The Wonthaggi Desalination Plant: Project Management

Background

The following report contains information and analyses related to the Wonthaggi Desalination Plant in southern Victoria, Australia, with the view to demonstrating a comprehensive understanding of the best practices in project management. Specifically, the report uses the knowledge areas documented in the project management literature to undertake a critical analysis and evaluation of how the desalination project has been run using key project management artefacts, namely initiating, planning, executing, monitoring and controlling, and closing (Richardson 2010). The knowledge areas considered in this project include scope management, time management, cost management, quality management, procurement management, risk management, integration management, and stakeholder management.

An Artistic Impression of Wonthaggi Desalination Plant
Figure 1: An Artistic Impression of Wonthaggi Desalination Plant (Source: Capital Projects Division 2009)

Project Initiation

This process group not only defines the project and succinctly states its objectives, but also obtains authorization to commence the project (Project Management Institute 2013). The Wonthaggi Desalination Plant, also commonly known as the Victorian Desalination Plant or the Victorian Desalination Project, was initiated as the largest seawater desalination plant in Australia by virtue of its capability to deliver up to 150 billion litres of clean water annually to Melbourne, Geelong, and other nearby towns.

The project was proposed against a backdrop of enabling Victoria State to be self-sufficient in water rather than being entirely dependent on rainfall to meet water needs (AquaSure n.d.). Consequently, the major objective of the project was to guarantee the reliability of Victoria’s current and future water needs through the use of available technologies to desalinate sea water for domestic use by the population.

The decision to develop this project was announced by the Victorian government on June 19th 2007, though a lot of planning was required before the project could be initiated due to its complexity and scope (Capital Projects Division 2009). The project was delivered within the Partnerships Victoria framework, whereby the Victorian government and the successful bidders (AquaSure Pty Ltd) were to jointly participate in designing, constructing, and operating the desalination plant.

In stakeholder identification, it is important to note that the project was “delivered by the AquaSure consortium, comprising Degrémont SA, Suez Environment, Thiess Pty Ltd and Macquarie Group, in partnership with the Capital Projects Division of the Departmental of Sustainability and Environment” (Capital Projects Division 2009, p. 2). The Partnerships Victoria framework forms an important component of the Victoria’s Government’s strategy to avail superior services to all Victorians by increasing and progressing Victoria’s public infrastructure and acted as the principal authorizing agent for project work to begin.

Project Planning

To be able to develop a desalination plant with the capacity to guarantee the reliability of current and future water needs in Victoria, AquaSure had to establish the scope of the project according to this objective and define an effective course of action commensurate with this particular objective (Project Management Institute 2013). This section reviews and analyses a multiplicity of knowledge areas commonly used in the project management literature and applies them to the case project.

Scope Management

The main justification for this project was nested in the provision of water security for Melbourne, Geelong, and the surrounding areas from a source that is exclusively independent of rainfall. Consequently, the project was to generate its revenues from the supply of portable drinking water to the mentioned areas (Capital Projects Division 2009).

In project scope description, it is important to note that the project was intended to (1) provide Victoria with non-rainfall dependent supply of portable drinking water equivalent to 150 billion litres per year, (2) develop the capacity for future expansion of the project to supply 200 billion litres of clean water per year, and (3) retain flexibility to vary supplies over time to sustain optimisation of Victoria’s water supply network (Capital Projects Division 2009). Consequently, the main deliverable for the project was the provision of non-rainfall dependent water to the population residing in project areas.

In acceptance criteria, the project was not only required to guarantee that the desalinated water provided to customers meets the State’s water quality requirements, but also deliver the project in a way consistent with the State’s strategy of maintaining ownership and management of water resources in the public domain (Capital Projects Division 2009). Some of the initial constraints noted during the early phases of the project included (1) how to use seawater without endangering marine life, (2) how to meet the huge demands for electricity needed in powering the desalination plant, and (3) how to deal with various community groups that were opposing the project.

The project had to invest heavily in developing technologies that ensured the safe harvesting of seawater without harming marine life. Similarly, heavy investments were made to develop a wind farm to provide the electricity needs of the project. It was assumed that the various community groups against the project could be brought on board through persistent education and awareness campaigns as the project progressed further (Capital Projects Division 2009).

Available literature demonstrates that breaking the work required in the project into finer work packages is an important function of project scope management, as such an action allows the project developers to effectively schedule, cost, resource, monitor, and control the work packages (Richardson, 2010). AquaSure (n.d., p. 1) defined the scope of work to include “the design, finance, construction and operation of the desalination plant marine structures, an 84 kilometre transfer pipeline, delivery of an 87 kilometre underground power supply for the project and the purchase of renewable energy.”

From this elaboration, it is clear that the work packages for the project included the construction of the sea water intake and outfall tunnels and structures, the construction of the associated infrastructural works including the transfer and outlet pipelines, the construction of underground power supply systems, as well as the construction and commissioning of a wind farm to meet the heavy electricity needs of the project (AquaSure n.d.).

These work packages were shared among the members of the AquaSure consortium and the subcontractors recruited directly by the consortium members. It is important to underscore that work placement was dependent on the contractors’ or subcontractors’ commercial, technical or architectural/landscape capabilities (Capital Projects Division 2009).

Time Management

AquaSure consortium was expected “to commence delivery of desalinated water from the project to Victoria’s water supply system by 19 December 2011” (Capital Projects Division 2009, p. 2). This meant that all activities and tasks related to the work packages spelt out in the project scope were to be done from September 2009 (effective month for commencement of project construction) to 19 December 2011 (effective date for project closure).

Subcontractors were identified to initiate various activities related to the mentioned work packages. The main activities for the project revolved around the following:

  1. the supply of high-voltage alternative power cabling by Olex Corporation,
  2. the supply of acoustic ceiling and roof systems by Ortech Industries,
  3. the development of water retaining structures by Ausform,
  4. the supply of process automation and switchgear kit for the main plant by Siemens Automation,
  5. the delivery of PCS7 equipment used in the plant to manage the flow, vibration, temperature and pressure,
  6. the supply of SIEMENS motor control centres by SRS Group,
  7. the supply and installation of indigenous ground covers, shrubs and tussocks over a roof area of approximately 26,000 square metres by Fytogreen,
  8. the undertaking of property surveys by Gippsland Building Approvals, and
  9. the designing and supply of a whole range of medium-voltage motors and low and medium-voltage variable frequency drives for the main plant by General Electric’s (GE) Power Conversion business unit (Capital Projects Division 2009; Victorian Government Department of Sustainability and Environment 2010). Of course there were many other activities for a project of this magnitude and scope, but the mentioned were some of the most important.

Owing to the fact that it is difficult to relate these activities to their timelines due to the complexity of the project, this report presents the primary milestones for the project, as follows:

Table 1: Project Milestones (Source: Capital Projects Division 2009)

Key Event Date
Contract Close 30thJuly 2009
Financial Close 2ndSeptember 2009
Commercial Viability (water delivery) 19thDecember 2011
Reliability Testing January-June 2012
Contract Expiry Date for O&C 30thSeptember 2039

Cost Management

The concept of value for money was employed under the Partnerships Victoria framework to identify and implement efficient infrastructure delivery according to the value of methodology of delivery whether by state or private sector (Capital Projects Division 2009). According to Capital Projects Division (2009, pp. 8-9), the value for money concept “considered quantifiable elements (i.e. items that can be quantifiable in dollar terms) as well as subjective or qualitative elements.” It is evident from the various readings that the various costs for the project were calculated around the work breakdown structures (WBS) and allocated to the various contractors and subcontractors depending on the what they were expected to deliver towards the successful completion of the project (Victorian Government Department of Sustainability and Environment 2008).

As acknowledged by Capital Projects Division (2009, p. 18), “the funding solution for this project included state support for syndication in the form of a guarantee, under which the state would effectively act as a lender of last resort if the debt which was to be syndicated was to be completely sold out.” The capital cost of the project was set at $3.5 billion dollars, while the total maximum net present cost (including construction, financing and operating costs) to the state over the 30-year contract term of the project was set at $5.7 billion dollars (AquaSure n.d.).

Stakeholder Management

It is important address this knowledge area under the project planning process group owing to the fact that the success or failure of the project was dependent on the effectiveness of the relationships between the various stakeholders brought together under the Partnerships Victoria framework. Stakeholder management was also of critical importance in the early phases of the project due to the fact that the project was being developed under a public-private partnership, hence the private sector under the AquaSure consortium had to develop strong relationships to oversee the designing, financing, construction, operation, and maintenance of the project over an extended period of time (Capital Projects Division 2009).

Overall, the stakeholders that were party to the project included the

  1.  Victoria state as the principal contracting entity for the project,
  2. department of sustainability and environment (DSE),
  3. AquaSure as the principal entity contracted to deliver the project,
  4. domestic and international equity providers,
  5. financiers,
  6. D&C Contractor (Thiess Degrémont) to design and construct the desalination plant and associated infrastructure,
  7. O&M contractor (Thiess Degrémont) to operate and maintain the desalination plant and associated infrastructure,
  8. transmission line operator to operate and maintain the high voltage alternating current (HVAC) transmission line during the O&M phase of the project, and
  9. electricity and REC provider (AGL) to supply the electricity and renewable energy obligations of the desalination plant and other infrastructural concerns during the operation and maintenance phase of the project (Capital Projects Division 2009).

A stakeholder analyses done prior to the commencement of the project established that all these stakeholders had an important role to play in ensuring the success of the project, hence were to be included in making major decisions affecting the work breakdown structure to avoid increasing project risks and other related adverse outcomes. Available literature demonstrates that project stakeholders should be fully engaged during the project planning phase with the view to negotiating expectations on contributions, creating relationships, and creating awareness (Eskerod & Jepsen 2013).

Procurement Management

Although procurement management was a continuous process throughout the life-cycle of the project (Richardson 2010), the overall procurement assessment was conducted prior to the commencement of the project to evaluate if the public-private partnership (PPP) was the actually the best model for use in delivering the project. It was decided the PPP model was better placed that other models (e.g., traditional state funded procurement, state funded alliance, state funded procurement under the DBOM model) to ensure maximum value for money in the delivery of the project outcomes. Some of the most important benefits for adopting the PPP approach included:

Effective Risk Transfer

Available literature demonstrates that “the PPP model offered the optimum risk profile given the size and complexity of the project, both during the construction phase and beyond into operations and maintenance, with the most efficient and effective management of risks overall” (Capital Projects Division 2009, p. 6). The risk for delivering safe drinking water to the public is normally borne by the public sector; however, in this case, it was thought that the private sector possessed adequate financial, technological, and material capabilities to not only ensure the delivery of safe drinking water and associated services, but also maintain the desalination plant and associated infrastructural projects.

Whole of Life Efficiencies

It was rightly believed that the PPP approach “encouraged bidders to take a whole of life approach to optimising the balance between capital costs and ongoing maintenance/lifecycle costs” (Capital Projects Division 2009, p. 6).

Improved Asset and Service Quality

It was believed that the PPP approach not only provided a higher control over the quality of infrastructure and services due to the high level of rigor and robust review as evidenced in an PPP procurement process, but also availed a framework for the appraisal of performance standards, particularly in terms of ensuring that those standards are successfully met (Capital Projects Division 2009).

Design Innovation

Available literature demonstrates that the PPP approach provided an exceedingly competitive structure within which there was substantial “scope and incentive for the private sector to deliver innovative solutions to achieve the best whole of life cost and management of risk while still meeting the performance requirements” (Capital Projects Division 2009, p. 6).

Timely Delivery

The PPP approach, according to Capital Projects Division (2009, p. 6), “was considered most likely to facilitate the required timeframe of commencement of delivery of water by late 2011 and to be effective in mitigating the risks of delay to commissioning compared to other options considered.”

Operational Flexibility

The Victoria State Government and other governmental agencies involved in the project felt that the PPP allowed the optimal level of operational flexibility desired to ensure that the project was able to commence water production at the required capacity (Capital Projects Division 2009).

Risk Management

Owing to the project’s complexity and scope, the government and AquaSure consortium had a multiplicity of risks to deal with as identified by the work breakdown structure (WBS) and other analyses. Indeed the WBS helped these stakeholders to not only identify the components of the project as demonstrated in the project scope, but also to discover and categorize the risks in terms of those that were unique to a particular area of the project and those that were shared across the entire project (Richardson 2010).

The Victoria Government was mandated to manage risks relating to land acquisition, key approvals (e.g., delay to the project due to legal action affecting the project), native title claims and artefacts (e.g., suspension of work due to discovery of artefacts on the site or native land ownership battles), output specification or project requirements (e.g., delay from the realisation that the State’s output specification for the project will not meet the set requirements), force majeure events and extension events (e.g., risks of delay to project completion and/or increased construction costs due to court decisions), and water supply system connection risk (e.g., delay to the completion of the project and commencement of water delivery due to an unforeseen delay in completing the main water delivery point near Cardinia Reservoir). Other risks for the government included power supply risk, industrial action and strikes, interest rate and foreign exchange risk before or after financial close, and operations phase insurances (Capital Projects Division 2009).

AquaSure consortium was mandated to manage risks related to approvals (e.g., risks and associated delay/costs associated with obtaining any other approvals, consents, permits or licences), site conditions (e.g., risks of geotechnical, marine and associated site conditions), environmental contamination, design and construction risk (e.g., risk that the design, construction and commissioning of the desalination project cannot be completed on time or to budget specifications), power supply infrastructure (e.g., risk that adequate power supply infrastructure is guaranteed to supply power during the construction phase), operational risks (e.g., risk that the requirements for operation, maintenance and repair to meet the specifications set by the State government are different or cost more than anticipated), as well as risks brought about by changes in law (Capital Projects Division 2009).

Project Execution

In project management literature, this process group concerns the undertaking of processes and activities aimed at completing the work as illustrated in the project management plan in order to satisfy the project specifications and objectives (Project Management Institute 2013). Human resources management and communications management are both critical in project execution, as human and material resources must be effectively coordinated to ensure successful completion of the project (Richardson 2010).

In the desalination project, AquaSure put up an executive team of professionals charged with such responsibilities as team development, effective information distribution among relevant stakeholders as well as solicitation. Although human resource management and communications management are important knowledge areas under this phase, this paper discusses how quality management and integration management were ensured in the project.

Quality Management

As already mentioned elsewhere, the public-private partnership model used to deliver the project not only provided a higher control over the quality of infrastructure and services as a direct consequence of the high level of rigor and robust review demonstrated in such partnerships, but also availed an unassailable mechanism for the appraisal of performance standards and ensuring that those standards were successfully met (Capital Projects Division 2009).

The D&C and O&C contractors, according to this document, ensured high levels of quality in the development of the various phases of the project, which included phase one (development of marine intake and outlet structures), phase two (development of the desalination plant and associated facilities), and phase three (development of transfer pipeline, power supply comprising HVAC underground cable network transmission and power supply from the desalination plant, and ancillary fibre-optic cable).

Integration Management

Available project management literature demonstrates that the integration concept relates to the all the processes necessary to guarantee that the various components of the project are adequately and effectively coordinated (Richardson 2010). In the Wonthaggi Desalination Project, various trade-offers were made between competing technologies and their alternatives with the view to using the most applicable technologies and hence meet or exceed stakeholder needs and expectations (Capital Projects Division 2009).

The tradeoffs between the project objectives were non-existent basically because the initial project objectives remained largely unchanged. Other activities involved in the actual project execution were integrated together not only to reduce costs and associated risks, but also to enable project stakeholders to follow-up on engagement and sustain mutually-fulfilling relationships (Eskerod & Jepsen 2013).

Monitoring and Controlling

All the project management teams met regularly to not only track and review the tasks and activities being implemented by the various contractors and subcontractors, but also to undertake an analysis of the progress of the as per the previously agreed project objectives and key milestones (Project Management Institute 2013). The AquaSure consortium was at the centre of tracking, reviewing and regulating the progress of the project to ensure the project was able to provide non rainfall-dependent water to the selected areas by the lapse of the commercial viability date.

It was also the task of this consortium in conjunction with the relevant government agencies to identify any areas or processes in which changes to the plan could be made with the view to delivering optimal project outcomes (Capital Projects Division 2009; Moore n.d.). For example, advances in technology necessitated several changes to be made to the original plan with the view to introducing emerging technologies that were non-existent during the initial project planning phases.

Project Closure

Although the project was able to supply non-rainfall dependent clean drinking water to the population in the selected areas in December 2012 (one year later than initially planned) after the completion of reliability testing, the contract between the Victoria government and AquaSure consortium will expire on the 30th September 2039, implying that the project is still operated and maintained by the consortium. However, many of the contractors and stakeholders engaged in the design and construction of the project has so far been disengaged due to the closure of their respective activities.

List of References

AquaSure n.d., Victoria desalination project – Frequently asked questions (FAQ), Web.

Capital Projects Division 2009, Partnerships Victoria project summary: Victorian desalination project, Web.

Eskerod, P & Jepsen, AL 2013, Project stakeholder management, Gower Publishing Company, Farnham, Surrey.

Moore, M n.d., Victoria: The desalination plant, Wonthaggi. Is this the way to do business?, Web.

Project Management Institute 2013, A guide to the project management body of knowledge: PMBOK (R) guide, 5th edn, Project Management Institute, Pennsylvania.

Richardson, GL 2008, Project management theory and practice, CRC Press, New York, NY.

Victorian Government Department of Sustainability and Environment 2008, Our water our future: Victoria’s desalination project, Web.

Victoria Government Department of Sustainability and Environment 2010, Victorian desalination project: Acquisition of easements required for pipeline, Web.