How project teams can use mega-project models for smaller scale projects
The same proven methodology and best practices used for mega-projects in the billion-dollar range can and should be applied as key learnings to the smaller scale projects closer to the $5-50 million range. Those projects have a greater success rate as well when best practices are implemented that match the project, industry experts said.
Mega projects have ridden a wave of new construction over the last five years, spurred on by U.S. shale gas production and cheap ethane and propane. The most successful of these large projects took deliberate steps to mitigate construction cost and labor shortage impacts using the best of the industry’s best practices today: modularization, off-site pre-assembly, Advanced Work Packaging (AWP), earlier/more in-depth planning, RFID-supported procurement and materials management, and the Construction Industry Institute’s (CII) Project Definition Rating Index (PDRI) tool, among other strategies.
These approaches were previously encouraged but under-utilized for several years. These approaches can help small projects as well. Some may think that modularization and off-site fabrication only makes sense for large projects, but that is not the case.
“Regardless of the project size, the earlier you can solidify scope, execution strategy, and mitigate risks the better off you will be at the end of the project, said Nicholas Smith, Global Projects Estimator, LyondellBasell.
Smith was part of a panel leading an afternoon workshop at Downstream 2019.
Joining Smith was Jan Shumate, Director Worldwide Engineering & Construction, Eastman Chemical; Steve Cabano, President, Pathfinder & Chair of the CII Board of Advisors; Brent Douziech, Project Operations Executive, Rangeland Engineering; and Peter Dumont, Executive Advisor, The Premier Resources Group and Principal, PrairieDog Venture Partners.
Small projects = greater chance of success
The smaller projects often are more successful in terms of meeting their business objectives than the larger projects.
While small-to-medium size projects struggle with many of the same issues as larger projects, generally they are easier in terms of being less fragmented, requiring less global involvement, having fewer interfaces and fewer moving parts, etc., Dumont said.
“The mega-projects are much more complex and require a more robust level of control and supply chain infrastructure. The negative side effect to this is that these large projects can be glacially slow as a result,” Dumont said. “The world is moving fast, and we need to find a way to build projects much quicker than what today’s delivery methods can produce.”
Typically, CFOs can only forecast out two to three years in most markets, but if a project takes four to five years to build, that owner organization may have built an asset that no longer aligns with market conditions.
“Smaller projects, especially repeatable ones, have the ability to do better. There are fewer contracts, fewer companies are involved, and there is a simpler supply chain to set up. Things can move quicker,” Dumont said. “The industry needs to become more agile and the smaller projects have the greatest ability to do this.”
The mega-projects tend to have a lot of turnover, especially at senior leadership levels, but this is not as big an issue with the smaller projects.
“The smaller projects don’t always suffer from the same level of turnover. Keeping the core people on board until the project is complete and working to improve retention through the project is important, but regardless of project size, this can be a challenge in today’s tight job market,” Dumont said.
Project challenges today
The number of petrochemical projects constructed simultaneously in the construction boom has had a significant impact in the marketplace. Time to market was the primary driver for these projects as everyone wanted to capture the early market opportunity. This resulted in a fast track planning and poorly executed construction-driven projects. This strategy resulted in cost growth and schedule delays for many projects.
The challenges for these projects were exasperated by skilled labor shortages, raw material shortages for steel and alloys, immature design because of weak front-end planning, poorly defined scopes of work and change orders, and poor productivity.
For the next wave of large and small projects, teams are realizing that new collaborative approaches to asset development that involve key stakeholders from the beginning will be a key factor to success.
“Full project team alignment is essential to the success of a project,” Smith said.
Research indicates that many capital projects fail to meet their business objectives. 98% of megaprojects experience overruns of 80% over budget and 20 months late, according to analysis from Bechtel.
Some of the most innovative thinking for solving these issues is coming from the Construction Industry Institute (CII) and the Construction Users Roundtable (CURT), who are collaborating on the research and development of Operating System 2.0., a technology-enabled transformation for the global construction industry, the panel said.
CII and CURT believe that the industry must find a way to build more with limited resources, including both capital and skilled labor.
Leasing is one example of an opportunity the team believes could have a huge economic advantage vs buying. The OS2 system would facilitate this.
Integrated Project Delivery
Integrated Project Delivery (IPD) has been used primarily in commercial building and healthcare construction. It is a delivery model that drives a high level of collaboration among all those involved in the project. Much of its success rests on using Building Information Modeling (BIM) software underpinned by collaborative contracting arrangements.
In IPD, there often is a multi-party contractor. Where it has been used in healthcare projects, for example, the owner, the A/E firm, the general contractor, and maybe even the major subcontractors at times will all sign one contract that binds them together in a shared risk / shared reward engagement. Teams are brought in early to design the project together and share ideas; and then those teams progress into execution together.
“Practitioners of IPD seem to do this fairly well via use of collaborative contracting strategies. They strive to facilitate the best ideas coming forward early to contribute to a collaborative target value design and effort for the project,” Dumont said.
They typically use advanced BIM systems to enable the design and execution of the project.
“Collaborative contracts may not be right for everyone, but they certainly do create an environment that facilitates deep levels of collaboration. These contracts, however, require trust amongst the participants. In absence of them, the traditional supply chain management groups often get in the way, perhaps unintentionally, of collaboration on projects via use of traditional lump sum or reimbursable contract types. Most construction contracts tend to promote combat over collaboration.” Dumont added.
Project Definition Rating Index (PDRI)
The PDRI came up often during the Downstream workshop as a solution to the planning challenges project managers are facing.
According to CII, PDRI is a powerful, easy-to-use tool that identifies and precisely describes each critical element in a scope definition package. It also enables project teams to identify quickly the project risk factors related to desired outcomes for cost, schedule, and operating performance. By using the PDRI method, teams can capture mitigation action items and evaluate the completeness of scope definition at any point prior to detailed design and construction.
The PDRI is intended for use during front end planning, the project phase that encompasses activities such as feasibility, concept, and detailed scope definition.
By Heather Doyle