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.

Stakeholder interests Conflict/reconciliation of interests
Congress Party-led national government Liberalisation 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

Enron Ambitious 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 Bank Potential 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?

 

MaharashtraStategovernment Regardless 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 projects Concern about MSEB payment problems. They cannot get return of investment since MSEB is not getting payment because of corruption Cease further funding and investment.

 

Godbole Committe 1999 – bit BJP and get the ruling power by opposing Dahol Breakdown agreement, fight for the people.

 

DPC – Dahol Power Company Project 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 ProgressiveAlliance Tool 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.

Problems Root causes projects 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 environments Improper 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.

Typical

 

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

disadvantage[13]

 

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.

 

initiatives description how
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.

Fast The 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 Accountability the 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?

 

Problems description
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 introduction Worse, 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
http://tsetseconsulting.webs.com/index.html
https://tsetseconsulting.wordpress.com/
http://erictse2.blogspot.com/

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