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- Herausgeber: John Wiley & Sons
- Kategorie: Wissenschaft und neue Technologien
- Serie: Wiley-Scrivener
- Sprache: Englisch
This book presents techniques for effective and successful project management across all phases of the project, covering all of the management tools and leadership skills for any industrial project, from the beginning of the project, through the feasibility study, execution, and through to operations and maintenance strategy. This book presents advanced modern tools for use by management and engineers in decision making, and it covers the gap between project management theories of the actual project. All statistical tools and probability distributions are discussed for use in the qualitative risk assessment of the project. The Monte-Carlo simulation technique is presented as a tool for risk assessment in the feasibility study phase and the construction management skills that are required on site to control the different parameters that affect quality, time and cost are discussed. The new concept of the total building commissioning technique will be presented, as well, a new method that is not covered in other volumes.
Moreover, all the methods that are used in the economic analysis and the evaluation between alternatives are illustrated. The planning and scheduling of the project are illustrated by the Critical Path Method (CPM) and the Program Evaluation and Review Technique (PERT). The control of resources and costs are very important issues that are covered in the book, and these provide the main tools for controlling and monitoring the performance of the project. Tendering, bidding and contracting methods are critical issues in any project due to their impact on the project performance and are discussed along with different methods and ways for dealing with these issues worldwide and on international projects. Resources organization and ways for enhancing project performance by controlling individual attitudes are very important issues that are clarified.
Finally, managing project risk is the main tool for a successful project, so all the techniques for risk analysis, assessment and evaluation is presented. This volume is a "one-stop shop" for project and construction management of industrial projects, for engineers, managers, owners, and anyone else working on the project.
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Seitenzahl: 476
Veröffentlichungsjahr: 2012
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Contents
Cover
Half Title page
Title page
Copyright page
Dedication
Preface
Chapter 1: Introduction
Chapter 2: Project Management
2.1 The Principle of Project Management
2.2 Project Characteristics
2.3 Project Life Cycle
2.4 Is this Project Successful?
2.5 Project Management Tasks
2.6 Project Manager Skill
Chapter 3: Economic Risk Analysis
3.1 Introduction
3.2 Project Cash Flow
3.3 Economic Risk Assessment
3.4 Decision Tree
3.5 Monte-Carlo Simulation Technique
3.6 Risk Adjusted Value (RAV)
Chapter 4: Time Planning
4.1 Introduction
4.2 Responsibilities of the Team
4.3 Expected Activity Time Period
4.4 Calculating the Activity Time Period
4.5 Time Schedule Preparation
4.6 Planning Overview
Chapter 5: Resource Management
5.1 Introduction
5.2 Project Organization
5.3 Roles and Responsibilities of the Project Manager
5.4 Administrative Organization for Total Quality Management
5.5 Team Member Selection
5.6 Managing the Team
5.7 Allocate Resources to Project Plan
5.8 Relation Between Project Parties
5.9 Document and Information Transfer
5.10 Information Transfer
5.11 Quality Control in the Design Phase
Chapter 6: Cost Management
6.1 Introduction
6.2 Cost Types
6.3 Economic Analysis of Project Cost
6.4 Cash Flow Calculation
Chapter 7: Bidding, Tenders, and Contracts
7.1 Introduction
7.2 Contracts
7.3 Contracts Between an Owner and an Engineering Consultancy Office
7.4 The Importance of Contracts for Project Quality Assurance (QA)
7.5 Contracts in ISO
7.6 FIDIC Contracts
7.7 General Conditions in Contracts
7.8 Arbitration and the Arbitrator
7.9 Bids and Tenders
7.10 Closeout Report
Chapter 8: Quality — From Theory to Reality
8.1 Introduction
8.2 Quality Management Systems
8.3 The ISO 9000 Standard
8.4 Quality Management Requirements
8.5 Project Quality Control in Various Stages
8.6 Operational Phase of the Project
8.7 The “Total Building Commissioning System”
Chapter 9: Project Risk Management
9.1 Introduction
9.2 Project Risks
9.3 Risk Assessment
9.4 Risk Identification
9.5 Defining Priorities
9.6 Risk Response Planning and Strategies
9.7 Risk Monitoring and Control
9.8 Example
9.9 Methods of Risk Avoidance
Chapter 10: Quiz for Project Management
10.1 Introduction
10.2 Questions
10.3 The Right Decisions
Reference
Index
Construction Management for Industrial Projects
Scrivener Publishing3 Winter Street, Suite 3Salem, MA 01970
Scrivener Publishing Collections EditorsJames E. R. CouperRichard ErdlacPradip KhaladkarNorman LiebermanW. Kent MuhlbauerS. A. SherifKen DragoonRafiq IslamVitthal KulkarniPeter MartinAndrew Y. C. NeeJames G. Speight
Publishers at ScrivenerMartin Scrivener ([email protected])Phillip Carmical ([email protected])
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Library of Congress Cataloging-in-Publication Data:
ISBN 978-0-470-87816-3
This book is dedicated to the spirits of my mother and my father, my wife and my children Maey, Hisham and Mayar.
Preface
The development of any country depends on increasing investment in industrial projects. Although there are many types of industrial projects, such as food processing plants, automobile manufacturing plants, and wind farm construction, the author has chosen oil and gas projects as the main source from which to draw examples throughout this book. The principles herein are meant to be universal and can be applied to any industrial project, but oil and gas projects were chosen as the primary focus because of the author’s experience in this area and because, even now, with climate change and other questions about energy, oil and gas are still the primary fuels which drive economies and worldwide development.
Project management is the main tool to achieving a successful project. This book focuses on using practical tools and methods that are widely and successfully used in project management for industrial projects. Most engineers study subjects that focus on project management in housing projects, administration projects and commercial buildings or other similar projects, but industrial projects have their own requirements and characteristics that set them apart from those other types of projects.
This book is not only addressed to graduating engineers who wish to improve their skills in project management, but it is also helpful to upper level management. This book covers all of the project management subjects from an industrial project point of view. The aim of this book is to be helpful to any engineering discipline or any staff in sharing or applying work of an industrial project.
Why do senior managers accept certain projects and refuse others? Why does a company have huge investments in a certain country but no investments on other countries, especially in oil and gas projects? Certainly, it isn’t just because “that’s where the oil is,” because there are countries that are extremely rich in oil and gas reserves in which there is little investment. These questions are important for understanding project management as a discipline and why using the tools of project management correctly will lead to successful projects.
Knowledge is power. When you understand well, you will do well. So in this book we will illustrate exactly what the project manager is thinking when he is working on a project and what his objectives and goals are. On the other hand, we will discuss what team members may be thinking through the project stages and what their objectives and goals are.
The main tools in managing the project, which are time, resources, cost, and quality management, shall be illustrated by using practical examples from petroleum projects. In addition to that, this book presents all the types of contracts and methods of technical and commercial evaluation for the tenders, with highlights on the FIDIC contract and its advantages.
I have worked on major rehabilitation projects for offshore structures with the best international companies from the owner, working with the engineering offices, the contractors, and the suppliers. Often, the project management staff and all the team members have ideal skills and competence as described in many textbooks, but unfortunately, the end users are not fully satisfied, which is a situation that usually faces us in industrial projects. The solution to this problem is proposed by using a whole building commissioning system that is used successfully in administration building, and this management system is clearly illustrated in this book.
This book tries to be practical and, at the same time, match with the Project Management Professional (PMP) guide, so we selected one hundred questions from the PMP exam to help you obtain the certificate. But we chose questions that present actual cases we face in managing industrial projects.
Mohamed Abdallah El-Reedy, [email protected], Egypt
Chapter 1
Introduction
Most project management books focus on the management of building projects, such as housing, administration, and commercial building projects. Likewise, most engineering faculties focus on housing projects in their curricula, while industrial projects are, for the most part, in the oil and gas sector and other process industries. The aim of this book is to focus on the main tools of project management that are essential to industrial projects, focusing on, but not limited by, projects in the oil and gas sector.
A good place to start, for anyone wishing to be a project manager, is to obtain a Project Management Professional (PMP) certificate, which is a credential offered by the Project Management Institute (PMI). As of March 31,2010, there were 375,959 active PMP certified individuals worldwide.
This credential is obtained by documenting 3 to 5 years of work experience in project management, completing 35 hours of project management related training, and scoring a certain percentage of questions on a written, multiple choice examination.
This book provides questions and answers for the subjects that are more traditional in the PMP exam, but it will be more beneficial to focus on practical life applications, so these questions are tailored to help in situations that are faced in real projects. It would not be beneficial to take this exam and receive certification but later fail in real, practical projects.
The definition of a project is a series of activities that have a start and finish time. A project, in general, is unique, and no project is similar to another. This is very important, because one should know that the problem one may face in managing a project may be unique. Also, one should have a creative mind in order to get to the right solution without a reference, so that the professionalism of the project manager depends on his or her previous experience.
Real life is like the theater, where everyone has a role in the story. So, you may be in the project play as an owner, engineering office, contractor, supplier, or service provider doing logistic service for the project. You may be at a higher level in the organization or at a lower level. In any case, you play a role in this story, so you should understand the whole story - who does what, and who is responsible for this and that issue. With this information, you will succeed at any project you are working on.
Chapter two discusses the scope of projects and the main characteristics of project management. To have a complete grasp of project management, one must first understand these basic principles and see how they work in the real world.
For us as engineers, a feasibility study is a mystery, because we are rarely working in this phase. Chapter three explains our role as engineers in the feasibility study. This chapter presents the main tools of economics to use in deciding whether to proceed with the new project. It also describes the scientific way to choose between the various alternatives. The principal of statistics is described in this chapter, in addition to the theory of probability from a practical point of view, and how we can use these tools to make the right decision. The Monte-Carlo simulation technique is presented, as it is the main tool in a feasibility study for oil and gas projects, which is the main tool that we use in the decision tree method. The decision tree method is very important and easy to use, and anyone who has read about it or attended a course on it is eager to apply it. However, the actual application of this method can be difficult. In this chapter, a practical way of applying the decision tree method in conjunction with the Monte-Carlo simulation is presented.
Time management is a primary tool in project management. There are many methods for making a time schedule for a project, and these methods will be discussed in chapter four. In addition, a method for estimating activities and project time using a traditional case study in a petrochemical project will be presented in this chapter.
Resources management is another element in project management. Resource management is the main area that should be controlled by the project manager and the team member. Chapter five provides the key to understanding resources management for the project manager and the team member, as well. It is very important that when you join a new project the team members know what the project manager is looking for and what he or she has in mind when choosing the team members. The project manager should have special skills and experience, as he or she is responsible for implementing project management strategy when handling an international project with labor from different countries and different cultures. The distribution of resources on a time schedule will also be discussed in chapter five.
Another main element in project management is cost. Therefore, chapter six presents a way to predict the cost estimate in each phase of a project, a way to define the project budget, and a method for monitoring the project cost during the project’s time-frame.
Older project management principals focus on time, cost, and quality. Nowadays, and especially in our case as we are discussing the management for petrochemical, power stations, and other middle sized industrial projects, safety, health, and the environment are very important to these types of projects, and in some cases they will be the big challenges facing project managers and project sponsors. Therefore, the four elements presented in Figure (1.1) are the main constraints to project managers’ decisions and should be managed by a project manager and his or her team members. This will also be covered in chapter six.
Figure 1.1 Project manager constraints.
Contracts are the chain that connects the primary parties of the projects, such as the owners, the engineering firm, and the contractors. Chapter seven describes the tender and bidding procedure and some of the ways to evaluate the bidders technically and commercially, especially in an international environment.
The market is open, and as an owner you can choose any contractors or engineering firm from any country all over the world, so there is a lot of competition between international companies to provide good quality to their products or services. Therefore, all the international companies follow the standards of the International Organization for Standardization (ISO) and apply the total quality management system as stated by the ISO. This will be discussed from a practical standpoint in chapter eight.
Before starting a project, one should have a scientific way to expect the problems that he or she will face on the project during implementation and to solve them in a timely manner without affecting cost, time-frame, and quality. Risk assessment, which is discussed in chapter three, is about economic assessment, and this form of risk assessment is essentially qualitative. It is not feasible in the implementation phase. For that phase, a more quantitative risk assessment is appropriate, in order to exectute the project properly. This is discussed in chapter nine.
In chapter ten there are one hundred questions with answers that may be seen on the PMP exam. However, these questions are chosen to serve our practical purposes, as these questions are not for the exam but are complementary for a project that presents these practical cases.
Chapter 2
Project Management
2.1 The Principle of Project Management
The subject of project management has recently become as a key concern in various engineering fields. The proliferation of mega-projects worldwide, aiming to take best advantage of the latest technological developments, itself demands new or improved methods of project management to cope with the fast developing.
As the concept of a project differs fundamentally from that of daily or routine operations, it follows that a number of principles and conceptions of project management must also diverge from those followed in the realm of daily operations management.
In operations management, production managers tend generally to focus on production/output volume per unit time — usually the current week compared to the previous week and-or the same week last year; profits accumulated and-or compared for the same time unit(s); sales or operational orders accumulated and-or compared for the same time unit(s); actual versus budgeted expenditure for the current quarter and the same quarter the year before; and sales revenue and sales volume for a given product compared to the performance of competitors producing/marketing a similar product.
Project management may be defined as the planning, organization, direction, and control of all kinds of resources in a specific time period for achieving a specific objective comprised of various financial and non-financial targets.
This should help clarify the difference in outlook of the project manager and the operations manager. The project manager’s goal is to finish the project on time. Then he evaluates where he will relocate after finishing the project. The operations manager, on the other hand, never wants daily production to stop, and cannot dream of work stopping — as distinct from the project manager’s goal of overall task completion.
2.2 Project Characteristics
The selection and assignment of the most appropriate personnel at different locations within the same company constitutes one of the most critical skills in the project manager’s arsenal. In some international projects, personnel originate from different countries, cultures, educations, employment, and possess a range of different skills. With all those differences, they must work together to complete the work in a specific time and definite target.
The project manager has to coordinate the deployment of available personnel, and the range of skills they bring, to accomplish project goals on time and and on budget. This skill has become increasingly important as most projects bring together so many different disciplines. In construction projects, for example, there is a team for constructing the reinforcing concrete (for example); other teams for finishing the work, such as plumbing and electrical installations — and every branch entails deployment of its own specialized technologies and skills, which it is the project manager’s job to coordinate. On the project manager’s shoulders devolves the requirement of ensuring the highest-quality work on time.
Two drivers contend for the project manager’s attention: that of cost and that of time. Only one of these can be the project’s main driver, and the responsibility falls on the shoulders of the project manager to find the right balance in each project. It is inevitably a balancing act because the selection of the main driver in each project is not determined by the project manager alone but by discussion and consultation between the project manager, its director, its sponsor, and other major stakeholders.
In some projects, reducing cost is the major factor whereas meeting the time target(s) is a subordinate consideration. For example, in the building of houses, mosques, churches, museums, and other projects that have a social aspect, the owner’s investment may not be significantly affected by some extension of the time needed for the project’s completion. On the other hand, with hotel construction projects, or oil and gas extraction and-or refinery construction projects, the owner’s projected profits are extremely sensitive to unanticipated extensions of the completion date. For example, if the gain of production from an oil/gas project project is 50,000 barrels of oil per day, with an oil price of $80, every day that can be saved gains the owner $4,000,000; the owner of a hotel under construction will similarly be concerned to minimize losses in room rental revenues arising from project completion delays. It is the responsibility of the project manager to ensure both that ail staff working on the project are kept fully aware of the main driver and its importance in material terms such as these, and to find ways that work teams involved in the design or execution of the project are encouraged to provide their own proposals, recommendations, and action steps that strengthen the ability and resolve of the entire workforce to are in the same direction of the project driver in reducing the time or cost.
At the same time, in each specific case, it falls to the project manager to figure out how best to balance how specific proposals affect the constraints of the cost/time tradeoff. For example, during a housing project, a proposal might come up from the engineers to use a type of cement to provide a rapid setting to reduce the time of construction, but it will increase the cost. Is this proposal acceptable? Certainly, it will not be accepted. On the other hand, consider the case of the construction of an oil or gas plant or new offshore platform, in which a proposal comes forward to use materials that are the cheapest, but require extra time to import from abroad which will delay the project some days. Is this proposal acceptable? Of course, this proposal is unacceptable, but if the same proposal was raised in the other project like residential, administration buildings or any similar projects, the proposal would indeed be excellent and acceptable.
These simplified but not unrealistic examples underline the importance of the clearest possible lines of communication being maintained between the project manager and the various personnel. No matter whether the driver happens to be time or cost, it is the driver sets the direction and if everyone involved in a project works hard, but in different directions, that effort becomes wasted. The same caveat applies to dealings between the project manager and elements outside but involved with the project, such as suppliers and contractors, so that their proposals in the supply materials and construction should be embraced and adjusted according to the criteria driving the project overall.
Project characteristics can be summarized as follows:
A project has a specific target.
A project is unique and cannot be replicated with the same task and resources expecting to give the same results.
The focus is on the owner requirements and his or her expectations from the project.
It is not routine work, but there are some tasks that are routine.
A project consists of a number of activities that contribute to the project as a whole.
There is a specific time in which to finish a project.
A project is complex in that it works by a number of individuals from different departments.
Project managers must be flexible to cover any change that occurs during the project.
There are uncertainty factors such as the performance of individuals and their skills for some of the unfamiliar work or unknown external influences that may not have happened before.
The total cost is defined and has a limited budget.
A project gives unique opportunities to acquire new skills.
It gives impetus to the project manager to learn to work under changing circumstances, as the nature of the project is to change.
There are risks with each step of the project, and the project manager should manage the risks to reach the project goal at the end.
2.3 Project Life Cycle
The project definition is a set of activities that has a start time, time period, and end time. These activities vary from project to project depending on the nature of the project. For example, a cultural or social project or civil project — such as the construction of a residential building, hospital, road and bridges or industrial projects — is different in its characteristics. The examination that follows limits its scope to on industrial projects.
Civil projects, in general, vary from project to project depending on the size and value of the project. It can be anything from constructing a guard room to constructing a nuclear plant. Therefore, the quality varies depending on the size of the project, especially in developing countries.
In a small project, it might be sufficient to apply a quality control only where small contracting companies or engineering offices do not wish to have a global competition. For, increasing the quality will increase the project total cost that they will execute, as if these companies have quality assurance tracking systems that will also increase the cost of the project as a whole. Therefore, they often apply the quality control only within the structure safety of the building.
In the case of major projects, there are many execution companies or engineering offices working. Therefore, we must also take into account that firms implementing quality assurance procedures are necessary and vital, as well as the quality control carried out in all phases of the project based on the project specifications.
Stages of construction projects start with a feasibility study, followed by preliminary studies of the project, following detailed studies with detailed drawings. Then, the operation crew will receive the project to run.
In all these stages, there are many types of quality control that are required to obtain a successful project that can return benefits and appropriate return money to the owner and all parties participants in that project. Figure (2.1) shows the life cycle of any project.
Figure 2.1 Project life cycle.
From this figure, it is clear that a feasibility study accounts for only 5% of the progress of the project, while completion of the engineering designs comprise only 25% of the project’s progress. By far, the biggest project stage in terms of time and costs is the execution phase.
As shown in Figure (2.1), after the feasibility study senior management should have a definite answer for the following question: Will the project continue or will it be terminated? Here is the gate if there is a positive situation, then cross the gate to the next stage to the preliminary studies, which will provide a more accurate assessment of the project. After that, another decision will need to be made on whether the project will move forward to the detailed engineering and construction phase.
At each phase of the project, there is a role for the owner, the contractor, and the consulting engineer. Each system has its own method of project management, and every stage of these methods has its own characteristics and circumstances, which follow a change in the area of employment Scope Of Work (SOW) that clarifies each stage for each of the three parties. A characteristic of the project life cycle is that is changes from time to time. In each period there is a different number of personnel and employment in the project. For example, at the beginning of the project the number may be very small but then increases when the number of activities being carried out increases and then gradually decreases until the end of the project. Figure (2.2) shows the change in the number of personnel in the project.
Figure 2.2 Change of crew size during project life time.
Figure 2.3 Industrial project main phases.
From the above figure, it is noted that the project manager should have the necessary skills to deal with the changes that occur during the life cycle of the project.
2.3.1 Initiation of the Project
In any major projects there is involvement of many project managers, as there is an owner, an engineering consultant, and a contractor. All of them should go through the same steps that we will discuss, but each person does it based on his or her goals, target, and company system.
In general, any project starts from a creation of a formal document called the project charter. The project charter is described in the Project Management Professional (PMP) guide, but its name is different from one company to another. This document is extremely important for getting a project started in the right direction.
There are many reasons for starting a project. In general, for commercial and industrial companies, making money is the reason for doing a project. However, in some cases, there are many other reasons for doing projects, such as to follow government regulations and laws, to enhance the health, safety, and environment (HSE) for a company, or to help with oil disposal and the instant cleaning of the Gulf of Mexico due to the oil spill that happened in 2010. In some industrial and commercial companies, the projects stay current with developing technology.
A project charter is defined in Project Management Professional Book of Knowledge (PMPBOK) and is expanded in the third edition due to the importance of this paper. It also recommends that the contract with the customer will be completed before the approval of the project charter.
Noting that, the definition of the customer is wide-ranging as everyone including the project managers, are a supplier and customer at the same time.
When the contract is signed by the customer the scope of work and deliverables should be clear, because the number of changes that can be made to the scope after the contract is signed is very limited. Therefore, there will be enough information to be included in the project charter.
The definition of the project charter in PMPBOK is a document that formally authorizes a project and includes directly or by reference to other documents the business needs and the product descriptions.
This document is usually made by the senior project manager, as the project manager will not be defined in this stage, so the document should be simple, precise, and accurate. To put the reference is not recommended because the top senior management does not have time to go deeply in the document. Also, I agree with Newell (2005) that this document should be small. If it is a big document you will face many questions and inquiries.
This document usually contains the following:
The name of the project
The purpose of the project
The business need for this project
The rough time schedule is defined by the project time period
The budget of the project
The profit from the project using the payout method (discussed further in Chapter 3)
The project manager in any situation
After signing this document the project manager will be selected through a discussion between the project sponsor and the senior managers. In the case of a small project, the project manager has been defined, so there is no need to include his name. In addition, the project manager will prepare this document under the supervision of the project sponsor.
It is better that the project manger prepare this document, as he or she will be the most involved in the project and will closely understand the target and goals for the senior manager.
2.3.1.1 Getting to the Scope Baseline
As previously discussed, everyone in the project is a customer and a supplier at the same time, including the owner who is a supplier to the operation department in his company or any other end user.
The key topic in any contract between two parties is to define the scope. As defined by PMPBOK, the term scope may refer to the following:
Product scope, which includes the features and functions that characterize a product or service
Project scope, which is the work that must be done to deliver a product with the specified features and function to the end user
The product, which will be delivered through the project, should satisfy both the customer and the stakeholder.
The scope should be prepared after clearly defining all the stakeholders. Take more time in this stage, because, in most projects, the scope baseline takes weeks, or even months, not days, to finish. Take ideas as needed from the key persons who are sharing in the project, so that they are satisfied with the scope as it is and won’t demand changes to it later.
So, after many meetings reduce the unnecessary items from the scope, or define part of the scope to the supplier so that the scope baseline is documented and approved by the concerned stakeholder.
After you define the scope of work, be sure it is clear to the supplier who will provide this service. You should use any communication and skills necessary to make the scope of work clear to the supplier. An engineering company will provide a list of deliverables. After you send the company the scope, be sure that the deliverables match with your requirements and that everyone has read any statement based on his or her background and previous experience.
It is better to return to similar projects and look at the work break down structure (WBS), and then review if you are missing anything from the deliverables list. In major projects, every discipline should review the deliverables list received.
This document needs to be clear because it will be read by many people. The SOW is the most important part of the statement of requirement document (SOR), because most of the conflict in any project is due to a misunderstanding of the scope of work. In some cases, the supplier may provide a small user manual to use for maintenance service. On the other hand, the operation and maintenance engineers may be waiting to receive a comprehensive user guide as they have a full responsibility to do the maintenance in house and avoid using the supplier in minor maintenance situations based on their policy, or they are afraid that the supplier will be out of business or has merged with another company, which traditionally happens. After receiving this manual, you may be in crisis because the supplier is doing what you are requesting, but the end user is not satisfied. In this case, you will change the order. From this example in the deliverable list, the contractor will deliver the “user manual” but it is different from the stakeholder’s expectation.
This situation is repeated many times in oil and gas projects. However, if we apply the whole building commissioning system methodology, as presented and discussed deeply in Chapter 8, these problems may not occur. The acceptance criteria, the test procedure, and criteria should be defined in the scope of work. So try all of the deliverables that are tangible and measurable items that can be easily understood.
2.3.2 Feasibility Study
Each phase of a project has a different importance and impact on the project as a whole, but each phase differs depending on the nature, the circumstances of the project, and its value and target.
The phase of the feasibility study is the second step after the emergence of the idea of the owner. The owners in an oil and gas project are the geologist and petroleum engineering team, whose idea is based on oil and gas reservoir characteristics.
The economic study for the project will be performed by personnel from a high level of the organization and with high skill, as this study will include the expected fluctuation of the price for oil and gas and other petrochemical products during the project lifetime. Their experience is based similar, previous projects, so they have records and lessons learned from the previous projects.
In this initial phase, the selection of the team or the consultant office that will perform this feasibility study is important. In some cases there may be input from an engineering firm to perform generic engineering study about the project and estimate the cost based on their experience.
The phase of the feasibility study, also called the appraise phase, is followed by the preliminary (FEED) study phase. These two phases are very essential and critical because they set the objective of the project and identify engineering ideas through the initial studies. It is preferred to apply the Japanese proverb, “think slowly and execute quickly,” especially in the feasibility study stage, which is the stage of defining the goal of the project. For these reasons, we must take great care with the economic data during this phase. The economic aspect is important at this stage, but the engineering input is very limited.
2.3.3 Feed (Preliminary) Engineering
This stage is the second phase after the completion of the feasibility study for a project. This phase of preliminary engineering studies, which is known as feed engineering, is not less important than the first phase.
This phase of engineering is one of the most important and most dangerous stages of engineering and professionalism of the project since the success of the project as a whole depends on the engineering study in this phase. Therefore, as this stage is vital, the engineering consultancy firm that performs this study should have strong experience in these types of projects.
For example, a Liquefied Natural Gas (LNG) project is a type of project that needs an experienced office. Another example would be offshore projects that use Floating Production Storage and Offloading (FPSO) and that also need a special consulting office that has worked on this type of project before.
In the case of small projects such as residential or administrative building or a small factory, the phase of feed engineering is to deliver the type of structure, whether it would be a steel or concrete structure. If a concrete structure is decided, the engineer should define it as a pre-cast concrete, pre-stress concrete, or normal concrete and then determine the type of slab structure system if it will be solid slab, flat slab, hollow blocks, or others. Also, this phase defines the location of the columns and the structure system and if it will use a frame or shear wall for a high-rise building.
In summary, the preliminary engineering is to provide a comparison between these alternatives and the variation depending on the size of the building itself and the requirements of the owner. The reasonable structure system and similar mechanical or electrical system will be selected, so this stage is called a select phase.
In the case of major projects such as a petrochemical plant or new platforms, there will be other studies in this stage such as geotechnical studies, met ocean studies, seismic studies, and environmental studies.
The main element of this study is to provide the layout depending on the road design, location of the building, and hazard area classification in the petroleum projects.
Moreover, it needs to select the foundation type, if it is a shallow foundation or driven or rotary piles based on the geotechnical studies.
In the case of oil and gas projects, we need to study carefully the mode of transfers and trade-offs of the product and select the appropriate methods of transferring between the available alternatives options.
Now it is clear that, as a result of the seriousness of that stage and the need for extensive experience, in the case of large projects the owner should have competent engineers and administrative organization that have the ability to follow up on initial studies in order to achieve the goal of the project and coordination between the various project disciplines, such as civil, mechanical, electrical, and chemical, as all the disciplines usually intersect at this stage.
Generally, regardless of the size of the project the owner must prepare the Statement Of Requirement (SOR) document during the preparation of engineering requirements. The SOR will be a complete document containing all the owner information and needs concerning the project and the objective of the project.
This document is a start-up phase of the mission documents quality assurance system, as this document must contain all that is requested by the owner. The SOR document must outline the whole project and have a document containing all particulars of the project and its objectives and proposals and the required specifications of the owner.
This document also contains the technical information available from the owner, such as the location of the land and its coordinates system and its specifications. Noting that, this document will be a part of the contract document between the owner and the engineering firm, noting that the engineering firm will provide the Cost Time and Resources (CTR) sheets based on this document.
Table 2.1
Title:-
Statement of Requirements (SOR) Preparation
What
The SOR is a formal document. It can vary from being a one-page document (minor projects) to a sizeable document incorporating the “basis of design,” i.e., plant, pipe sizes, pressures, etc.
Why
The SOR is intended to document, in a clear and unambiguous manner, the key engineering inputs and the major engineering requirements and management tasks that have to be completed in order to meet a particular business objective, this objective being clearly defined at the beginning of the SOR. The completed SOR is intended to identify the factors that the business sponsoring the project considers important to the ultimate success of the project, as well as being a high level specification of project deliverables.
How
Create a formal document, depending on the project needs.
When
Within the project framework, the SOR will form an integral part of the select stage DSP, and it is required for the chosen option at the end of Selection, and the project should not continue into Define until the SOR has been approved.
Who
In practice, the SOR is usually prepared by the project personnel who liase closely with the business unit personnel (SPA). It is important that the BU formally approves the SOR as it is effectively a contract between the BU and the project team defining high-level deliverables and expectations. Similarly, because of the significance, a change management procedure should be established that will ensure all the changes receive the necessary approval.
In the case of projects such as gas, an LNG gas liquefaction project is to determine the amount of gas, type, and specifications, which need to process and transfer with the clarification of temperature, pressure, and all other technical data for the final product to be shipped or transported outside. This is one of the most important data to be mentioned in the document, which is to identify the project lifetime. Specifications required by the owner in the project should be defined clearly and precisely in this document.
It should be noted that we must hold many of the regular meetings between the owner, technical team, and the consulting engineering responsible for the preparation of initial studies. Through document must contain the date and revision number as to contain all of the requirements of civil, architectural, electrical, mechanical and others found in the project.
We may recall here that in quality assurance we must be sure that the final document resides with all the parties and that everyone is working through this document, and it must be done to determine the number of meetings and the exact schedule of meetings needed to reach the target required.
The SOR document is not only required for the new project, but it is also needed in the case of modification to the buildings or in the plant. In the case of small buildings, the owner should define the required number of apartments, floors, and stories or any other requirements the owner feels is a benefit to his target.
Upon receipt of the engineering office, the SOR document is to respond to the owner document with another document that is called the Basis of Design (BOD). Through the document the engineering firm will clarify the code and engineering specifications, which will operate in the design as well as the calculation methods, theory, and computer software that will be used.
This document may state the required number of copies of the drawings that will be sent to the owner and the sizes of those drawings.
In addition, the engineering firm should request any missing data and require a third party to supplement information such as weather and environmental factors. This document will be review by the owner carefully and can be amended many times until satisfies the two parties.
At this stage, it is important to make sure that both the owner and the engineering firm have the same concept and there is a complete agreement among all the technical aspects. In the preparation of any drawings, we are now in the FEED studies, in which the drawings should be delivered to the owner to review and give input. The owner and the engineering firm should agree on the number of reviews of the document, and if it goes over the specified time it means that the owner has accepted it. This is very important in controlling the project’s timeline.
This phase may take a number of months in the case of large projects, and therefore the technical office of the owner must have a qualified engineer with experience in controlling costs and follow-up time according to the schedule agreed upon in advance. We may need to consult a specialized engineer in planning who is the Planner Engineer. The engineer should be specialized in cost control, the estimated cost of the project, and the expected time, which is comparable in the feasibility study.
After clearly selecting the equipment and the project layout in its final stage, the project cost estimate will be more precise, and, as the end of the initial study approaches then one can obtain the nearest possible accuracy of the cost of the project as a whole. It is worth mentioning that investment projects, such as petroleum projects, that have any savings in time, bring a big return where the return of income or expense is calculated by the day.
It is imperative that we note here that at this stage one should not overlook the way in which to determine the maintenance of the buildings and the facilities foundation in oil and gas plants in the future, which can be done by establishing the age of the structure and defining the structure lifetime, type of structure, and the ways of maintenance. The project site itself and the surrounding environment must be considered to determine the ways to protect it from weather, reducing the cost of maintenance over time by selecting different methods of maintenance.
For example, you can protect a reinforced concrete foundation from corrosion by protecting the reinforcing steel, for example, through a system of expensive protection at the beginning of the construction with a periodic low-cost maintenance. On the other hand, we can use a low-cost alternative during construction and high-cost regular maintenance as a simple example if we don’t use any external protection system.
The structure, the mode of operation, and the maintenance plan all have an impact on the preliminary design. For example, in power stations we must ask whether the water tank can be repaired, maintained, or cleaned. To answer this question, you must decide if it needs additional tanks as standby for maintenance purposes or not.
In this phase many other initial design decisions must be made, and therefore this stage, as previously mentioned, requires high experience, since any error would lead major problems during operation, which could cost a lot of money and could be prevented by a low-cost solution in this phase.
2.3.4 Detail Engineering
At the end of this phase, the engineering office will deliver the full construction drawings and specifications for the whole project that contain all the details that the contractor will execute. In this phase, there will be a large number of engineering hours, so it is necessary to have good coordination between the different disciplines.
Changes might occur in the cooperation between departments, and therefore it varies depending on the performance of the work of managers. The system of quality assurance is a benefit as it provides us with the basic functioning of all departments, despite any change in personnel. These problems often occur at the stage of the study that requires the cooperation of extensive, vital, and influential team members among the various departments of engineering such as civil, architectural, mechanical, and electrical department.
For example, when the managers of the Department of Civil and Mechanical Engineering have a strong relationship and there are regular meetings, good work will come from it and the meetings and correspondence will be fruitful.
You can easily determine whether your business might benefit from the quality assurance systems or not by taking a closer look at past experiences. When you meet with the team and you find that the goals and expectations are not clear between colleagues, then you should ask yourself if the majority of problems can be avoided if individuals committed to work through preselected and agreed-upon measures. All colleagues should fully and clearly know their roles.
The system of quality assurance in this stage is important as it organizes the work, everyone knows the target of the project, and everyone’s responsibility in the project is clear. The concept of quality is defined with a supported document. The documents are regarded as the executive arm of the process of the application of quality. Therefore, any amendment or correction in the drawings should go through the procedure and agreed system.
The drawings should be sent in a specified time to the client for review and discussion through an official transmittal letter to control the process time. Any comments or inquires should be discussed and made through agreement between the two technical parties, then the modification will be made by the engineering firm and resent to the client through the same communication procedure.
To avoid duplicating copies of the drawings or confusing versions of them, every document should be dated, and the reviews should also be dated. This system should be used throughout, until the final stage of the project. The final approval of the drawings should be sealed with a stamp indicating “Approve For Construction” that these are the final drawings for approval of the construction.
After the completion of the detailed engineering phase, the specifications and drawings are ready for the execution phase. You can imagine that in some projects the documents may reach hundreds of volumes, especially the specifications and other operation manuals, as well as volumes of maintenance and repairs.
2.3.5 Decision Support Package
This package of documents is usually put together by the project manager and the project team, then it is presented to senior management to help them make decisions, as in Figure (2.1) to provide green or red light to go to another stage of the project or stop the project. A decision will be made at every project gate in order to enter another stage, and this is very important after the feasibility study and feed engineering phase. In order to define exactly the DSP and how to implement it, the following questions should be answered.
2.3.5.1 What is the DSP?
The Select Decision Support Package (Select DSP) is a compilation of key project information used to support decision-making at this gate. The decision to be made is generally whether or not to fund the Define stage of the project. Therefore, the DSP must accurately support the team’s recommendation with particular emphasis on potential rewards and risks. The project should not progress through the gate to the next stage until the project team presents the Gatekeeper with the “key to the gate” — the Decision Support Package (DSP). This document should include information taken from the Select stage activities that is necessary for the Gatekeeper to review and approve the project for the next stage. A plan for the next stage incorporates the following:
A clear set of expectations
Signed SOR
PEP (including project specific WBS)
Conceptual factored Class 3 estimate
Holistic risk assessment
Exit strategy
Output from applicable VIP
Defined list of capital and manpower resources for the next stage
This decision should be aligned with the business goal, strategy, and objectives, and it must be determined based on the needs or deliverables of the appraise stage.
The DSP includes three major components: the Executive Summary, the DSP Notification Document, and the DSP Reference Document.
2.3.5.2 Executive Summary
The Executive Summary is a stand-alone document that provides an overview of the project. The executive summary may range from just one page to ten or more pages, depending on the size of the project. The Executive Summary includes:
Project Overview (includes SOR)
Business Case
Decision & Risk Analysis
Plan for Project and Next Steps
2.3.5.3 DSP Notification Document
The Notification Document provides a short formal written (or electronic) record summarizing the opportunities or options to be moved forward into the next stage, together with documentation addressing those opportunities or options that are being dropped. It is intended to be shared with all stakeholders of the project.
2.3.5.4 DSP Reference Document
The Reference Document contains all other reference materials such as project schedule details, contract work scopes, etc., which have been succinctly presented in the Executive Summary. This documentation is retained as reference material, and it isn’t formally distributed outside of the project team.
2.3.5.5 Why Is It Important?
The Select DSP allows the Gatekeeper to make an informed decision as to the next course of action in relation to any specific project, i.e., the key to the Define gate. It will provide information on the best identified project approaches and analyses concepts, and it will include prelim cost estimates to confirm project viability in line with the business strategy. In addition, one of the most important uses of the DSP is to ensure that the right people are selected for the next stage of the project, even before you get to that stage.
Using information provided in the Select DSP, the Gatekeeper either:
approves the project, giving the team the ability to pass through the gate to the next Select stage;
defers the project, based on portfolio management;
“kills” the project; or
recycles the project.
Keep in mind that “recycling” a project back through a stage should be a rare occurrence, and it is not really a desired option. A recycled project often indicates a failure in communication between the Gatekeeper and the project team.
2.3.5.6 How Can We Implement this Document?
The Select DSP is a compilation of key project information used to support decision-making at this gate. This is a formal document that will be issued and presented to the Gatekeeper for review at the end of the Select Stage.
2.3.5.7 When Is the Reasonable Time?
The project should not progress through the gate to the next stage until the project team presents it to the Gatekeeper, who is usually the senior manager with the “key to the gate,” which is the DSP. This applies at all gate stages within project life cycle.
2.3.5.8 Who Is Responsible for this Document?
Single-Point Accountability (SPA) for the project, who is usually the overall project team leader, should deliver the Select DSP in line with Gatekeeper’s expectations. They should be assisted where required by appropriate resources needed to provide overall project assurance as well as an increased involvement by the project teams. It is essential for the project’s success that the correct team is formed to deliver the select deliverables and DSP. The select stage of the project should not proceed unless there is a clear business commitment to these deliverables through resource allocation and support. Project lifecycle commences at the beginning of select.
2.3.6 Design Management
The target is to control the design stage to provide high quality with a better price.
The design input is all technical information necessary for the design process. To be clear, the basis of this information comes from the owner through the statement of requirement (SOR) document, so the engineering firm should review this document clearly, and if there is any confusion or misunderstanding it should be finished and clarified in the document and through meetings.
Instructions for controlling the design are often provided in the contract. The client puts in some instructions to control the whole process or request some specific action, such as a representative from the audit during the design phase.
The designer must take into account the available materials in the local market of the project country and its location, and they must match with the capabilities of the owner. The designers must have a contact with and full knowledge of the best equipment, machinery, and available materials.
The design must be in conformity with the project specifications, and the permissible deviation and tolerance should be in accordance with the specifications and requirements of the owner.
Health, safety, and the environment are critical subjects now days, so every design should match with health, safety, and environmental regulations.
The computer is one of the basic tools now in the design process as well as in the recording and storage of information, with the possibility of changing the design easily. It is easy now to modify the drawings by using Computer Aided Design (CAD) software in order to obtain more precise information with the access to information through various forms of tables and diagrams.
The design output must be compatible with all design requirements, and design should be reviewed through the internal audit. The design must be compared to an old design that has been approved for similar projects. Any engineering firm should have a procedure such as a checklist to review the design.
The audits of design review are intended to be on a regular basis. In the case of important stages in the design, the audit must have complete documentation and could take the form of analytical forms such as the analysis of collapse, with an assessment of the risk of Failure Mode and Effects Analysis (FMEA). In the case of oil and gas projects, operating risks such as Hazard Operation (HAZOP) are being studied. The review will be conducted by engineers with higher experience.
