Tag Archives: projects

The Case for Independent Verification and Validation (IV&V)

The concept of Independent Verification and Validation (IV&V) is not new and is generally understood as part of any significant IT projects. Many firms employ it, especially in mission critical projects. In addition, the service is commonly used when things are going, let’s say, south. However, in the Energy/Commodity Trading and Risk Management (E/CTRM) industry, IV&V is few and far between when it comes to E/CTRM implementation, upgrades and system integrations.

Why is it so?

We believe the fundamental reason is that, when budgeting for E/CTRM projects, IV&V is not typically on the radar. Often viewed as an additional cost, and frankly, senior management may think it is not necessary. It can be perceived as consultants trying to “up sell” additional services, or thought that current project dynamics might be upset by bringing in other 3rd party consultants to perform the IV&V. Also, many times, the E/CTRM project budgets are lower than the thresholds to trigger mandatory IV&V as per an organization’s IT policy.

But does it have to be so? Can IV&V consultants be an integral part of the E/CTRM projects and actually help drive the delivery time & cost to remain within budget?

Empirical evidence seems to suggest so. Georgia Technology Authority’s Enterprise Program Management Office (EPMO) observed that in 2008, IV&V provided a tangible benefit of $29.6 million on an investment of $2.1 million.

We strongly believe that IV&V should be integral part of any E/CTRM project plan & governance activities, utilized to drive the following key objectives:

  • Independent measurement and validation of project objectives, progress, and risk
  • Compliance validation with agreed requirements and internal standards
  • Independent testing & verification of required customizations
  • Early detection and remediation of project variances, issues, and risks
  • Evaluation of adequacy and competencies of stakeholder and vendor involvement

Governance, in a typical E/CTRM project, utilizes Steering or Working Committee meetings to evaluate project progress, issues management and stakeholder management. In the event (often likely) of disagreements, it may be a case of vendor versus client manager view-points with considerable energy and resources spent aligning potentially conflicting perspectives. IV&V, being integrated with the project activities, opens up another channel to manage stakeholder dynamics through independence, open communication, and teamwork to successfully achieve project objectives. The IV&V process can thus provide a non-adversarial forum to facilitate faster resolution of issues, and help in managing project schedules.

IV&V also supports the evaluation and management of E/CTRM customizations. “Are they really needed?” is a question with which an independent and objective IV&V evaluation can help. All too often vendors or business stakeholders do not fully comprehend the limited ROI for time and costs for customizations that provide only limited benefits or competitive advantages. In fact, eliminating “unnecessary” customizations can potentially provide project savings far greater than the investment in IV&V services.

In conclusion, companies should consider the benefits an IV&V can bring to an E/CTRM project in minimizing the potential for higher costs and blown deadlines, as well as, the potential value added perspective in managing costly and unnecessary customizations.

Image
About the author. Prashant Shah is a Principal at AXCELERUS, a specialized ETRM/CTRM consulting practice with global client-base and solutions for the full spectrum energy transacting value chain. Prashant focuses on risk management activities, risk reporting, front, middle and back-office processes and energy transacting/risk management (ETRM) systems. Prashant can be reached at prashant.shah@axcelerus.com.
Advertisements