In 2006, the citizens of Panama voted to approve a national referendum for the Panama Canal Expansion Program (PCEP). The goal of the program was to grow the global shipping industry infrastructure and expand the economic opportunities of Panama. This would be accomplished through an additional expanded size lane of traffic—via a new third set of locks — to double the Canal’s tonnage capacity and allow the transit of much longer, wider ships through the existing canal waterway. When the expansion locks were inaugurated in June 2016 they increased ship throughput to 18,000 vessels with an increase in capacity to approximately 15,000 TEUs, a standard unit for describing a ship’s cargo carrying capacity or a shipping terminal’s cargo handling capacity.
During the development of the PCEP concept, it became evident that the Autoridad del Canal de Panama (ACP) could benefit from the services of a Program Management firm due to the program’s risks in logistical and technical complexity; the interrelated multiple contracts; and the multi-billion dollar budget which encompassed resource needs beyond the ACP’s existing engineering and procurement support managing the operations & maintenance and routine capital improvement projects. Therefore, a decision was made to partner with an experienced Program Management firm to advise and assist throughout the execution of the expansion program .
Program Management Definition
Program Management is the delivery of multiple, interrelated projects in a coordinated process for the benefit of the owning entity. The need is often associated with a spending growth for capital infrastructure programs reflecting increased risks and complexity arising from the interfaces between multiple projects as well as the effects of varying project schedules.
Program durations are longer than individual projects because programs encompass multiple projects and uncertainty is likely to be higher because of the likelihood of encountering environmental, financial, political, technical solutions and other changes.
The PCEP is defined as a Program as distinguished from a Project by the following characteristics: The scope of the program encompasses the design and construction aspects of a megaproject including contract document development and procurement, design-build construction, construction management, environmental mitigation and remediation, rainforest preservation and reforestation, wildlife and animal rescue, social impacts to residences, and site clearing for potential unexploded ordinance from previous military operations. The needs to fulfill the program role from ACP were for partnership, advice, mentorship and training within an integrated team arrangement.
ACP’s Consideration of Program Management Models
The ACP evaluated the following models with a goal of selecting a working construct that aligned with its short- and long-term goals as well as its organizational and political objectives:
Owner Management Model: Owner provides project definition, hires the engineers and contractors and manages all contracts.
At Risk Model: Owner has less direct project input and control because it has assigned more risk to the Consultant and must also assign commensurate control over the Program to the Consultant.
Consultant Management Model: Consultant Manager may supplement the Owner’s staff in an advisory role. The Owner hires the Program Manager, the designers and the contractors.
Owner’s Agent Model: Owner hires the program manager and contractors, and may also in some cases hire the engineers, but the program manager is responsible for providing direct management of engineering services.
Integrated Program Management Model: Program Manager may be either the Owner or the Consultant, with staff from both organizations integrated at multiple levels. The Consultant staff may augment positions within the Owner’s organization where expertise or experience is lacking.
ACP Selection: Integrated Program Management
The ACP selected the Integrated Program Management model. CH2M HILL would eventually phase out its staff, leaving in place an owner team trained in advanced Program Management and delivery and capable of operating and managing a world-class operation.
Program Management Services Contract Awarded to CH2M in August 2007
At its peak, CH2M reached a maximum staffing level of 40 supporting the ACP in an integrated program management team of greater than 200. With the successful implementation of the knowledge transfer strategy, that number today stands at six full-time CH2M staff. The ACP team currently has approximately 60 members assigned to the program for the remaining contract close-out period.
One Team One Mission
To meet the ACP’s expectations, the CH2M team worked towards the goal of institutional and professional mentorship of ACP’s staff throughout the execution. This approach was cross-cutting from the program management development of tools and processes to establish the governance of the PECP to a mirror manager approach of CH2M with ACP counterparts offering guidance, advice, and support for ACP’s decisions.
PCEP’s Stakeholders
Four primary stakeholders are driving the PCEP:
People of Panama: Ultimately, the people of Panama are the primary stakeholders. They are the ones who gave approval to proceed and now benefit from the success.
Autoridad del Canal de Panama (ACP): The agency of the government of Panama responsible for the operation and management of the Panama Canal.
Board of Directors: The eleven-member group responsible for establishing the Canal’s policies for operation and management pursuant to the National Constitution, the Panama Canal Authority Organic Law and ACP Regulations.
Global Maritime Industry: The Canal’s ultimate customers who will benefit from increased loadings, larger vessels, reduced canal transit times and lower transportation costs.
Risk Management
A key element of any Program Management model is risk allocation. Risk transfer works best when you get as close as possible to a “win-win” scenario. A risk profile with an imbalance inevitably leads to the detriment of one or more parties.
In the case of the PCEP, the integrated ACP-CH2M team identified the risks during the tendering process and the risk allocation was improved, in favor of the tenderers, as a result of open dialog. This risk approach was maintained throughout the execution.