How To Properly Manage the Transition from FEED to Project Execution in combined FEED and Execution Contracts

An increasing number of EPC contracts combine both FEED* and project execution. In this context, we observe an increasing number of situations where Contractors move from FEED* to execution in a continuous manner without checking the comprehensive maturity of the proposed solution. This then inevitably creates substantial issues during project execution. In our new White Paper 2019-12 ‘How To Properly Manage the Transition from FEED to Project Execution in combined FEED and Execution Contracts’, we explore the good practices that should be applied in this situation, and the reasons why.

In general this approach of combined contracts can only be used in industries where the process and the solutions are proven. This then creates a number of opportunities for improved overall project performance.

The push for acceleration tends to blur the limit between FEED* and project execution and this also creates substantial risks for the project which are often under-estimated.

In keeping with the good practices of project development governance for Owners, there should be an effective decision gate at the end of a Detailed Feasibility Study which not only covers aspects related to design but also checks the overall condition of the project including its execution plan, contractual strategy, and considers how well it interfaces with its environment including other parties or facilities.

Combining FEED* and project execution in a single contract is an attractive concept for acceleration of development projects. However, it should not mean that execution actually starts with the FEED*. It remains essential to check that the design and project execution plan are fully consistent and mature at the end of FEED*. Contractors need to learn to introduce in their project management framework a strong review gate at that stage inspired by Owner project governance frameworks. Any anticipation of execution or early commitments prior to that gate should be justified, limited and subject to authorisation. Read our new White Paper 2019-12 ‘How To Properly Manage the Transition from FEED to Project Execution in combined FEED and Execution Contracts’ to understand better this issue and learn how to address it.

*FEED is a common acronym in Oil & Gas and stands for Front-End Engineering and Design, and is more or less equivalent to Detailed Feasibility at least for the technical part (basic design)

If you can’t access the link to the white paper, copy and paste the following link in your browser: https://www.projectvaluedelivery.com/_library/2019-12_Risk_no_milestone_FEED_to_Execution_v0.pdf

Best Practices of Gate-Based Project Assurance Approaches for Project Execution

Gate-based governance approaches are now mainstream for the project definition phase (or bidding phase for contractors). Many organisations also implement similar approaches during project execution, however, their application is slightly different because gates cannot in reality be go/no go gates. Based on our experience designing and implementing gate-based governance tools for project execution, we develop in our new White Paper 2019-11 ‘Best Practices of Gate-Based Project Assurance Approaches for Project Execution’ the best practices we have identified for those approaches.

A gate-based project assurance tool is a substantial asset for an organisation during project execution. It has to be designed and used slightly differently from similar tools used during project tendering (contractor) or project definition (owner) phases. It is particularly useful in organisations with low to moderate project execution maturity levels, as it acts as a safety net to make sure no major aspects of project execution get forgotten. It is also useful in highly mature organisations specifically for complex projects for which the basic model can be adapted at the start of the project and act as a reference shared by the team.

One of the most important differences is that most of the gates during project execution cannot be go/no-go gates but rather used as a self-check for the Project Manager to make sure that all aspects of the project have been correctly addressed as expected. The objective and scope of the process is thus quite different from usual gate-based approaches.

Read our new White Paper 2019-11 ‘Best Practices of Gate-Based Project Assurance Approaches for Project Execution’ to understand the specifics of gate-based project assurance for project execution.

If you can’t access the link to the white paper, copy and paste the following link in your browser: https://www.projectvaluedelivery.com/_library/2019-11_gate-based_governance_execution_v0.pdf

How Brownfield Projects Are Always More Complex Than Expected

Brownfield projects by definition involve the modification of existing facilities. Specific characteristics of those projects lead to an increase of complexity compared to a greenfield project of similar scope. In our new White Paper 2019-10 ‘How Brownfield Projects Are Always More Complex Than Expected’ we investigate the causes of additional complexity, how to reduce complexity in this situation, and what additional measures are needed to achieve successful brownfield projects.

Brownfield projects include the modification of an existing facility, which is often currently being operated. While those modifications may vary significantly in magnitude depending on how much the changes or additions are done separately from the existing facility and how complicated the tie-in to the existing resources is, factors are always at play which increase complexity. Increased complexity always leads to a reduced success rate and a much higher uncertainty of the project outcome (in terms of cost, delay or operability of the final facility). Therefore, achieving success in brownfield projects is often harder than in greenfield ones.

The additional complexity of brownfield projects is real and is too often underestimated. Brownfield tends to increase organizational, technical and project execution complexity. This additional complexity has a significant impact on the success rate of those projects. Integration with the operating organisation is essential from the start, as is a proper leadership. The project definition phase will generally require more work than in a greenfield project, and this needs to be properly accounted for. A good integration of the project team with the operator and key contributors is also an essential complexity management approach.

Read our new White Paper 2019-10 ‘How Brownfield Projects Are Always More Complex Than Expected’ to understand better the complexity aspects of brownfield projects.

If you can’t access the link to the white paper, copy and paste the following link in your browser: https://www.projectvaluedelivery.com/_library/2019-10_complexity_brownfield_v0.pdf

How to Properly Review Project Estimates

Assurance of the quality and accuracy of project estimates is an essential issue for both Owners and contractors. In the previous post ‘What a Project Estimate Should Comprise of: An Extended Definition of Estimate Class’ we developed what the components of an estimate should be. In our new White Paper 2019-09 ‘How to Properly Review Project Estimates’ we describe a generic approach for reviewing the soundness of project estimates. We also expose some issues and shortfalls we have often experienced during estimate reviews.

The framework described in the White Paper starts from the observation that the accuracy of the underlying assumptions to the estimate are essentiel for its quality – compared to the detail or precision of the estimate itself. It is not because an estimate has taken much pain to develop and looks very detailed that it is accurate. It is essential to check the consistency of the estimate detail with the detail of project maturity, not only in terms of technical maturity but also in terms of detailed project execution planning.

The framework includes:

• Assessing the estimate objective and the estimate class
• Checking the underlying maturity of the project
• Checking the scope coverage
• Checking the documentation of the estimate
• Checking the relative quality of the Opex estimate (Owners or operating contractors)

Read our new White Paper 2019-09 ‘How to Properly Review Project Estimates’ to discover a structured framework for challenging project estimates.

If you can’t access the link to the white paper, copy and paste the following link in your browser: https://www.projectvaluedelivery.com/_library/2019-09_estimates_review_approach_v0.pdf

Benchmarking: How to Ensure Effective Feedback from Cost Estimating to Project Control and Back

One of the major challenges for project-driven organisations is the quality of cost estimating. It plays a significant role in the final success of a project. For less mature organisations, the quality of estimating often relies on the infamous ‘little black pocket booklet’ of an expert estimator. However, the quality of estimates can be greatly enhanced by an appropriate benchmarking process that feeds back actual, timely cost information into estimating. Setting up and running this process is difficult and only a few very mature organisations manage it effectively. In our new White Paper ‘Benchmarking: Ensuring Feedback from Cost Estimating to Project Control and Back‘ we examine the main stumbling blocks and what are the best practices for effective benchmarking processes.

The main issue facing effective benchmarking is the fact that the breakdown structure for estimating and for benchmarking are never quite aligned, and that seeking such alignment will create substantial inefficiencies and risks.

Other issues are explored based on our observations around the level of detail of benchmarking, the issue of timeliness of information and the need to have a continuous benchmarking process to have fresh cost information, the issue of data quality and accessibility.

Explore in detail this important issue in our new White Paper ‘Benchmarking: Ensuring Feedback from Cost Estimating to Project Control and Back‘.

If you can’t access the link to the white paper, copy and paste the following link in your browser: https://www.projectvaluedelivery.com/_library/2019-07_estimating_benchmarking_v0.pdf

How Systems Engineering is an Essential Transformation Force for Project-Driven Integrated Contractors in the Energy Industry

The Systems Engineering approach has transformed engineering processes in many industrial sectors such as automotive or aerospace. It allows to deal with the increased product and usage complexity, providing ever-increasing functionalities while decreasing cost in highly competitive environments. We observe that engineering departments in most Owners and Contractors of the energy industry are still organised traditionally, by product or by trade. The increasing cost and performance pressure, allied with increased digitalisation, will require this transformation to Systems Engineering. Those that will start earlier will definitely build a strong competitive position on the market. In our new White Paper 2019-06 ‘How Systems Engineering is an Essential Transformation Force for Project-Driven Integrated Contractors in the Energy Industry’, we describe the principles of Systems Engineering, the benefits, as well as the challenges of the transformation.

Systems Engineering is a relatively new approach that has been developed to manage systems in their entirety rather than as a sum of components. It allows to address the emerging properties resulting from the interaction of those components, thus increasing predictability and reliability as well as flexibility and agility, and enabling new usages. It also enables to address extremely complex systems (systems with many components and interfaces), as the effort to manage those systems increases exponentially with complexity. When implemented fully, Systems Engineering upends the traditional engineering organisation.

The large Capex in the energy industry have been so far protected from this trend by several facts. However, Systems Engineering is essential for tier-1 Contractors. Observation of other industries shows that adopting an effective Systems Engineering is a definite competitive advantage, therefore, the early adopters can be expected to draw a substantial competitive advantage from this approach. In some industries, new entrants using this approach directly have sometimes taken substantial market share compared to well-established players. Therefore, timely migration is a competitive need.

Transforming traditional engineering organisations in the energy industry into Systems-Engineering driven organisations is inevitable. There will be substantial competitive benefit to be amongst the first to really implement the approach, delivering significant benefits and much increased agility. The transformation can also be expected to create significant changes to the market, with the emergence of wider system integrators driving the overall system architecture and functionalities on a wider scope than the current split of scope generally witnessed. The Systems Engineering transformation will be an essential revolution of the engineering approach of the energy industry. When do you start? Find more about this issue in our new White Paper 2019-06 ‘How Systems Engineering is an Essential Transformation Force for Project-Driven Integrated Contractors in the Energy Industry’.

If you can’t access the link to the white paper, copy and paste the following link in your browser: http://www.projectvaluedelivery.com/_library/2019-06_Systems_Engineering_Transition_v0.pdf