Identifying and Evaluating the Impact of Regulations throughout the Project Life Cycle

RT-PUI-01 Topic Summary
RT PUI 01

Overview

The Power, Utilities, and Infrastructure Sector Committee (PUIC) formed Research Team PUI-01 (RT-PUI-01) to answer an essential question:

What is the current best practice for decision-making methodologies to proactively identify, evaluate, and respond to the impacts of regulations throughout the different project life cycle phases?

The PUI-RT-01 research explored the effects of regulatory changes on capital projects in the power, utilities, and infrastructure sectors and identified ways that companies could better anticipate and adapt to regulatory changes.

The team adopted a T-shaped research approach: scanning across the industry for general trends and issues, but also diving deep into specific company experiences and practices. To gain a sense of the impacts of a regulatory change on a large capital project and the current challenges to addressing these impacts, the team conducted a literature review, surveyed 27 affected companies, and interviewed 47 subject matter experts with more than 800 collective years of experience in monitoring, evaluating, and complying with regulatory changes. The team also conducted a deep dive into three specific case studies of regulatory changes, to obtain a more granular and regulation-specific understanding of business and project procedures, processes, decision-making methodologies, and response strategies.

Building upon the findings of this research, PUI-RT-01 developed a regulatory future-proofing framework that regulated entities can follow to anticipate future regulatory actions, take proactive steps to minimize the risks and maximize opportunities created by those regulatory changes, and thereby capture value.  This process involves gathering data, weeding out irrelevant information, routing critical details to the relevant teams for analysis, tracking accountability, determining the best course of action to avoid potential impacts or capitalize on opportunities, and mobilizing the organization in a timely manner to implement the response strategies.

In practice, regulatory future-proofing delivers real-time accountability and transparency across an organizational structure to facilitate more effective information sharing, better decision making, and more nimble responses. To support this process, RT-PUI-01 developed a guide for regulatory future-proofing in the construction industry. The guide includes a detailed process map, a comprehensive set of key actions, and good practices for implementation. In this way, the guide serves as a reference for individuals and companies who would like to improve their current practices.

Research Publication:

Stoa, R. (2019). “From the Clean Power Plan to the Affordable Clean Energy Rule: How Regulated Entities Adapt to Regulatory Change and Uncertainty” Hofstra Law Review 47(3). https://ssrn.com/abstract=3371243


 

Key Findings and Implementation Tools

1 : Essential Knowledge for Regulatory Future Proofing

RT-PUI-01 identified essential knowledge for regulatory future proofing including: the process, key actions, and good practices for the future-proofing implementation.

Figure 1. Essential Knowledge for Future Proofing
Reference: (FR-PUI-01)

2 : The Process Map for Future Proofing

The regulatory future-proofing process includes five overarching sub-processes:
  1. Regulatory horizon scanning
  2. Stakeholder engagement
  3. Risk and opportunity assessment
  4. Response strategy development
  5. Compliance implementation
These future-proofing sub-processes are implemented at different stages of regulatory development, such as the stages for pre-rulemaking, proposed rule development, and proposed rule publication, as well as the post-promulgation compliance period.

Figure 2. Sub-Process of the Process Map for Future Proofing
Reference: (FR-PUI-01)

3 : Key Actions for Future Proofing

The RT-PUI-01 research identified key actions for each regulatory adaption sub-process, based on a synthesis of rich data and other information:

Regulatory horizon scanning
  • Be proactive in identifying regulatory changes.
  • Allocate resources to horizon scanning.
  • Develop mechanisms to navigate and manage information.
     
Stakeholder engagement
  • Engage all relevant stakeholders early and often.
  • Involve the right people at the right time.
  • Bring the right data and mindset to the conversation.
     
Risk and opportunity assessment
  • Start risk and opportunity assessment as early as possible in the pre-rulemaking stage.
  • Involve diverse multi-function teams at the different stages of risk analysis.
  • Disseminate and communicate regulatory risks and impacts internally.
  • Integrate regulatory risk analysis with both corporate and project risk assessment processes.
     
Developing a response strategy
  • Follow an adaptive process.
  • Start the final response strategy early.
  • Develop the response strategy based on clearly defined guiding principles and key considerations.
  • Maintain a balance between the no-regrets and wait-and-see approaches.
  • Assemble a diverse and experienced team.
     
Compliance implementation
  • Embed regulatory adaptation into the project development process.
  • Establish effective communications among stakeholders at different levels.
  • Continuously monitor compliance.
Reference: (FR-PUI-01)

4 : Good Practices for Implementation

RT-PUI-01 identified four thematic areas that represent good practices for implementation. The team proposes that an organization should adopt these four areas as a guide for gauging its preparedness in dealing with regulatory changes:
  1. The earlier each adaptation stage starts, the more proactive the overall process will be in the long run.
  2. Managing regulatory changes requires a portfolio of flexible resources.
  3. Robust communication links with all relevant parties are key.
  4. Continuously evaluate current practices and review key actions to “mature” the overall process.

The final report discusses the importance of each thematic area, as well as its common struggles and plausible implementation actions.
Reference: (FR-PUI-01)

5 : Implementation Tool #1: Future-Proofing Guide for the Construction Industry

RT-PUI-01 designed a Future-proofing Guide to assist any company that wishes to improve its practices, no matter where it sits on the spectrum, or any individual who wants to improve specific practices or just seeks a better understanding of the regulatory process, no matter where that person sits in an organization.

The Future-proofing Guide is organized into two main parts:

  1. The Regulatory Future-proofing Framework and Process Map outlines how companies generally identify and adapt to regulatory changes (i.e., “the process”). A general overview of the Future-proofing Framework is accompanied by a visualization of the process (the Process Map). Each step is then described in more detail, offering a set of key actions for each stage to provide the “know-how” for effective regulatory future-proofing. Real-life examples are provided where appropriate.
     
  2. Good Practices for Implementation presents four overarching implementation areas for companies to consider when assessing their own practices and seeking process improvements for better regulatory adaptation.
     

To better understand the overall future-proofing process:

  • Start with the Future-proofing Framework Background section and the description of the Process Map.
  • In the sections that describe each sub-process, concentrate on the first two sections (detailing “challenges” and “who does and when”)
  • Consider who in your company currently conducts each phase of the future-proofing process, how the information flows, and your role in supporting the effort.
     

To improve a company’s overall system:

  • Use the process map to identify who, when, and how each phase of the future-proofing process is currently conducted.

  • Consult the Good Practices for Implementation section for ideas to make the overall process work better.
  • Consider which phases of the future-proofing process or good practices are missing or could be improved.
     

To improve specific practices:

  • Concentrate on the “key actions” call-out boxes and descriptions in the Future-proofing Framework section.
  • Consult the Good Practices for Implementation section.
Reference: (FR-PUI-01)
RT-PUI-01

Key Performance Indicators

Regulatory compliance, Regulatory cost

Presentations from CII Events

Session - Protecting Business Value from the Impact of Regulations

Publication Date: 08/2019 Presenter: Number of Slides: 30 Event Code: AC2019


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