Project Culture and Total Cost Management: the Italian case

THIS IS AN ARTICLE THAT I WROTE IN 2001, MAYBE IT’S PARYIALLY OUTDATED. YOUR COMMENTS WOULD BE APPRECIATED

Project Culture and Total Cost Management: the Italian case

by: Gianluca di Castri, FwAICE CCE / ICECA, Delegate of the AICE to the ICEC

Project culture

Italy belongs to the group of countries where the legal system is based on the Civil Law (also called Romanist German System). This is different from the Anglo-Saxon legal system, based on the Common Law.

In the majority of Common Law countries, Cost Engineering and Project Management have had a separate development, like two fully independent disciplines. The relevant professions are separate, like in England, in the majority of the Commonwealth countries, in the United States of America.

In countries belonging to the Civil Law group of countries, the profession of Cost Engineer, Planning Engineer and Project Manager have had a common and sometimes confused development. This can also be understood from terminology: while in Anglo-Saxon countries we have different definitions for Cost Engineering, Project Management, Planning Engineering, Quantity Surveying, in Latin countries the overall term of Ingegneria Economica (Ingenieria Económica, Financiera y de Costos) has been used since the beginning. Now this overall concept has been accepted also by the ICEC, as Total Cost Management, whose meaning is corresponding to the meaning of Ingegneria Economica, as far as the different languages will allow the correspondence.

Project management

Development

Up to some years ago, Project Management and Total Cost Management in Italy were known and developed only by those Engineering and Construction companies working abroad, in countries where a project culture was needed. It is funny to note that some of those companies, whose methodologies for project management and project controls have been considered as advanced on a world-wide basis, have developed and used such tools only abroad.

As a matter of fact, in Italy it would not have made any sense to use an advanced tool in a contract for public works, where all the contractual milestones were bound to procedural and bureaucratic steps completely beyond of any control. This is why the real completion time was actually unknown, this is why all contracts for public works were and still are subject to heavy claims for disruption and longer contract time.

In private sector situation was better. However, till the beginning of the Nineties, the major investment in Italy were either public works or investment of State owned companies. Such projects, although not considered as public works on legal point of view, have been actually managed with the same criteria.

Situation is slowly changing due to the European integration. The new law on public works no 109 of year 1994 has been amended several times and still is not fully in operation. The relevant regulations have been finalised in July, 2000.

Organisation, practice & methods

In major, international engineering and construction companies the projects are organised as follows:

• The Project Director, whose responsibility is normally extended to several projects, is part of the senior management of the company and, in most cases, is part of the Directing Committee (namely to the higher committee of the management) or of the Board of Directors. To be noted that some confusion can be due to the use of the word Director, whose Italian equivalent (Direttore) has a meaning equivalent to Top Manager, while the members of the Board are identified with the title of Amministratore.
• The Project Manager, one for each project, is part of the middle management.
• The Project Office or Project Team is composed by the following sections (useless to say, each section can be formed of one ore more people according to the size of the project itself):
• Project Engineering,
• Planning & Project Control,
• Contract Management,
• Cost Engineering.
• All Project Controls are then not considered as an independent function, while they are part of the Project Management.In minor companies the situation is more confused, the Project Management or Co-ordination being considered as part of the Engineering or Construction Department. The Owners The real project directing function should belong to the Owner or to the Employer, where different from the Owner. In its organisation there should be a Project or Programme Director with its Project Monitoring Office. This Project Director should be part of the senior management of the Owners organisation, for projects considered of primary importance for the Owner itself, while for minor projects or maintenance and refurbishing project a middle manager could be enough.

  This function was completely unknown among the public owners till few years ago. Now, the new law provides for the public Owner to have a manager, defined as Responsabile del Procedimento, that is a complicate way to say Programme Manager. Useless to say, the law does not create a culture, it will be needed a generation time to have real Programme Managers in Italian public works.

  The new law should also allow project financing to start. Some vitality has been shown in municipal and regional public works, mainly for hospitals, urban transportation (metropolitan railways, suburban tramways and some innovative transportation systems) as well as for power generation. This is in some way related to privatisation of major state owned companies or corporations, and will have a further development in the next years.

  In private owners situation is better. However, in a lot of major industries the function of the ownership has been often deputised to the Purchasing Departments. This is also wrong, since the Programme Management or Directorship, being a basic function of the Owner or Employer, should be strictly related to the General Management of the Owner itself, without being deputised to any functional department.

  Contract management & claims

  Up to now, contract management has been not enough taken into consideration, while claim procedures have been only a business for the lawyers. This was due to the fact that, under the old regulations, a privilege was given to legal technicalities in front of the real ground of the claims themselves.

  This is in part a characteristic of the Italian mentality. However, situation is in process of being modified.

  According to the Italian law, the disputes can be solved through the civil procedure of litigation in Court or through arbitration, according to what the contract stipulates. For public works, some matter are reserved to the Administrative Court, while majority of contractual disputes can be referred either to the Court or to the Arbitration, according to the case. In the old regulation (1962) an arbitration panel of five members was provided, while the new law provides for the normal panel composed by three members.

  To be noted that, since the arbiters are in general retired judges or university law professors, the arbitration procedure is actually very similar to a full litigation.

  The innovative methods of settlement of disputes, such as conciliation, adjudication, etc. are nor allowed for public works. However, their use is increasing in the private sector.

  Risk management

  In major private works, a correct procedure for risk management is being introduced. In general, there is a distinction between the contingencies for work variation and other contingencies (disruption, force majeure, delays, etc.), both being managed under the direct responsibility of the Project Manager.

  In public works, as well as in minor works, the situation is still confused.

  Human factor

  In the Italian companies, people is classified as employees of various levels, semi-managers (quadri) and managers (dirigenti). In some, major companies there is a further contractual distinction between middle managers and top managers (dirigenti superiori).

  The career path, in major engineering and construction companies, starts with Engineering or Site responsibilities at a minor level, such as Planning Junior Engineer, Cost Junior Engineer, Site Junior Engineer, Design Junior Engineer, and so on. This is still considered as employee level.

  In general, only after having some experience as a full Engineer, the person can obtain a secondary responsibility as Project Co-ordinator or as Assistant to the Project Manager. This should be at semi-manager level.

  The further step is the full Project Manager responsibility, normally at management level. To be noted that some companies try to save money by giving qualification and level lower than it is expected according to the actual responsibilities. This is a wrong policy, source of bad results. Unfortunately, still is more used than it should be.

  Consultants are working as project management consultants or as specialists in contract and claim management. This is a growing profession in Italy, although still new and still in the starting phase.

  Training

  Some University or Polytechnics offer courses in Project Management at post-graduate level. The private sector (professional association or companies) offer courses for professionals at different levels.

  Major companies still prefer in house training, more or less formalised.

  The AICE (Associazione Italiana di Ingegneria Economica), member of the ICEC, together with the Provincial Authority of Varese, has offered a one year course for people aiming at entering the profession. This course has been funded by the European Union.

  Certification & Qualification

  The AICE offers two different level of certification, both accredited by the ICEC:

• Cost Engineering Practitioner (Praticante in Ingegneria Economica) for graduate people aiming at entering the profession or for undergraduate people with proper professional experience, and
• Certified Cost Engineer (Esperto in Ingegneria Economica) for graduate people with professional experience at a proper level of responsibility.Certification in project management are being offered by the ANIMP according to IPMA rules or by the Italian chapter of the PMI. Future perspectives The total cost management shall be in Italy a slowly growing profession in private as well as in public sector, either within the organisation or as free consultants. In the next few years, the whole system of Engineering profession shall be modified to cope with the new European rules, also the University courses are being modified and re-shaped for the same reasons.

  Although the matter is still under discussion and far from being clear, we hope that there shall be proper room and qualification for our professions and we are working for this objective.