementing a PMO, including:
1. Assessing the overall capital
programme and set goals
2. Plan for resources
3. Assess and establish controls
The first step in establishing a PMO is
to assess the entity’s capital programme
overall and set performance goals for future
projects. The past performance and future
plans of a capital programme significantly
affect the approach taken and how that
approach is implemented. Some key
questions in this area include:
»» Is our spend on capital programmes
and projects steady, does it fluctuate
significantly (e.g. due to business
conditions or emergency projects)
»» Is our capital programme changing
(e.g. ramping up or down?)
»» Is our capital programme comprised of
many small projects, a few large projects
or a mixture of the two?
»» What is the maturity of the project
management processes?
»» What resources do we have available
internally?
»» Have our projects been successful?
»» Have certain project types been more
successful than others?
»» Do certain organisational units execute
projects more successfully than others?
Project Advisory / Leadership Series 1
Once the owner has a good understanding
of its capital programme, those in charge
of setting up the PMO should identify the
goals of their capital programme including:
»» Do we want to deliver projects using
internal resources primarily or do we
want to outsource as much as possible?
»» D
o we want our project management
processes and controls to meet base
minimum requirements, or do we
want to invest in our programme to
make it industry leading and a potential
competitive advantage?
»» What level of project performance
do we want and believe is reasonable?
»» What level of risk are we willing to accept?
2. Planning for resources
A responsibility matrix is the ideal tool for
identifying PMO roles and responsibilities
and describing the interfaces among
departments involved in planning, design,
procurement, construction and operational
handover. The responsibility matrix
facilitates effective communication among
project stakeholders, avoids gaps and
duplication of project efforts and aligns
goals and objectives of the various parties
involved with a given project or overall
programme. The responsibility matrix
should include all of the various tasks to be
performed and indicate each person’s roles
and responsibilities pertaining to each task.
Project teams are frequently comprised
of individuals from across an organisation.
In planning for PMO resources, the
owner can rely on either a top down
estimate, based on available industry
information (e.g. surveys and general
guidelines) or bottom up estimates of
resources based on the specific internal
project management activities it intends
to perform. For best results, resources
should be formally assigned to the PMO
and to specific projects to eliminate
competing responsibilities from jeopardising
programme and project success.
3. Assessing and establishing controls
One of the most common reasons for
programme and project failure is the lack
of objective control standards. Conversely,
successful entities frequently evaluate
risks and the internal control environment
designed to mitigate these risks. Leading
entities use a comprehensive set of
objective criteria that serves as a consistent
baseline for controls evaluation and
measurement. Such standards can also
provide needed assessment criteria for
internal audit departments.
Consider the following guidelines when
assessing, developing and implementing
project or programme controls:
Prioritising objectives
Before assessing programme controls,
understand and prioritise the objectives
of the programme with validation from
management and key stakeholders.
Developing a framework
Develop and adapt a controls framework
that meets the needs of the programme.
Current policy and procedure analysis
Perform a gap analysis of existing core
policies, procedures and processes in order
to identify gaps, overlaps and areas of
strength or weakness.
Evaluate analysis with sponsor
Prior to implementing new policies and
procedures, evaluate existing and planned
controls with the PMO sponsor to ensure
the right balance of controls is in place.
/05
Phased control implementation
Modifying controls, implementing new
controls and providing training to PMO
team members in phases to minimise
implementation issues.
Continuous improvement
Reassess controls on a continuous basis
to keep up with the organisational and
regulatory changes.
Recognising that the effectiveness of
project management processes and
controls is never black and white, the
PMO sponsor should challenge PMO
members to achieve a desired state of
PMO performance. The state of the PMO
performance can be described as a range
of process maturities such as the following:
Tier V optimised
Tier IV managed
Tier III defined
Tier II repeatable
Tier I awareness
An approach to evaluate and measure
process maturity might also include a
checklist of criteria for managing risk,
which can help identify control gaps and
encourage project management process
improvement.
Project Advisory / Leadership Series 1 /06

How can KPMG help?

The KPMG Controls Framework uses five major process control categories and approximately
forty sub-categories to describe leading practices for managing large capital programmes.

30

Programme Cost and Financial Procurement Project Controls Schedule

Strategy, Management Management and Risk Management
Organisation and Management
Administration

Schedule
Project strategy Change development
core process

Budgeting Solicitation
and authorisation management standards and
processes

Policies and Payment processing Schedule change

Source selection Risk management
procedures and administration management

Project
Project cost Contracting Design standards
management
reporting standards and specifications
reporting

Estimating and
Contract
contigency
administration
management

Schedule
Communication Procurement Regulatory
support process

Forecasting management
plan planning compliance
process

Project self
Roles and Solicitation Schedule
Variance analysis assessments and
responsibilities planning integration
lessons learned

Project planning
Project cost Contract Compliance
and intergration
coding Negotiation auditing
management

Project Cash flow Quality control

Contract closeout
infrastructure reporting and inspection

Document Materials Environmental

Value engineering
management management health and safety

Historical trend
analysis

Conclusion
Determining the most effective project
management and controls framework
for your organisation and understanding
how to implement your PMO presents
significant challenges. Despite these
challenges, there is always room to
improve project management practices
to match precisely the needs of the
organisation. If you are considering
implementing a PMO, then the advice
and tips described above will help you
through the decision making process.
Project Advisory / Leadership Series 1
About KPMG Project Advisory
KPMG’s Project Advisory services are
objective, professional approaches to
managing the many risks associated
with major change: risks that involve
complexity, technology, governance,
selection and management of vendors
and partners, implementation of
solutions and acceptance of change
throughout the organisation.
Our project advisory services include
Independent Quality
Assurance (IQA)
Is your project or programme on track?
Are the key risks and issues being
effectively managed and addressed?
Independent Quality Assurance is
KPMG’s approach to providing objective,
practical and open feedback to senior
executives, independently assessing
project status, risks and issues. Advice
is provided by experienced staff who
are not part of the delivery team.
Portfolio, Programme &
Project Management (P3M)
Practices
P3M provides services for the purpose
of designing or evaluating portfolio,
programme, or project management
practices. The objective is to assist
in implementing or improving P3M
practices to reduce project costs,
increase project success and create an
organisational P3M support environment
which is valued by internal and external
stakeholders alike.
Large Project and Programme
Management Assistance
This cornerstone service of KPMG’s
Advisory practice is designed to
address the full lifecycle of a project or
programme, providing an integrated
approach to managing large initiatives
- the result: significant efficiencies and
enhanced outcomes. The methodology
incorporates concepts from well-
known risk, benefits, project and
quality management disciplines to help
companies achieve the results they
expect during every phase of a large
project or programme.
KPMG applies leading concepts
and practices, supported by:
› Experienced practitioners
› Recognised best practices
› Effective tools and templates
› International standards
› Built-in knowledge transfer
Project Risk Assessment &
Monitoring
These services provide a highly focused,
activity-based approach to project risk
management. They provide management
with an objective and independent
assessment of the risks associated
with a business initiative, programme or
project, and evaluate the effectiveness
of planned or implemented controls to
mitigate the risks.
Benefits Management and
Realisation Advisory
KPMG professionals help you identify the
measurable business changes that you
will to see at the successful completion
of your project and to tie these into
an effective Benefits Management
and Realisation strategy which can
be referenced in your Business Case.
Even for projects where outcomes are
“enabling” or “intangible”, our Project
Advisory team will be able to assist with
the identification of proxy indicators
and benefit relationships to support the
approval of your Business Case and its
successful delivery.
Portfolio Management
Effective portfolio management helps
large organisations make sound
decisions by prioritising the deployment
of scarce resources to change initiatives
and maximizing their value to help
achieve the organisation’s strategy.
Organisations operate in increasingly
dynamic environments, which often
make it a struggle to satisfy fluid
business requirements.
/07
Project Advisory Services can assist
organisations to generate significant
cost savings by minimising poor
selection decisions, costly overruns,
misalignment with business needs,
poor quality deliverables and failed
projects.
KPMG’s Portfolio Management (PfM)
Advisory and Assistance services help
organisations to develop appropriate
processes and capabilities to achieve
this aim. We provide practical guidance
for conducting capability development,
maturity assessments and performance
reviews. Our methodology provides a
flexible, comprehensive approach that
can help our clients achieve their goals.
Programme Management
Office Assistance
Programme Management Office
Assistance is intended to help our
clients develop the processes to
support a Programme Management
Office. We assist with the development
of a client’s programme office processes
and facilitate communication across
client leadership to help make sure that
enterprise programme initiatives are
aligned with the organisation’s business
strategies. The focus of the PMO is to
increase project visibility across client
leadership in order to help achieve
strategic programme performance.
Project Advisory
Our practitioners know that successful
projects are the result of clear vision,
careful planning, and meticulous
execution.
Bottom line: Project Advisory services
drive speed and effectiveness of change
within your organisation by reducing
costs and increasing success.
Leadership Series

Please look for important topics covered

by our Project Advisory Leadership Series
in the coming months:

»» Project development and delivery strategy

»» Budgeting, estimating and contingency
management
»» Project controls and governance
»» Stakeholder management
and communication
»» Project risk management
»» Monitoring capital projects and
what to do if one is in trouble.

Contact us

Gina Barlow
Director
Project Advisory
T: (04) 816 4798
E: gbarlow@kpmg.co.nz

Chris Dew
Director
Project Advisory
T: (09) 363 3230
E: cdew@kpmg.co.nz

David Leighton
Associate Director
Project Advisory
T: (03) 378 0504
E: dleighton@kpmg.co.nz

Harriet Dempsey
Associate Director
Project Advisory
T: (04) 816 4883
E: harrietdempsey@kpmg.co.nz

kpmg.com/nz

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appropriate professional advice after a thorough examination of the particular situation. 3418