Project Management approach purpose it to establish and gain a framework which a Project have it’s success. Purpose of Project management is to complete the Project on Quality, Time and Cost wise success.
When we go in deep with Project management of Engineering projects, the understanding of Project management and way forward to achieve the success in Project management exposure particular Picture of itself.
Defining the success criteria is the only and first requirement to create Project management system of the Engineering Project.
Furthermore, project management system is developed to have better understanding of managing engineering projects as it can be seen in the project excellence model.
Now, the scope, engineering together with the costs and the schedule, should be further detailed and defined and finally funding to realize the opportunity need to be obtained. If and when all the pre-work or the front-end development work is properly executed and sufficiently detailed, this will result in a positive final (or financial) investment decision. In the fourth phase the project is executed and it has to produce an operating asset within the boundaries of cost, schedule and scope as defined in the earlier phases. In the fifth phase, the asset will be commissioned, started up and continuously operated. A couple of months into this phase the operation will be evaluated to ensure that the asset performs as forecasted and in line with the customer’s expectations, the so-called post investment review or PIR.
Phase nomenclature in various industries together with an indication of engineering and project management deliverables Value drivers of Project success. A well-planned and properly executed project assurance process can provide significant support to the project and the Client. Targeting the windows of opportunity when decisions are taken and leveraging external insights and experience is most valuable.
Hence ‘real time’ involvement requires a high trust environment to be created, where behaviours are conducive for knowledge transfer and continuous improvement.In setting the definition, it is important to make a clear differentiation between ‘controls’ and ‘assurance’. In the common language, we talk about ‘assurance’ when we really mean controls. With the ‘controls’ in the domain of engineering project management, the integrated checks and balances are meant to help the manager ensure that she stays in control of the core engineering and project management process and drives towards desired outcomes. Assurance builds thereupon. It primarily covers the process of checking the strengths and completeness of those controls by a respected and credible party that is external to the project team.
Opportunity framing is a structured approach to understanding and defining an opportunity. It is the starting point for a robust, decision-driven process for the realisation of the opportunity. For projects this is first of all setting the boundaries on what the project is and is not. The essence of opportunity framing is to decide what the project will include and what not. This process is
performed together with stakeholders. In addition, opportunity framing can be about adding scope and (re)framing the project concept. It can also be the application of a new technology, or any new concept to be considered by the client/sponsor, project team or stakeholder. Important at opportunity framing is the interaction with stakeholders to secure project success.
Crucial at opportunity framing is:
- To define the project scope.
- To involve stakeholders.
- To define when the project will be successful (project success).
- To create value drivers.
- To identify risks: threats as well as opportunities.
THE NECESSITY OF FRONT END DEVELOPMENT (FEED)
The main goal of FEED is to provide owner representatives with a sufficiently complete image of the project to enable them to decide whether or not the project is worth investing resources in’ (p. 24/25). In the front-end phase, the image of the project is created, starting with the business needs that have led to the initiation of the project and the way to meet these needs. This image also includes objectives, setting the scope, design basis, project planning, required resources and risks involved. How value is developed during the different project stages is shown in Figure
The influence of front-end development (Phase 1, 2, 3) on the value of a project according to the oil and gas industry
Standard recommended front-end activities in the process industry
Hence risk management is strongly related to uncertainties. A clear trend is an increasing complexity in society in general with its related uncertainties .This trend also clearly touches the performance of projects, as can be seen from the huge variety in increasingly complex projects with a higher risk profile. Often risks are not very well evaluated upfront and/or they are underestimated. This is one of the main reasons for having (so-called) unsuccessful projects. As a consequence the reputation of projects is not very good. On top of the intrinsic complexity of projects, the highly complex projects often span multiple years or even decades (especially if one also includes the operating phase), and they will be subjected to changes in the environment. This clearly increases the risk profile of the projects.
A contract is a legally binding, enforceable and reciprocal commitment governing the collaboration between two (or more) parties. Such an arrangement needs to be robust; i.e. it needs to be effective throughout contract execution despite changes that will inevitably occur. The main streams in contract theory and their application in practice are discussed. The development of an optimal contracting strategy, breaking up the project work scope into contract packages, is considered in the light of owner capability. The main forms of remuneration and their application are described, together with the tendering and award process as well as subsequent contract management.
For the development of a contracting strategy, project activities are typically broken down into:
- Front End Engineering Design (FEED)
- Detailed design and engineering
- Procurement of materials and equipment
- Fabrication and construction; and
- Commissioning and start-up.
When generating options, it is useful to start with the two archetypes, described schematically below as strategy (a) and (b) and to subsequently develop a number of hybrids. The various options can be visualized in the form of a so-called ‘contracting quilt’. In Figure, the contracting quilts of two archetypical contracting strategies are depicted, with a breakdown into five asset elements (general facilities, utilities, process plant 1/2 and storage tanks). The various blocks each represent a contract. In reality the breakdown will be more detailed and capital cost estimates for the various asset elements may be included to establish the size of the various packages.
It becomes clear that adequate project controls are a critical part of project success and that the project controls team has an important role to play. Adequate control means applying the right level of control for each scope element and associated risks during the subsequent project phases. Being the conscience of the project manager, the project controls team needs to provide reliable information for timely decision making. This requires input from many different disciplines and external parties that needs to be analyzed, integrated and reported. To perform this essential task, the project controls team needs to proactively engage with the project team and various external stakeholders, while realizing that they all have their own interest in measuring and reporting project performance.
If a project is not in control, a variety of things can go wrong. Below some statements are listed that will sound familiar to most project managers:
- The agreed schedule to deliver the project was unrealistic from the start.
- The stream of scope changes during construction never seemed to stop.
- We have significantly underspent budget.
- It took months before producing at design capacity.
- The operational cost turned out to be much higher than predicted.
The cost estimate covering the initial capital investment, also called Capital Expenditure (CAPEX), is usually generated at the very beginning of a project, or even before project initiation, and is subsequently updated and detailed during project development. The estimate covering the operational cost, also known as Operational Expenditure (OPEX) or Revenue Expenditure, includes all cost incurred during normal operations once the project has been delivered. OPEX typically includes the cost of operations, maintenance cost, consumables and cost of sales.the operational cost is also an important input to the project economics and can be used to make trade-offs during design and procurement on the basis of lifecycle cost, also referred to as Total Cost of Ownership.
The quality of a capital cost estimate is critical, as it impacts the economics of a project and can determine the investment decision. Since funds and resources are constrained, a company can only invest in a limited number of projects, depending on their business cases. Poor cost estimates can either result in cancellation of economically sound projects, or in wasting money and resources on non-profitable projects.
PPD Follows AACE cost estimation practices.
Class 5: Screening estimate
The purpose of a screening estimate, also called a subjective estimate (Lester, 2014), is often to provide a ballpark figure or order of magnitude number being used for strategic business planning, such as ranking of future investments. It enables management to prioritise projects by comparing, amongst other drivers, the economics of each individual project. A screening estimate is usually compiled even before project initiation, or during the first project development phase. The level of project definition and available deliverables are limited at this stage, hence the wide accuracy range. A screening estimate can be delivered relatively fast and does not require much effort to deliver.
Class 4: Concept Study estimate
The purpose of a concept study estimate can be to determine project feasibility, concept evaluation or to provide a preliminary budget. At this stage the project premises (e.g. objectives, key assumptions, technical premises, etc.) are frozen, concepts have been developed and the first engineering might have been completed to determine the technical design basis. For complex projects it is also common to assess the feasibility of multiple options, supported by multiple cost estimates to help management compare the concepts and select one. A preliminary budget might be required to move to the next project phase. Since a class 4 estimate is still based on limited information, it has a fairly wide accuracy range and it still requires limited time and effort to deliver it.
Class 3: Budget estimate
The purpose of a budget estimate can be to support budget authorization and/or project sanctioning. The estimate is based on typical project deliverables like front-end engineering documentation, a detailed project execution plan and a minimum percentage of firm quotes from vendors and service companies. The estimate has a better accuracy range and can even become the first control estimate against which cost performance is being monitored.
Class 2: Control estimate
A control estimate, also called an analytical estimate, provides the baseline for detailed cost control during project implementation. It can also serve as a tender or bid estimate, used to determine contract value. It is the most detailed estimate typically in place at the start of construction and requires rigorous management of change to monitor variations to the budget.
Class 1: Check or Tender estimate
Class 1 estimates are generally prepared for discrete parts of the total project rather than for the entire project. The parts of the project estimated at this level of detail will typically be used by subcontractors for bids, or by owners for check estimates (bid checks, claims, change orders, etc.). Depending on the cost changes, it can be used to update the control estimate and to establish a new baseline for cost control. A project definition level of 100% will normally only be reached upon project completion, at which the actual cost are known.
a project lifecycle exists of a number of distinct phases. In each project phase many activities are taking place and many deliverables are produced. To control the planning and execution of a project, all scope and activities need to be broken down into manageable activities, linked to a WBS as explained in the previous paragraph. The WBS forms the basis for compiling a schedule and brings scope, cost and schedule together. The WBS work packages can be broken down into lists of activities and events that form the basis for the project schedule. For each activity and event the predecessors, successors and the duration are defined and these interdependencies can be graphically displayed in a network planning. Next the network planning can be analysed to optimise the work sequence and project duration. Not all activities need to be scheduled at the same level of detail. It depends on the specific risk of an activity or work package and the level of control required.
Earned Value Analysis
Earned Value Analysis (EVA) is a quantitative method for evaluating project performance and predicting final project results, based on comparing the progress and budget of work packages to planned work and actual costs. The advantage of EVA is that both cost and schedule performance can be analysed using one method based on cost or monetary value.
Project controls plan
Depending on the size and complexity of a project, the project controls plan can also be included in the overall project execution plan. A project controls plan typically includes:
- Project controls organisation (organisation chart, roles and responsibilities)
- Project planning, key milestones
- Project scope and execution strategy
- Schedule development and resource planning
- Cost estimating and budgeting
- Risk management
- Cost control
- Progress and performance measurement
- Change management
- Project reporting
Sometimes additional topics, like document control or auditing, can be included, depending on the tasks assigned to the project controls team. It is also important to realise that there are possibly multiple contractors involved in the execution of the project, all performing their own project controls and reporting. Therefore large complex projects require an integrated
ECONOMIC PROJECT EVALUATION
In its project selection process the owner will consider a number of aspects such as company strategy, production technology, marketing, personnel and importantly also the financial aspects. The results of the economic evaluation are important to the management (representing the owner), which takes the go-no-go decision on the execution of a project. As the decision is quite often a choice between a number of project opportunities, a profitable prospect provided by the economic project evaluation is a major decision criterion. In contrast to some other aspects of managing a project the economic project evaluation is based on an arithmetic model. This model itself is not subject to strategy, tactics or approaches. The input for the model – the financial data – however is influenced by the business management view and as a result strategy, tactics and approaches do affect the outcome of the economic project evaluation. Nonetheless models do not take decisions, people do. So the evaluation outcome is only a part of the decision process; an important one however. Economic evaluations take place at the various stages of a project. The data are provided by the business case; both capital investment estimates and financial yield of the project under consideration. As the business case is reviewed at various stages of the project the data used in the project evaluation firm up and the outcome increases in reliability.The economic evaluation can be performed in a number of ways using various indicators. Thelevel of these indicators for the project at hand define the financial attractiveness of the project.Each indicator has its own meaning about the company, the decision makers and the project perspective.
Those stated below are the common ones:
- Payback period (PBP)
- Internal (or Investor’s) rate of return (IRR)
- (Net) Present Value ((N)PV)
- Return on investment (ROI)
Tender Engineering & Management
PPD provides Bid management services for tenders of large scaled projects. This service can be provided for a single Project tender and/or enterprise wide bid management system development. PPD also provides tailor-made cloud based software tool to ensure fulfil workflow of bid management system and RFQ requirements.
In order to define cost of Engineering projects AACE regulations should be followed. Company’s historical data is needed to be processed as benchmarking studies as well. PPD provides services for development of cost management accordingly with the Client’s organization.
All costs, collected bids and conditions should be recorded in database. Furthermore PPD can develop cloud base cost management software tool based on Company’s cost management workflow.
Unknown effects are more than known effects of importance of scheduling. EVA (Earned Value Analysis) is highly important but ignored aspect of scheduling. PPD provides to Client schedule management system development with EVA. Furthermore, PPD provides tailor-made cloud based software tool which interacts with scheduling software (Primavera) to ensure conduction of project scheduling & monitoring system.
Most of engineering projects contains hundreds or up to thousands of engineering documents. A handy tool to manage those documents is mandatory in our era. PPD provides document management system set-up and development accordingly with Client’s requirements. Also provision of tailor-made cloud based document management software including document approval cycles, variable document numbering system is one of PPD’s services.
Large scale engineering projects requires provision of procurement services. PPD provides procurement management system development In order to manage both company wise and project specific procurement services . It is highly recommended to support procurement services with software tools to ensure fulfilment of workflow.
PPD develops project specific project & quality management system(s) and Client specific software tools as single module, multiple modules or complete package covers :
Bid & Tender Management
Bill Of Materials of related Project
Scheduling & Monitoring
A typical Project & Engineering Management Workflow of PPD is given below.