The Use Of Logical Framework Approach

Published Date: 02 Nov 2017

The Logical Framework Approach (LFA) for project cycle management was designed based on the principles of management by objective for use in the public sector. Mega projects in the private sector have a failure rate of 65%i. The Independent Project Analysis Inc. (IPA)i has proposed that one of the main causes of project schedule and cost over-run in private sector is unclear objectives.

This paper attempts to evaluate the usefulness of the LFA in addressing some of the challenges in private sector projects. This is done by comparing the LFA with the Stage-gate framework for managing oil and gas project and the MPcp framework of British Petroleum. The comparison is done with respect to the critical success factors for capital projects.

The paper is concluded by acknowledging that although the LFA has some weak points, some of the phases in the LFA can be adopted by private sector companies in managing their projects. The recommended phases are:

Objective Analysis Phase (which includes stakeholder analysis, problem analysis and objective analysis)

Use of Logical Framework Matrix in the planning stage of the project

KEY WORDS:

Logical Framework Approach (LFA), Logical Framework Matrix, Stage-gate Framework, Major Projects Common Process (MPcp), Critical Success Factors, Objective Management, Additive Weighting Technique

INTRODUCTION

Independent Project Analysis Inc. (IPA) carried out a research (2011)i, which revealed that projects less than $500 million record about 37 % failure rate while the failure rate of mega projects is about 65%. The research involved the evaluation of 4500 process facilities projects and 318 megaprojects. Booz Allen Hamilton (2006)ii, in their research, also noted that oil and gas projects frequently exceed budget and time projections by more than 10 percent. Hamilton’s research revealed the failure rates as 40% for megaprojects (more than $1 billion) and 35% for other projects (less than $1 billion). For the purpose of this paper, a successful project is defined as a project that finishes on time and on budget.

In their research, IPA proposed that one of the causes of cost and time over-runs is unclear objectives. This paper seeks to evaluate the possibility of using a project management methodology that is based on management by objective, in the private sector, particularly in the oil and gas industry. The methodology is called Logical Framework Approach (LFA).

In this paper, I want to compare the Logical Framework Approach to the project management methodology used by some private sector organizations in order to identify the differences. It is believed that the LFA is based on the principles of management by objective, and if an unclear objective is one of the major causes of project failures, then adopting the LFA in the private sector may increase the success rates of projects.

THE LOGICAL FRAMEWORK APPROACH

The LFA is currently used mostly in the public sector, in formulating and managing development projects and programmes. One of the key outputs of the LFA is the Logical Framework Matrix or sometimes simply called Logframe. The matrix shows an overview of what the project intends to do, how the project is going to achieve its goals, the key assumptions underlying the project, and how outputs and outcomes will be monitored and evaluated. The following figure shows an overview of what the LFA entails.

Figure 1: Overview of the Logical Framework Approach

Logical Framework Approach

Analysis Phase

Planning Phase

Stakeholder Analysis

Problem Analysis

Analysis of Objectives

Strategy Analysis

Logical Framework Matrix

Activity Scheduling

Resource Scheduling

Opportunity Statement

In the research carried out by Booz Allen Hamilton (2006)ii, they surveyed leaders of 20 companies in United States, Asia and Europe with total spend of over $100 billion. The survey revealed that most executives were dissatisfied with the overall performance of their projects. He proposed that one of the interventions to improve project success rates is to rethink the project framework of these organizations.

There is increasing demand for oil in major countries of the world like China, and this is putting a lot of pressure on the oil and gas industry to increase production. This would most likely increase the annual capital spending for exploration and production. This is putting a lot of pressure on industry leaders to significantly reduce, if not totally eliminate, multiyear and multibillion dollar project overruns in this sector.

What are we going to do

By comparing the project framework of some oil and gas companies with the established and proven Logical Framework Approach used in the public sector, the objective is to identify the areas of differences. An attempt will be made to evaluate the possibility of adopting the LFA and adapting it for use in the private sector.

How will we do it

A comparison table will be set up for the LFA and the project framework of some oil and gas companies. A Compensatory Modeliii for evaluating alternatives will be used in the analysis of the frameworks and the areas of differences will be identified. An attempt will also be made to identify the requirements for adopting the LFA in the private sector.

Why this is important

The Independent Project Analysis Inc.i has identified ‘Unclear Objectives’ as one of the major causes of cost and time overruns in projects. Given that LFA is based on management by objective, it is believed that adopting this framework will help to bring clarity to project objectives and better management of costs and time schedules based on clear objectives will significantly reduce overruns.

WHERE ARE WE NOW?

There are various approaches to the management of oil and gas projects, depending on Project Owner i.e. the company, and the resources they have on ground. A report written by Ernst and Young (July 2012)iv on Capital Project Life Cycle Management for Oil and Gas has revealed that the stage-gate model is one of the most proven and effective ways to manage capital projects in the oil and gas industry. Most capital projects in the oil and gas sector are executed using the stage-gate approach. The key phases of this approach are as shown in Figure 2 below.

Figure 2: Stage Gates of the Capital Project Life Cycle

Some oil and gas companies also have their own customized capital project management methodology. An example is British Petroleum’s MPcpv. The MPcp (Major Projects Common Process) is a PRINCE2 Style set of guidelines.

Figure 3: British Petroleum’s Major Projects Common Process (MPcp) v

The key phases in the MPcp are as follows:

Figure 4: MPcP Phases

Challenges in Oil and Gas Project Management

Dismantling

DecommissioningA very large number of oil and gas projects fall short or completely miss their targets. Recent literatures have identified several factors that are responsible for failure of oil and gas projects. These factors include:

Project Objective Alignment: Aligning investments in the oil and gas sector with the organization’s business goals has been a major challenge in many companies. This is partly because business goals are constantly shifting

Financial and Credit Risk: The financial market is constantly changing, and these changes would usually have a significant impact on the financial stability of the company and also on the feasibility of projects

Schedule Delays: Failure to implement appropriate schedule management and time tracking tools can result in significant delays in the execution of projects

Ineffective cost management and lack of financial transparency: Not managing contracts effectively, relying on manual controls and not utilizing a robust project management methodology exposes the company to a lot of project risks

Unclear definition of roles and responsibilities: This is particularly true for joint ventures where governance may not be very clear. The contract and governance structures do not take risks and how to mitigate them into account

In the past, oil and gas employees were only charged with the responsibilities of exploration and production. However as a result of these challenges, they now have the responsibility for planning projects, risk management, managing technical performance and corporate strategy. Project schedules, project costs and technical performance are commonly used in the measure of project success/failure in the oil and gas industry.

USE OF LOGICAL FRAMEWORK APPROACH

The Logical Framework Approach (LFA) is used mainly in the public sector. It is based on the principles of clear objectives and stakeholder commitment, which drives project success. The LFA is used as an aid to thinking and does not replace creative analysis. A large number of agencies use the LFA as a planning and management tool. These include the British DFID, Canada's CIDA, the OECD Expert Group on Aid Evaluation, the International Service for National Agricultural Research (ISNAR), Australia's AusAID and Germany's GTZ, amongst others. The World Bank has also been using the LFA since 1997.

The LFA is used throughout a project’s lifecycle from identification to monitoring and evaluation. Project stakeholders are usually actively involved in the use of LFA to manage projects. The steps in carrying out the Logical Framework Analysis are as follows:

Figure 5: Steps in Logical Framework Analysis

The key output of the LFA is the Logframe Matrix, which summarizes the basic design of the project in terms of its objectives, activities and outputs. The Logical Framework achieves four main goals for project teams, which are:

Identify ‘root cause’ problems and needs in an organization and link those needs to the overall organizational strategy

Facilitate selecting and setting priorities between multiple possible alternatives or projects, given limited capital or other resources

Plan and implement an organization’s projects effectively

Follow-up and evaluate selected projects’ results versus the original organizational objectives

Figure 6: The Logical Framework Matrix

Current practice of using the LFA

For some development organizations, the driving force behind the use of the LFA is the fact that it is a requirement for getting funds from donors. For some however, they have internalized the use of the LFA and have found it very useful in managing their programs and projects. The success of the LFA, like any other framework or methodology, depends on how it is used rather than on its contents. According to the work done by Bakewell & Garbutt (2005)vi the current practice for most development organizations in planning, managing and monitoring their projects are:

Using the LFA and producing a logical framework

Using the Logical framework matrix without the LFA

Using the LFA without a logical framework matrix

No use of LFA or logical framework – different planning methods are used

COMPARISON AND ANALYSIS

The critical success factors for a successful project have been researched by various scholars all over the world [e.g. Morris and Hughes (1987), Park (2009), Ogunlana (2009)]. Based on the work of Ogwueleka (2011)Vii the top five (5) critical success factors for project performance are as shown in Table 1 below.

Table 1: Critical Success Factors for Project Performance in Nigeriavii

The objective of any good project management methodology would be to effectively address the critical success factors listed above. Table 2 below was formulated for use as a basis of assessing the prominence of the success factors in the frameworks.

Table 3 compares the Logical Framework Approach with the MPcp methodology of British Petroleum and the Stage-gates approach commonly used by major oil and gas companies (as indicated in Ernst and Young’s reportiv). This comparison is done with respect to the critical success factors listed in Table 1 and 2 in order to attempt to determine how effectively the success factors are addressed by the different frameworks.

Table 2: Prominence of Success Factors Key

Table 3: Analysis of the Frameworks

*Note: An assessment of ‘Poor’ does not necessarily mean that the critical success factor in question is totally ignored in the framework. It simply means that the success factor does not appear to be a prominent part of the framework, especially as shown in Figures 1-5 above.

Framework Comparison Using a Compensatory Model

The three frameworks are compared below using a compensatory model for decision making. The selected method is a Nondimensional Scaling method known as Additive Weighting Technique. The attributes being considered are critical success factors for any capital project, therefore the acceptable value for all the top 5 success factors is ‘5-Very Good’.

Table 4: The Additive Weighting Technique

The most important critical success factor for projects is ‘Objective Management’ (Ogwueleka, 2011)vii

Table 4 above shows that the Logical Framework Approach is very strong on Objective Management. This is based on the fact that the framework was formulated from the principles of Management by Objective. The LFA therefore has the highest rating, from the results of the Additive Weighting Technique, as shown in Table 3. However, Technical Factors and Risk Management are not a very prominent part of the Logical Framework Approach to project cycle management.

LOGICAL FRAMEWORK APPROACH CONSIDERATIONS

S/N

Success Factors

Logical Framework Approach

Objective Management

Objective management in LFA includes analysis of stakeholders, problem analysis and objectives analysis. This is an iterative process rather than a linear set of steps. The objectives are developed from the problem analysis tree. The means-end relationship in the objectives analysis is used to develop a narrative description of the project, which is included in the logical framework matrix.

The LFA’s objective analysis process may be an effective way to ensure that private sector companies choose projects that meet the specific business goals and objectives of their companies.

Management of Design

The management of project design is usually done using the logical framework matrix. The matrix usually has 4 columns and 4-5 rows, explaining the means end relationship of the project. The efficiency and economics of the project can be evaluated based on this matrix. The project description is first completed, next is the assumptions and indicators, and lastly the means of verification. The process is also an iterative one, and the different aspects of the project need to be revisited as the matrix is being developed.

Technical Factors

There is no separate stage for the analysis of the technical factors relating to a project. In the stage-gate framework for example, engineering design (front end engineering and detailed engineering) are a very prominent part of the framework. This is one of the key reasons why Logical Framework approach may not be appropriate for use on its own, but along with the stage-gate approach, in the private sector.

Top Management Support

There is a lot of emphasis on stakeholder analysis in the analysis phase of the logical framework approach. The roles and interests of all stakeholders are identified, including management and the general public. The logical framework is strong on this point.

Risk Management

Although risk management is not a very prominent part of LFA, it is addressed during the Strategy Analysis phase. Here, the merits, difficulties and risk associated with the project are identified and discussed by the planning team. The LFA may not be the best model to use in addressing risk management deficiencies in other frameworks.

CONCLUSION

The Logical Framework Approach has two (2) key phases that can be adopted in the stage-gate approach to project cycle management in the private sector. These include mainly the:

Objective Analysis Phase (which includes stakeholder analysis, problem analysis and objective analysis)

Use of Logical Framework Matrix in the planning stage of the project

The adoption of these two key phases may help in addressing some of the main challenges in private sector projects, such as poor alignment of project objective and unclear definition of roles and responsibilities. This may also help to build three (3) of the top five (5) critical success factors for projects into the project management framework of the companies. The three (3) critical success factors supported by the Logical Framework Approach are:

Objective Management

Management of Design

Top Management Support

REFERENCES

iMerrow, Edward W. (IPA Inc.), ‘Why Large Projects Fail More Often - Mega Projects Failures Understanding the Effects of Size’, retrieved from: http://www.aacei-ncs.org/Downloads/AACEI_-ASME_-_Why_Large_Projects_Fail_Final.pdf

iiBooz Allen Hamilton, ‘Capital Project Execution in Oil and Gas Industry – Increased Challenges Increased Opportunities’, retrieved from: http://www.boozallen.com/media/file/Capital_Project_Execution.pdf

iiiSullivan, W. G., Wicks, E.M., & Koelling, C.P. (2012). Engineering Economy (15th ed.) (pp 573-589) New Jersey, NJ. Pearson Higher Education, Inc.

ivErnst & Young. (2012). Capital Project Life Cycle Management for Oil and Gas. EYGM Limited. Retrieved from: http://www.ey.com/Publication/vwLUAssets/Capital_projects_life_cycle_managemant_oil_and_gas/$FILE/Capital_projects_life_cycle_managemant_Oil_and_Gas.pdf

vLearning Inc. (2012). Oil and gas Project Management: The BP Way. Learning Inc. Retrieved from : http://www.malakim.org/stuff/learninginc/OilandGasSlidePack.pdf

vi Bakewell, O & Garbutt, A. (2005). The Use and Abuse of the Logical Framework Approach. SIDA. Retrieved from: http://www.intrac.org/data/files/resources/518/The-Use-and-Abuse-of-the-Logical-Framework-Approach.pdf

viiOgwueleka, A. (2011). The critical success factors influencing project performance in Nigeria. International Journal of Management Science and Engineering Management. (6.5), 343-349. Retrieved from: http://www.ijmsem.org/upfiles/Download/2011100522061127320.pdf