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Customise for Project Value

Most people believe that doing a project is like following a recipe. A recipe dictated primarily by the risk partitioning (delivery) strategy.

For mature technology projects we identify an opportunity we confirm that a business case exists by doing some cost and market studies this generally enables funding to then engage consultants to explore permitting and carry out engineering whilst the Owner firms-up financiers, product off takers and execution contractors that the Project Owners believes will largely take the delivery risk off their hands. This then normally enables an investment decision to be made based on the work done with support from corporate drive and good old gut feel. For new technology projects the recipe is very similar except that the Technology Owner is expected to provide the technical basis for the engineering from laboratory and pilot scale testing. Outcomes are directly related to the quality of this data.

Unfortunately there are major differences between existing mature technology driven projects and firsts of a kind. Simply there is no recipe for first of kind and even for mature technology projects rarely are two projects alike let alone the same. Many a time we have heard the argument that the only difference is the core technology piece, the balance of plant is all standard and well proven. Yes each piece of the balance of plant and supporting systems may be proven as standalone units, however when coupled together the integration issues especially for first of a kind projects should not be underestimated. Even for mature technologies, each project typically has different drivers, market conditions, on-site and off-site infrastructure, services and support systems which makes the project unique and needs to be approached as such notwithstanding that some synergies and prior experience will facilitate the project’s development.

Although common systems and procedures are generically applicable to projects of similar size and complexity and whilst projects share many sources of value, if value is to be maximised then systems and procedures needs to be customised and all sources need to be reviewed in an optimal way.

 

Project Costing

Project costs vary significantly depending upon technology operating conditions, locations, contracting and procurement strategy and overall project complexity. Project costs can be further broken down into areas, systems and assets Cost areas typically include Raw Materials handling/pre-processing, Processing, Product handling, Utilities and Services, Onsite and Off-site Infrastructure, Indirects and Provisions. Processing upon which technology owners typically concentrate often accounts for much less than half of the total project costs. So there is plenty of room for under scoping costs even if the estimates of what is costed are accurate which early in a project are not.

Our experience is that the application of contingency tends to be grossly out of step with reality especially during the formative stages of project budgeting. Despite what organisations such as the AACE recommend the application of 35% – 50% contingency levels for say a Class 5 estimate is rarely accepted by company Boards and therefore contingencies appropriate to one or two classes higher are typically applied implying that the project is better defined than it actually is. Little wonder that the poor project is behind the eight ball before it even starts in earnest. If the project economics don’t stand up with the appropriate contingencies being applied it is less likely to stand up as it gets better defined. At some point the walls will come tumbling down unless the company has deep pockets or finds willing partners with deep pockets and few start-ups have that luxury.

 

Proactive Scheduling

Prepare a plan then prepare a schedule to manage the Implementation Plan. The schedule becomes the management tool. However most schedules get prepared and then are used primarily for reporting progress retrospectively. Typically a progress report will be issued towards the end of the first week of a calendar month based on what occurred during the previous month. By the time the report is issued and read by the Steering Committee the information is 2-6 weeks old and often presented in positive rather than natural light.

In order to overcome this deficiency you may say that we have weekly meetings and sometimes even daily toolbox meetings. How often are actions rolled over to the next meeting? Has the effectiveness of these meetings been reviewed or is everyone too busy to even do that? If so perhaps you could benefit from some external assistance but be prepared for corporate culture shock.

Because it is difficult to include contingencies in the schedule and projects tend to move around schedules fall behind. They become at best a course tool to track progress retrospectively. Using scheduling as a management tool requires Proactive Scheduling and Proactive Scheduling is difficult but rewarding. So don’t take the easy way out by not scheduling or by passing the responsibility down the supply chain or simply paying lip service to the schedule.

Downstream participants will schedule to suit their requirements and again it becomes coincidental if the Owners requirements are met in the process. If all you want is a reporting tool the schedule can be greatly simplified to a milestone based schedule rather than a logically driven proactive schedule.

Ask us for more details and if you are really interested ask us about proactive scheduling but we warn it is not for the faint hearted.