Friday, February 10, 2012

Dabhol Power Project

After reviewing the assigned case studies and articles you should have an understanding of some of the key factors that cause projects to lose value and in some instances to fail. Utilizing this background and your outside research respond to the questions below.
1. Identify the various stakeholders in the Dabhol Power Project Case Study and the issues most important to these stakeholders. Where interests diverge, describe how these interests can be reconciled.
StakeholderinterestsConflict/reconciliation of interests
Congress Party-led national governmentLiberalisation of commerce/electricity/licensing, encourage foreign management,
Initiate Dabhol power plant, help ease SEB power supply, less corruption, flagship initiative marking the opening ofIndia’s domestic energy sector to foreign interests [1]

Suspect get bribed by Enron to speed up the process, and make the project happen regardless of the feasibility objections from authority
MaharashtraStateElectricity Board (MSEB),  Local power generation sector
Enough power generation, cheap power generation.
Loss money, corruption and bribing. No money for building new plants. [2]
Cannot get their  electricity payment back. (corruption from industrial users??)
MoU signed, not agree program split in two phases
Don’t ask people for payment if people bribe
EnronAmbitious US power company
CEO had high profile[3] visions. He wanted Enron to be largest distributor of liquefied natural gas inIndia. [4]

Enron, with its aggressive
lobbying efforts, overcame the notoriously conservative Indian bureaucracy with exceptional speed to allow Dabhol to proceed[9].

After the halt of the Dahol project, Enron sue the Indian central and state governments for claim of compensation.

2001. Enron get bankrupted because it is corrupted as well.

MoU signed, but later split program two phases, violate interests of MSEB
World BankPotential sponsor and funding provider[5]
State Dahol project not feasible early in the project.[6][7]
Central Electricity Authority (CEA)Federal authority for power sector
State that the Mou is one sided to Enron (electricity generation is too high)
Can Enron charge less?
MaharashtraStategovernmentRegardless of objection of project feasibility of CEA[8] and World bank, still push the government to clear the project. (They get bribed???)Get bribed to make wrong judgement?
Nationalist BJP Party
Hindu nationalist Shiv Sena
Replace the Congress state government before the commencement of the Phase I of the project
They have an anti-Dahol perspective, believe dealings with foreigners are always bad.
Enron spent US$20 million to bribe the new party to let the project pass. [10]
The BJP ignored what they have promised during the campaign, to dump Enron into theArbianSea, and they revise the agreement more favour to Enron.
40 lenders, financing Phase two of the projectsConcern about MSEB payment problems. They cannot get return of investment since MSEB is not getting payment because of corruptionCease further funding and investment.
Godbole Committe1999 – bit BJP and get the ruling power by opposing DaholBreakdown agreement, fight for the people.
DPC – Dahol Power CompanyProject executor, partnersjip of MSEB and Enron
1999 Cash Crisis,
2000 MSEB can’t afford the high cost, sold sahres to Enron
2001 stopped Phase I operations May, constructions of phase 2  halt in June
2001-2004 Left Idle
2004 Bachtel and GE acquired the Stake of DPC from American bankruptcy court
Waiting settle agreements

2006 reopen the the Power plant
MSEB accused DPC of misrepresenting Dahol’s technical capability and made a claim for compensation. (They know it is not feasibility, but they got bribed, not they claim money back)
Dispute payment of state, central government and the MSEB.

Bechtel and GE acquired Enron.s 65% stake in DPC for US$23 million through an American
bankruptcy court and initiated arbitrations to make good their losses.
United ProgressiveAllianceTool over central government at 2004,
Main aim to clear foreign debts
settle the case between Dahol and Indian government. Bechtel get $160 million, GE get 145 million.
Overseas lenders get some money back.
Try to settle the dispute by paying the foreign investor some money back to minimize the lost of impact

2. Based on your readings and outside research, discuss the typical reasons why projects fail and how they might be addressed by early planning.
ProblemsRoot causesprojects fail and how they might be addressed by early planning.
Ignore feasibility studies, at the stages of financing,
The world bank has already indicated the project is not feasible. (such as the electricity is too expensive) [11]. Somehow the program management organizations ignore this. And at the1st phase of the project the prediction is correct.
Improper planning, Ignore feasibility studies of expert who has the knowledge.
Lack of understanding of the local situations.
If the project is identified as not feasible, they shouldn’t get started. [13]

Enron is too aggressive to bribe everyone to make it happen.

They should work out better alternatives to start and should balance interests on both sides.
Underestimate the complex stakeholder environment, such as negotiation of complex financial transactions with governments in unstable institutional environmentsImproper Implementation of key program and project management processes.

Lack of understanding of local situations. Poor risk identification.
It is hard to invest in a country that is political unstable.

Also have they identified the MSEW payment problems? They should have known that those State power company won’t push people to give them payment if people bribe them. This problem make the whole plant fail.

That’s why the new party United Progressive Alliance, try to stabilize the political and rebuild the confidence to the foreigner investors by giving them some money,
Accusations of corruption in the government association of the project

“Antagonism towards Dabhol was accentuated by a statement before aUScongressional
hearing by a senior company official that Enron had spent US$20 million in education in
Indiato show the benefits of private power projects,44 a sum which many inIndiainterpreted
to mean bribe money.[12]”
Improper Implementation of key program and project management processes

Need more local understanding network (stakeholder interests)

Ignore the project environments.

But get a clear pictures(map) of how Indians (or Chinese) works from white people was not easy.

When Enron do a foreign investors project, they should have even local knowledge to asses if the political party is stable. If the power get overthrown, are you going to lose the projects etc. But probably they can just keep bribing the new party to keep the project going. They don’t have enough local knowledge to predict this will happen

But nowadays, out –sourcing is a global trend. White people should know to make project work in china orIndia, projects won’t get smooth without bribing. Also they might get halt if someone get bribed as well.

Don’t ask. Just bribe them (conclusion).
Project became a pawn in the volatile of the Indian political environment

“In March 1995, prior to the commencement of construction of Phase I  a new coalition of
the nationalist Bharatiya Janata Party (.BJP.) and the Hindu nationalist Shiv Sena replaced
the Congress state government that had been responsible for entering into the Dabhol contract.
Both the BJP and the Shiv Sena campaigned for election on an anti-Dabhol platform, fanning
the widespread perception that dealings with foreigners were likely to be to India.s
Improper Implementation of key program and project management processes

Lack of stakeholder information and local political assessment.

Don’t bother building in fallback options

Ignore the project environments.
Not as typical.

How political being unstable is not easy to predict for foreigners  without good local knowledge.

When Enron do a foreign investors project, they should have even local knowledge to asses if the political party is stable. If the power get overthrown, are you going to lose the projects etc. But probably they can just keep bribing the new party to keep the project going. They don’t have enough local knowledge to predict this will happen

Foreign investors should access political environment before stepping their toes into the mess.
Completion of project suspended for years, at great cists because Enron collapsed in the interim.Improper Implementation of key program and project management processes

Don’t bother building in fallback options

Ignore the project environments.

Lack of business integrity and ethics, (even for theUScompanies)
This is not typical. (before).
But this is typical nowadays because many big brands got bankrupted.

How would you know beforehand 2002 before it would crash. It is one of the most renowned power company in theUnited States.

Did anyone say something before the scandal happen? (with author Anderson)

But company always bribe others won’t be clean themselves anyways.

But I don’t any foreign companies don’t bribe if they open offices and plants in developing countries.

3. In the development of a Project Management Office, how would you address the "white space risk" and the "integration risk" discussed in the assigned article "Why Good Projects Fail Anyway."
Unless the end product is very well understood, as it is in highly technical engineering projects such as building an airplane, it’s almost inevitable that some things will be left off the plan. And even if all the right activities have been anticipated, they may turn out to be difficult, or even impossible, to knit together once they’re completed. Managers use project plans, timelines, and budgets to reduce what we call “execution risk”—the risk that designated activities won’t be carried out properly—but they inevitably neglect these two other critical risks—the “white space risk” that some required activities won’t be identified in advance, leaving gaps in the project plan, and the “integration risk” that the disparate activities won’t come together at the end.

Rapid-Results Teams Work
Results Oriented
A rapid-results initiative is intentionally commissioned
to produce a measurable result,
rather than recommendations, analyses, or
partial solutions.
Even each teams have done their part and give out the effort. If the whole thing is not working, or some accidents happened, they are still considered as failed.
Vertical.Project plans typically unfold as a
series of activities represented on a timeline by horizontal bars. In this context, rapid-results
initiatives are vertical. They encompass a slice of several horizontal activities, implemented
in tandem in a very short time frame. By using the term “vertical,” we also suggest a
cross-functional effort, since different horizontal
work streams usually include people from different parts of an organization
By intensively putting people in all expertise to complete one tasks, unknown/integration risks can be identified more easily/minimize/mitigate.

If something unexpected happen, the cross disciplinary collaboration would speed up fixing the problems.
FastThe short time frame fosters a sense of
personal challenge, ensuring that team members
feel a sense of urgency right from the
start that leaves no time to squander on big
studies or interorganizational bickering.
People always think the tasks have to be done the next day. So they won’t slack. If those white and integration risks happen, they would try to fix it as soon as possible.

Also by doing work faster, they leave more time and budget in case something very bad happen. (white risks and integration risks).
A Shift in Accountabilitythe team is free—indeed,
compelled—to find out what activities
will be needed to produce the result and how
those activities will fit together.
This approach puts white space and integration risk onto the shoulders of the people doing the work. That’s appropriate because, as they work, they can discover
on the spot what’s working and what’s not. And in the end, they are rewarded not for performing a series of tasks but for delivering
real value. Their success is correlated with benefits to the organization, which will come not
only from implementing known activities but also from identifying and integrating new activities.

Why is it hard to recognize impending failure? What are some of the avoidance techniques for limiting the impact of bad projects?

face of resistance from the project manager, team members, and upper management proponents.Their opposition is understandable because
by this time they have a personal, ego
stake in the project. Consequently, they keep digging, convinced that somewhere under all the detritus of escalating costs, poor performance, and sliding schedules, there must be a pony!
The mis-belief that throwing more money at a project will somehow “buy” success.unless a project is truly suffering from a
dearth of funding, increasing its budget will usually not bring the kinds of returns hoped for.

The larger question is whether or not the firm will receive due value for the additional monetary support.

The extra money given to a troubled project does not necessarily correlate with an improved likelihood of success.
the common threads that runs through many of the better-known project failures is the company’s unwillingness to back away from a poorly managed development process or product introductionWorse, it is common to actually commit more and more resources to a losing hand.
It is important here to distinguish between adding resources to a project that is in trouble and simply reacting in a “knee-jerk” fashion by increasing funding.

[1] Parry, S. (2001) .Enron.sIndiaDisaster.,
[2] Hill, C.W.L. (2005) op. cit.
[3] Anderson, F. (2001) .Free and Clear of Enron.s Woes., Business Week,
[4] Hill, C.W.L. (2005) op. cit.
[5] Human Rights Watch (1999) op. cit.
[6] Choukroun, S. (2002) op. cit.
[7] Allison, T. (2001) op. cit.
[8] Dutta, S. (2002) .The Enron Saga.,ICFAICenterfor Management Research.
[9] Hill, C.W.L. (2005) op. cit.
[10] Human Rights Watch (1999) op. cit.
[11] Human Rights Watch, (1999), cit
[12] Human Rights Watch, (1999). Cit
[13] Sutta, S. (2002) op, cit
[14] Wall Street Journal,, (1996)“Eurotunnel Suspends Interest Payments,”

Eric Tse, Richmond Hill, Toronto
Tse and Tse Consulting -Security, Identity Access Management, Solution Architect, Consulting

1 comment:

Casey Dale said...

Risk management attempts to plan for and handle events that are uncertain in that they may or may actually occur. These are surprises. Some surprises are pleasant. We may plan an event for the public and it is so successful that twice as many people attend as we expected. A good turn-out is positive. However, if we have not planned for this possibility, we will not have resources available to meet the needs of these additional people in a timely manner and the positive can quickly turn into a negative.