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

How Implementing and Owning a Strong Master Schedule is Essential for Owners

In our work for Owners driving large, complex projects we too often identify processes that have not the resilience and consistency that would be required. This may be due to several factors and dramatically impacts the success rate of the project. In our new White Paper 2019-04 ‘How Implementing and Owning a Strong Master Schedule is Essential for Owners’ we investigate Schedule Management, in more detail with a specific focus on the overall Master Project Schedule. We describe possible reasons for oversight, consequences on the project and ways to implement a proper approach.

For most projects, the Master Schedule needs to be properly managed at Owner level. The issue is more acute when several Contractors are involved on separate sections of the scope, because interfaces between the various Contractors’ schedules multiply.

When Owners do not maintain a properly developed, technically sound Master Schedule that reflects the full scope of the project (including those activities directly or indirectly under Owner responsibility), consequences on the overall project schedule (and hence cost) can be dire. Still we often find that the schedules maintained by Owners are incomplete (they do not cover in a comprehensive manner all activities required for the project successful delivery), inaccurate, technically unsound or too complicated.

An important point is that the Master Schedule to be maintained by the Owner responds to specific Owner needs and therefore, requires a specific development. It needs to be developed early during the definition phase and updated regularly as progress information flows in from contributors and Contractors during the course of the project. Development of the Master Schedule at the right level of detail to ensure its accuracy and usefulness is an intellectual effort which requires a seasoned scheduling lead. The Owner’s overall schedule does not need to be huge in terms of size and number of activities. It needs to cover the entire scope required for the delivery of the project, identify clearly what is the critical chain and focus on interface points between contributors and Contractors.

Maintaining an accurate Master Project Schedule covering the full project scope in a comprehensive manner is indispensable for the Owner. It cannot be delegated. It is necessary to understand where lies the critical chain and where focus should be applied. Applying the right format for the Master Schedule allows to perform this activity in a fluid manner without great expenditure of resources and bringing great benefits to the team and its governance. Master Schedule management is indispensable – why is it too often overlooked by Owners? Read our new White Paper 2019-04 ‘How Implementing and Owning a Strong Master Schedule is Essential for Owners’ for some answers.

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/2019-04_Owner_Master_Schedule_Importance_v0.pdf

How Implementing and Owning a Strong Interface Management Process is Essential for Owners

In our work for Owners driving large, complex projects we too often identify processes that do not have the resilience and consistency that would be required. This may be due to several factors and dramatically impacts the success rate of the project. In our new White Paper 2019-03 ‘How Implementing and Owning a Strong Interface Management Process is Essential for Owners’ we investigate Interface Management in more detail, possible reasons for oversight, consequences on the project and ways to implement a proper approach.

This issue is applicable to Owners driving large, complex projects involving several Contractors and scopes. Even if a single EPC Contractor is contractor for most of the scope, interface management is generally still required when considering the full scope of the project from the Owner perspective. The issue is obviously more acute and interface points substantially more numerous when several contractors are involved on separate sections of the scope.

Consequences of the lack of interface management on project outcome can be quite dramatic. While the previous phases of the project development process should have anticipated and described as much as possible many interfaces between parties, it is essential at any point during project development and execution to be able to manage new emerging interface issues. Unfortunately we find that many Owners do not sufficiently consider this aspect.

Interface Management is an essential process that must be taken seriously by the Owner to ensure proper control of the project and a successful outcome. We believe the responsibility should not be delegated or subcontracted, as it has dramatic consequences on the successful outcome of the project while not being onerous in terms of resources if well designed. Interface management is indispensable – why is it too often overlooked by Owners? Read our new White Paper 2019-03 ‘How Implementing and Owning a Strong Interface Management Process is Essential for Owners’ for some answers.

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/2019-03_Owner_Interface_mgt_v0.pdf

How to Overcome the Challenger Syndrome for Upcoming Project-Driven Market Leaders

We often help organisations move successfully from the execution of small projects into the execution of larger, more complex projects. This transformation is often accompanied by an ambition to rise into the first-tier of the market. Beyond the improvements in systems and processes, a psychological hurdle often also needs to be overcome: the Challenger Syndrome. In our new White Paper 2019-02 ‘How to Overcome the Challenger Syndrome for Upcoming Project-Driven Market Leaders’ we detail what this syndrome covers and how to overcome it, with a particular focus on project-driven businesses.

Smaller upcoming companies are challengers: they take pride in executing special projects and finding custom solutions, in addition to maintaining a particularly close client relationship as they strive to please their client in all details. Their adaptability, reactivity, low overheads and inventiveness are often a key selling point, enabling them to grow in the interstices left by larger competitors. It is the foundation of their success.

As those companies grow to the point of competing with market-leading competitors on larger projects, they tend to try to maintain the same adaptability and closeness to client wishes while at the same time being competitive on price and delivery time. They avoid developing and implementing standard systems and processes that are needed to control large projects, even if they are available, because they feel they are too heavy and incompatible with their traditional business approach.

It is amazing how trying to achieve success in the execution of large complex projects with the wrong mindset can lead to utter failure, even if basic and necessary systems, processes and knowledge are available.

Customisation and adaptability do not scale. At some stage, as it becomes closer to market leadership, the fast-growing challenger company must dramatically change the foundation of its success. Implementing the best-in-class processes, systems and knowledge in an organisation without a mindset shift will lead to failure. A well-thought cultural transformation programme must be implemented at the right time. The effort and time required should not be underestimated; such transformation must be anticipated before very large and complex projects, or portfolios of projects requiring standard approaches, are taken up by the organisation. Read our new White Paper 2019-02 ‘How to Overcome the Challenger Syndrome for Upcoming Project-Driven Market Leaders’ to understand better the Challenger Syndrome and its effects.

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/2019-02_Overcome_Challenger_Syndrome_v0.pdf

How to Synchronize Different Engineering Contractors at Project Development Stage

Owners that develop large complex projects sometimes have to synchronise the work of several engineering contractors at project development stage (pre-Final Investment Decision). Since engineering processes often differ between those contractors, it can be difficult to achieve this synchronisation. Our new White Paper 2019-01 ‘How to Synchronize Different Engineering Contractors at Project Development Stage’ investigates the issues at stake and proposes some proven approaches for solving it.

Owners generally use a project development and definition framework involving successive stages of improved definition and increased commitment, such as for example, framing, preliminary design and basic design stages. Those stages are often separated by formal gate reviews by senior management. The FEL (Front-End Loading) process developed by IPA is a well-known example of such models, which are proven to be best practice.

It is essential to impose the Owner’s model on the contractors and make sure the design development plan of each contractor is aligned in terms of expected deliverables at each gate, with a consistent maturity level of the design across all contractors. In addition, comprehensive design reviews of the full facility must be carried out in a collaborative manner to ensure full alignment of assumptions and interfaces in preparation of the main gates.

In order to achieve the best development of a project definition plan, we recommend holding planning workshops at the start, involving key representatives of all contractors, so as to share the expected Owner approach and discuss all the interfaces that are required to happen. Those sessions can sometimes be difficult and may in that case need to be facilitated to achieve their objectives. The outcome should be an overall plan for the full project scope development, and an understanding of each contractor’s project development plan, that aligns with the essential requirements of the overall plan.

Some Owners might find it difficult to organise such collaboration or get into the details needed to synchronise the processes of all contractors around a single project development process. However, it is unavoidable in the case where several contractors are involved. We observe too often that the Owners are not up to that responsibility and definition phases falter because Owners are not sufficiently engaged. Owner engagement is needed in those cases. This signifies a higher upfront investment, that will redeem itself by a shorter project definition stage, a much better apprehension of interfaces between contractors, a much-improved decision-making framework for senior management, and finally a smoother and more predictable project execution. Read our  new White Paper 2019-01 ‘How to Synchronize Different Engineering Contractors at Project Development Stage’ for more thoughts on the subject.

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/2019-01_Project_dvpt_contractor_synchronisation_v0.pdf

How to Reap Benefits from Improved Collaboration between Owner, Contractors and Subcontractors

Improved collaboration between Owner, Contractors and Subcontractors can generate substantial benefits in terms of cost, schedule and risk for the delivery of large, complex projects. The recent crisis in extractive industries has led stakeholders to investigate new contracting and collaboration models. In our new White Paper 2018-15 ‘How to Reap Benefits from Improved Collaboration between Owner, Contractors and Subcontractors’, building on our experience helping Owners and Contractors release value by working more collaboratively, we detail what is driving the change in collaboration on large complex projects, what is limiting with the traditional model and how an innovative, improved model can be implemented to succeed.

The traditional approach for contracting on infrastructure projects has been to define a few large packages with well-defined interfaces. Lump Sum Engineering, Procurement, Construction, Installation and/or Commissioning contracts have been the norm. Contract Management has adopted an arm’s length approach with each contractor working in relative independence using its own Quality Management System. Whilst this approach has provided contractual clarity and simplified contract management, it has not been conducive to collaboration.

We now observe that several of our clients, Owners and Contractors, are seeking to increase and improve the collaboration between Owners, Contractors and Subcontractors to improve the project delivery. Ideally, the Owner should commence preparing for increased collaboration before Final Investment Decision so that it can be reflected in its budget, schedule, resourcing and invitations to tender. As a minimum, principles for collaboration should be included in the contract. They don’t need to be too detailed but need to be made contractual.
When a contract is awarded, work should start to establish efficient ways of collaborating between Owner and Contractor.

For the new way of collaborating to produce the desired results, proper support needs to be provided both at the governance level and at the project team level. Proven processes and methods are available that can be deployed from before the Final Investment Decision until to the project start-up stage to ensure significant value can be reaped by Owners and Contractors. Read our new White Paper 2018-15 ‘How to Reap Benefits from Improved Collaboration between Owner, Contractors and Subcontractors’ to get some useful thoughts about how to implement improved collaboration between key stakeholders and share your thoughts in the comments section!

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/2018-15_Owner_contractor-cooperation_v1.pdf

How to Handle Large Complex Projects That Involve Remote Sites

Some types of Large Complex Projects involve construction in remote areas that have low levels of pre-existing infrastructure. This can even reach the point of having to include in the project scope to build some or all of the transportation, communication and accommodation infrastructure required for the project and/or the continuous operation of the facility. The challenges associated with these projects must be tackled specifically since the success of the project may lie as much in the successful delivery of these surrounding scopes as in the delivery of the core facility itself. Other issues to be considered include the proper preparation regarding tooling and equipment. In a first White Paper we have presented how to rate the remoteness of a project. In our new White Paper 2018-14 ‘How to Handle Large Complex Projects That Involve Remote Sites’ we will develop how to account for remoteness in the execution plan of the project.

Remoteness has a major impact on project execution. It will drive cost and a large part of the contracting strategy. Spare capacity in terms of quantities and schedule will impact cost and overall project schedule, and they need to be understood from the start when building the overall business plan of the project.

It is critical to develop a proper quantified understanding of the productivity and logistics issues faced at the site as early as possible during the project definition phase and at the start of execution. This requires proper site familiarisation and early testing at a smaller scale of construction operations.

Read our new White Paper 2018-14 ‘How to Handle Large Complex Projects That Involve Remote Sites’to have detailed insights about the activities and precautions that are needed for projects in remote sites.

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/2018-14_dealing_with_remote_projects_v0b.pdf