Nature of Projects and Special Approaches for Their Management
Discuss about then Program and Portfolio Management Information Systems.
Projects, by their nature, are unique and different from normal organization operations because they require different approaches and resources, and usually involve non-routine work and activities: these sometimes need special teams to undertake. Because of the uniqueness of projects, many at times, projects are either unsuccessful or fail (Payne & Watt, 2014). To enhance the chances of projects succeeding and create a suitable framework for managing projects, different from normal operations management within organizations, special approaches and frameworks have been developed (Usmani, 2018). For instance, project management methodologies that include PRINCE 2, Project management Body of Knowledge, and Systems Engineering Body of Knowledge among others. Yet, even with such frameworks, projects still fail, and the failure is often systematic rather than incidental (Robertson & Williams, 2006). Projects will always have threats and risks; using the various approaches and standards of project management, such threats and risks can be pro-actively managed to avert disasters and losses caused by the various risks and threats (Usmani, 2018). In this context, this paper evaluates the BP Deep-water Horizon Oil Spill and Offshore Drilling and discusses whether an effective use of project management approaches and methods could have averted the disaster, and then draws a conclusion; the article is based on the question
Discussion
On 20th April 2011, a Deep water horizon oil rig run by BP experienced an accident where an explosion went off, leading to the deaths of eleven people with 53000 barrels of oil spilled into the sea per day (Bryant, 201). The accident and its subsequent management is a classic example of complete and total disregard for using standard approaches to assess and respond/ mitigate threats in off shore oil drilling projects (Greene-Blose, 2015). BP PLC, with its headquarters in London, England, is among the world’s biggest organizations involved in the oil and natural gas extraction, refining, and supply and has operations in over 80 countries globally (Rapier, 2016). Different firms have different levels of tolerance to risk (or risk appetite) such that what one organization considers as a high risk for an organization that is risk averse can be viewed as being a medium or low risk to an organization that is risk seeking or risk neutral. This risk preference consequently influences how such organizations approach and manage risks. Risk attitudes and tolerances, according to the PMI, are classified inputs in enterprise environmental factors within the processes of identify and plan risk management. Many factors influence the acceptance of risk for organizations, including time dependence, the perception of benefits versus the costs of reducing risks, training, and industry standards and regulations (Yeomans, 2011).
BP Deep-water Horizon Oil Spill and Offshore Drilling
According to Kerzner and Saladis (2009), the culture within an organization may have a significant effect on its tolerance to risk. An organizations’ risk tolerance can be indicated via a utility factor where for the risk-averse organization, the level of comfort (utility) for the level of satisfaction associated with risk increases at a decreasing rate. As such, the risk-averse organization becomes more and more uncomfortable as the risk increases (Saladis & Kerzner, 2009). The BP oil spill case was enormously impacted by organizational culture, especially how it approached the risks in 2010. The company has a high risk tolerance, and as such, fall into the category of risk seeking organizations. Risk seeking organizations are those that are willing to passively accept threats or rely upon reactive rsponses when threats materialize. Such organizations are not committed to taking proactive mesures to deal with risks; insetead, they take shortcuts whenever it suits them. Further, such organizations have a tendency to downplay hreats and be overy optimistic about available opportunities, while more emphasis is placed upon probability instead of impact when risks are being assessed (Winston, 2010). BP, in case of the Deep water Horizon dsisaster, can be considered as being a risk seeker due to a multitude of factors including a deeply entrenched organizational culture of placing greater value on cost above quality, minimal independent overshights in operations, minimal financial reprecussios whenver there is failure, and deep reserves of cash. These factors conspired to enable BP to accept risky events as being standard operating procedures instad of identifying and managing risks proactively (Adams, 2016).
The 2010 case in BP is not isolated, which is why BP is a risk seeking organization; in 2007, an internal report at BP described unprecedented level of accidents and issues and a pervasive organizational culture of unwillingness to stop working even when something went teribly wrong (Jennings, 2010). This corroborates the general organizational culture at BP which was established during a survey of the Macondo Well BP crew a few weeks before the 20th April incident; the rsponse from 46% of the crew was that there was far of reprisals for reproting unsafe situations (National Commission, 2010 p. 222). The driving force behind the company’s decisions and appetite for risk are undoubtedly cost cutting and revenue increments (Achenbach, 2011). A casual response to a series of incidents at BP were driven mainly by cost cuting concerns; 15 employees of BP were killed at a BO owned refinery in Texas; 170 employees suffered injuries during an explosion and an nvestgation by the US OSHA established there were a total of 439 violations as BP failed to comply with 271 regulations just before the explosion accident. BP was subsequently fined $ 87 million (Jennings, 2010). It was concluded that cost cutting measures had greatly contributed to the company’s failure to dal with the numerous violations where a 2004 directive by BP wanted costs cut by 25% in all refneries.
Risk Tolerance and Attitudes in Organizations
A BP pipeline at Prudhoe Bay, Alaska, in 2006 burst resulting in 267000 oil gallons being spilled, and the reason for the bursting of the pipe was the piping used; it was three years overdue for replacement and had corroded as a result (Jennings, 2010). In 2008, there a minor oil spill experienced by BP (about 193 oil barrels) in its Gulf of Atlantis rig and the main reason for the spill, among others, was putting off a decision to repair a faulty pump due to tight budgetary constraints. Investigators learned that any repair delays were not questioned by the top management ; the questions were inevitably in the line of why they could not spend less. These incidets show a worringly risk seeking organization
The BP deepwater oil spill and accident is among the worst cases of poor (or failure in) effective rsik mangement in recent history. In experiencing the disaster (rik actualization), and its subsequent management, BP demonstrates such a high level or risk appetite and risk seeking: this is contrary to provisions of such standards as SEBoK, which is a risk management appoach that mimics systems engineering. A working risk management following laid down strategies in PRINCE 2, as well as standards such as SEBoK could have significantly helped avoid the experienced risk (Garvey, 2009) . BP violated government regulations, standards for safety and control of losses as stipulated for the oil exploration industry, internal BP standards for safety and control of losses, and core principles of risk management (Jansen, 2012). BP fell into traps it had itself set in its risk seeking culture; generally, human insticnts become flawed in the context of risk management; there is fcus on frequent lossses but ignorance of vastly importantly severe losses. People and institutions focus more on apparent risks, such as costs exceeding budgets, but ignore the remote but potentilally severe risks such as, what happens if costs are lowered in lieu of required equipment maintenance and safety standards ad the entire equipment gets spoilt or causes a severe accident. In the ca of BP, this is the overriding principle and organizational culture. Cutting costs is the norm, rather than evaluating and managing remote but highly impactful risks. Past events and incidents at the deep water horizon gave BP warning after warning that there were impending disasters; being a risk seeking rganization; BP did nothing to mitigate or reduce these risks (Jansen, 2012).
Organizational Culture and Its Effect on Risk Tolerance
The BP deep water horizon disaster was not caused by a single act (or inaction); instead, a combination of several factors and interlinked series of failure at critical times, coupled with risk seeking and a culture where revenues and cost cutting are given greater value; the accident happened. The failurs relate to failure in human judgement, poor engineering design, lack of an effectve risk management strategy, and failure or operational implementaton of rik management strategies, along with total dsregard for effective risk management practices based on the SEBoK, PMBOK, and PRINCE 2 guildelines, all interfaced together the expose the company and its risk seeking culture. BP emphasized that costs be at the lowest possible levels; there were slips in the project shcedule that reprsent extra costs: BP allowed the contsraint of quality to be sacrified across many levels. Quality assurance in activities that would ensure the appropriate approaches and procedures are implemented became suboordinate to the achievement of schedule and cost goals. Its previous incidents, such as the Texas City refinery exlosion revealed the company tolerated serious deviations from prescribed safety standards and this organizational culture and practice continued unabated. Senior management failed to address risks, hazards, or safety procedure performance, contrary to requirements for total quality management and PRINCE 2 guildelines on managing risks and assurig quality
The cost of quality for BP is very low due to non conformance; the cost of quality pertains to the descripton of the costs incurred through conformance to quality activities, for instance, audit, training, prevention, and maintenance costs. The costs of non conformance was borne by BP several times through fines, compensation, and losses to production and revenue from incidents. In the Mocando and Deep Horizon projects, BP ha various proactive measures it could implemented to minimize the effects of potential well blowout. For instance, it would have been possible and logical to build a relif well that would significantly lower the required time to cap a blow out to just days rather than weeks (Hagerty & Ramseur, 2010). However, such measures (relief well0 would have required an additional investment of $ 100 million, which according to BP’s organizational policies and culture, represented increased costs and so they took on greater risks by refuing to invest in the relief wells, well before any accidents or incidents (Fountain, 2010). The blow out preventor of the well head could have had an extra acoustic actuator installed at a cost of some $ 500000; tis was also not done with the aim of maximizing profit and spendng as less as possible on managing risks and contingencies (Gold, Casselman, & Chazan, 2010). an additional $ 50 million investment was needed to put in place a capping stock to act s a backup should the blow out preventor fail; again this was not done. These issues had been raised in the panning phase but were never implemented in order to cut costs
Organization’s Risk Tolerance and BP’s Risk-Seeking Culture
The company never did a detailed cost benefit analysis which would have enlighteeed it to the fact that the total liability placed on an oil spill from a 1990 US legislation was $ 75 million; the fine was far less than having a relif well put in place and to a company the sze of BP, this was not such a huge costs; being a risk seker with a high affinity for risk, BP sought not to invest in risk mitigation measures and implement safety. This is in violation of SEBoK guidelines along with general requirements for safety and risk management as well as quality management in such projects. The Deep water horizon rig needed test to be done on the blow ut preventor, the cement poured into the well, the cement choice, as well as installing other safety and fail safe measures. Eventually, with huge cas reserves and an affinity for high risk and failure to implement quality control led to the incidents, whose management is also unprofessional and against TQM principles.
Conclusion
After evaluating the BP Deep water incidents, the BP disaster happened because of the company having an organizational culture of being risk seeking; failing to follow risk and quality management measures as defined by various project management bodies such as SEBoK, PMBoK, PRINCE 2, and the PMI. The company was following an organizational strategy of minimizing costs and maximizing revenues; with huge cash reserves, it still chose to do nothing on potential riss, even after such issues were raised during the projects planning stage. The analysis shows risk seeking, poor risk management, and failure to implement quality measures in its projects is systemic rather than incidental.
References
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