challenges in project management sept 11,2009 slide number- 1 of31 delivering excellence through...

Challenges in Project Management Sept 11,2009

Slide Number- 1 of31

Delivering excellence through people

THEME LECTUREPETROFED

SEPT 11,2009( M. Rohatgi, CMD EIL)

CHALLENGES IN PROJECT MANAGEMENT

Challenges in Project ManagementSept 11,2009

Engineers India Ltd – Delivering excellence through people

Presentation Outline

Introduction

Major areas of Concern

Stages of a Project

Key Challenges

Conclusion



Introduction

• Projects are growing in size and complexity-today it is common to think in terms of projects involving investments of Rs. 20000 Cr and more.

• Integration for value addition characterizes most projects e.g. Refinery-Petrochemicals. The future could see refining and gas processing or refining and coal processing integrations.

• Increasing complexity and size accompanied by a need to cut implementation time and cost

• The net result is a set of major challenges that the Project Owners, Consultants, Contractors and Suppliers have to face jointly and overcome at each stage of a project



Concerns

• Delays

• Cost over runs

• Management of risk

• Resource Constraints

• Sustainability

The right approach at each stage helps to address these issues



Concerns-Delays

• Lack of approvals

• Supply lead chain times

• Poor scope definition

• Changes in design and scope

• Poor Planning / unrealistic schedules



Concerns-Cost Over runs

• Materials price escalation• Inadequate scope definition• Time delay• Inadequate estimating/forecasting• Regulatory approvals• Inadequate resources/ Inexperienced team• Poor risk Management• Labour costs• Design Changes

A good Project Management approach would attempt to address these issues at each stage of a project



Stages of a Project - Formulation

Objective-• Define the project boundaries with limited information

available.Issues to be addressed• Industrial outlook, Competitive trends• Project for domestic demand/export or both• Location, size and scale• Access to raw materials and markets for products• Technology options• Environmental stipulations• Investment and financing outlookDesirable to have a PMC in place at this juncture



Idea

Generation

Brain Storming

SWOTOptions

Alternatives

Initial

Vision Plan

Formulation-where does it all begin?



Business Applications

External Factors

Market Demands & Prices

Available Crudes & Prices

Emissions & Product Quality

LegislationSupply OptionsConversion

Options

Strategic Considerations

Growth

Return on Investment

Cash Flow

Development of Vision – Influencing Factors

Available Options

Visualizing the Project



Long Term Vision

Factors

Develop Options

Evaluate

Future Configuratio

n

Where TO?

How TO?

WHAT are the costs benefits, risks and financial sensitivities?

Road Map to the Future



Stages of a Project-Development

Objective: • Facilitate an investment decision

Issues to be addressed• Infrastructure-raw material receipt and product

evacuation, location and site development requirements, water intake and treatment, enabling facilities for construction.

• Technology selection and integration of various processes into one composite scheme to meet the project objectives

• Investment and economic analysis• Project financing • Output-Project Feasibility Report and

recommendation of project implementation approach



Stages of a Project-Definition

• Crucial Stage for the project as it is the final gate for approval or otherwise.

• Project owner should have the approval for expenditure towards Basic design and engineering, followed by FEED preparation for ISBL facilities, utility and offsite facilities.

• Detailed cost estimates and project schedules to be prepared, with appropriate value engineering carried out for cost rationalization, overall process integration, optimization of utility and offsite systems design and project implementation approach

• Output- Front end loading report with detailed cost estimates and packages that are good for inviting bids from EPC/EPCM contractors



PROCESS DESIGN

DESIGN BASIS

CONCEPTUAL PROCESS DESIGN

DETAIL PROCESS DESIGN

BASIC FRONT – END DESIGN

BID PACKAGE FOR EPC/LSTK BIDDING

ENGINEERING CONSTRUCTION CONTRACTS

COMMERCIAL TERMS & CONDITIONS

SUPPORT

ADVANCE CONTROLS & OPTIMISATIONMATERIALS & MAINTENANCEENERGY & ENVIRONEMNTOPERATIONS,SAFETY & HAZARDS

All this on electronic media

FEED Implementation Sequence Encapsulated



VENDORS CONTRACTORS EPC

CONTRACTORS

PROJECT MANAGEMENT

OWNER MANAGEMENT

CONFIGURATION & DESIGN BASIS

PROCESS DESIGN

DETAIL ENGG.

BID PACKAGE &

CONTRACTOR SELECTION

FRONT END ENGG

EQUIPMENT DELIVERIES

CONSTRUCTION

COMMISSIONING & HANDING OVER

EXTERNAL LINKAGES INCLUDING STATUORY

Project Management – Managing all players



OWNER engages a CONTRACTOR to implement the job on EPCM basis with fixed commitment on Project Schedule at an agreed fee

The Contractual arrangement provides for the commitments to be made by contractor & shared with the owner transparently till an agreed commitment level of 65-70% of the target cost is achieved

Single Point responsibility of contractor to deliver the project as per the agreed schedule

Option of conversion of the contract to LSTK mode after typically 65-70% of the commitment of the Target cost has been achieved

Is the emerging favoured mode of Project Implementation in India as

It reduces contractor/client risks and hence optimises the Project Investment Enables early start for Schedule gains Provides for LSTK benefits with reduced overall risks Win Win both for Owner – Contractor

EIL 15

Project Implementation-OBE/LSTK



EIL 16

EPCM LSTK OBE/LSTK

Overall Cost Low High Moderate

Schedule Commitment Low High High

Owner’s Risk High Low Low

Contractor Risk None High Moderate

Flexibility to Change High None Low

Contractual Issues & Change Orders

None High Low

Owners Management team Resources

High Low Low

Quality of Produce High High – Extreme vigil required

High

Popular mode of Implementation in India

•Till Early 2000

•Since 2001

•Very Popular

•Not favoured except for revamps

•Emerging

•Selectively Popular

•Non – Existent

•Gaining Popularity

Alternative Modes of Implementation



Finalisation of Overall schedule

Finalization of procurement procedures Type of bidding Open or limited Imported/Indigenous Items Taxes/duties/structure Shipping, marine transport, Custom clearance, Insurance and

inland transportation philosophy Finalisation of Master Vendor list

Finalization of detailed project schedules for Engineering ,

Hardware procurement and Construction

Development of Quality Assurance plans

System finalisation for real time monitoring of activities

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Kicking off the Implementation Process



Low cost

Competitive Cycle Time

Excellent Operability

Focussed Project Management Process

Empowered Team

Front end Loading

Timely involvement of

contractors

Discipline & continuity

Technology Selection

Value Improving Process

Best Practices

Project control-a sustained exercise



Schedule

Sets the parameters of measurement Essential prerequisite and analytical tool for Project Health Monitoring Torch bearer for Mid Course Corrective action Time saved is Money realised

Cost

The Key is to build in less than Estimated cost Crucial for Process Viability & hence warrants close control Facilitates the basis of Comparative Evaluation Needs in-depth Knowledge of Variables ,Market, Taxation, Competition ,

Schedule for Exercising vigil & control over costs

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Time and Cost Control-the key drivers



EIL 20

Work Break down StructureProject Details

Conceptual plan/Overall

schedule

Project quantum

Project proceduresSchedule Requirements

Functional schedules

Process

Engineering

Ordering

Manufacturing

Construction

Project control &

TurnaroundProgress Reports

Project scheduling and control



LEVEL 1

CORPORATE MANAGEMENT

LEVEL - II

FUNCTIONAL MANAGEMENT

LEVEL - III

JOB LEADER

OVERALL PROJECT SCHEDULE

MASTER NETWORK KEY CONSTRUCTION NETWORK

RESOURCE BASED SCHEDULE

• ENGINEERING• PROCUREMENT• CONTRACTING• CONSTRUCTION• TURNKEY WORK

INPUT / OUTPUT SCHEDULE

• DRAWING SCHEDULE• EQUIPMENT SCHEDULE• BULK MATERIAL SCHEDULE• CONSTRUCTION SCHEDULE

ACTION

CORPORATE REVIEW

DIVISION REVIEW

OPERATING LEVEL

REVIEW

ACTION

MONTHLY ACTIVITY

LIST HOLDUP & SLIPPAGE REPORT

MONTHLY ACTIVITY

LIST HOLDUP & SLIPPAGE REPORT

ACTIONCONSOLIDATED PROGRESS REPORT

CRITICAL LIST

Project Control System



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Work Break down StructureProject Details/Data Project quantum

PFR +/- 30%

DFR +/- 10%

Investment approval +/- 10 %

Project Cost Control and monitoring

Cost Status Reports

Project specific CriticalitiesTechnology/Licensor/details

Estimate Update Increasing accuracy of Estimates

Owners Committments

Purchase Orders

Contract Award

Project Cost Control



SITE INFORMATIONIMPLEMENTIONSCOPE DEFINITIONPROCESS DESIGNBASIC / FRONT END ENGG..

BID EVALUATION & VENDOR / CONTRACTOR SELECTION

DETAIL ENGINEERINGCHANGE MANAGEMENTEQUIPMENT SELECTIONEQUIPMENT DELIVERIES

CONSTRUCTIONCOMMISSIONING

COST CONTROL SCHEDULE CONTROL

LEVEL OF OPPURTUNITY DURING

* * * * *

* * *

*

Value Engineering Chain



Most Critical Step

Conduct Brainstorming Peer Reviews Project risk review meetings

Assign Risk to Team

Identify Risk Manger

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Project Risk Identification



Managing Risk

Improve Risk Mgmt

Standardization/ Formalization of Processes

Reviews/

OversightDedicated/

Experienced resources

Independent assurance processes to support Key Project decisions

Internal peer reviewInternal audit

Independent Project assurance

value assurance reviews

External reviews/feedbacks/Audits



Identify Risk response Plan Reduction Transfer Share ( Not Preferable) Retain Avoidance

Respond Accordingly Avoidance – Develop mitigation plan Reduction – Develop mitigation Plan Transfer – Close Risk and Transfer Share – Develop mitigation Plan Retain - Develop Contingency Plan

EIL 26

Project Risk Response Plan



Develop and finalize design basis, overall, unit by unit and discipline

by discipline

Develop and finalize Scope

Weighing of options vis-avis Value Engineering

Finalization of Implementation Philosophy

Ensuring Quality, Safety and Technical excellence

Protecting Overall Time and Cost

Vendors/Contractors/EPC/LSTD selection

Monitoring Performance of Vendors/Contractors/EPC/LSTD

selection

Change Management , Pre emptive mid course corrective actions

Integrated Complex into a techno commercial viable entity

Ensure Owner’s Satisfaction

11 ingredients for a Successful Recipe



Unambiguous scope definition

Clear design basis

Sound execution strategy

Management of pre project activities

Emphasis on construction driven Engineering

Consistent and extended front end engineering

Staying with performers-vendors/contractors

Monitor, control and pre-empt actions

Manage changes

Manage resources particularly human resources

Key Contributors to Success



29

Need of the HourNeed of the Hour

To Marry the advantages of To Marry the advantages of LSTK & EPCM for optimal LSTK & EPCM for optimal

CAPEX and Security of ScheduleCAPEX and Security of Schedule

RecommendationsRecommendations

Mid size units standard Mid size units standard alone type 400-600 Cralone type 400-600 Cr

LARGE UNITSLARGE UNITS700-1500 Cr700-1500 Cr

•Revamp Revamp •Energy Conservation Energy Conservation •Utilities & offsiteUtilities & offsiteLSTK Mode

(Example)•Hydrogen Plant•Sulfur Block•Treating Units•Selective Polymer units

EPCM ModeMaturing to OBE•To avail cost benefits along with secured schedule•To initiate early start of the Project (savings in schedule to line up LSTK

EPCM Mode•To facilitate better & smoother Project Interfaces•Difficult to define scope for LSTK

Eye to the Future-modes to adopt



Conclusion

• Large projects increasing in Complexity and Project owners as well as Service Providers have to grapple with the issue of resources.

• Increased standardization /formulation of processes, coupled with a system of reviews and oversight can help to mitigate the problem

• Good Project definition is the key to avoiding time and cost over runs.

• Proper planning and appropriate Project controls will contribute significantly towards success

• Recognize the change of the times-collaborative approach will work well-has been amply demonstrated. A supportive Owner will motivate the consultant/contractor

• Essential to have PMC participation at all stages of project development and execution.

challenges in project management sept 11,2009 slide number- 1 of31 delivering excellence through...

Documents

project slide

project management slide

project boundaries

project owners

engineers india

competitive trends project

juncture slide

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