fluor presentation on managing mega projects

8/18/2019 FLUOR Presentation on Managing Mega Projects

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Managing Mega projects

Content

Mega projects Definition

Mega projects Challenges Driving and executing mega projects to success

Mega projects execution - Risks & Opportunities

Fluor tools and processes

Mega projects Opportunities

Information from: FLUOR guidelines, procedures and database.

2012 AACE INTERNATIONAL TRANSACTIONS RISK.823.4

Industrial Megaprojects: Concepts, Strategies and Practices for Success. (Edward W Merrow. 2011)

MegaProjects and Risk, An Anatomy of Ambition, (Bent Flyvbjerg, Nils Bruzelius, Werner Rothengatter. 2003)

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Mega project definition

A mega project is an extremely large-scale investment project,typically defined as costing more than US$1 billion

Mega projects attract a lot of public attention because of substantialimpacts on communities, environment, and budgets

Mega projects include oil and gas, petrochemical, mining,aerospace, airports, canals, environmental, information technology,stadium and sporting venues, rail and rapid transportation, bridgeand highway, science, space flight, planned cities, dam andhydroelectric and water infrastructure projects

Governments invest in mega projects to stimulate the general

economy (i.e. Chinese economic stimulus program (2008-2009);the European Union stimulus plan (2008) and the AmericanRecovery and Reinvestment Act (2009)

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Mega project elements

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PROCESS

ENGIN.COMPLEXITY MAYOR STIR.

LABOR

MARKETS

COMPLEX

EXECUTIONINTERFACE

COST ANDSCHEDULES

OWNERORGANIZATION

COMPLEX

ENVIRON.REGULATION

PART OFA PROGRAM

FINANCIALPROFILE

MEGAPROJECTS


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Political, security and financial instability

Economic uncertainty (i.e. recession / devaluation)

Government licensing and permitting constraints

Transportation and logistical difficulties

Extreme climatic conditions / Communications

Manpower staffing, retention and labor unrest

Camp and catering facilities

Emergency preparedness and evacuation

Healthcare services / medevac capabilities

Environmental protection and preservation

Mega project Challenges


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Mega project Challenges


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Driving and executing Mega projects to success

Business priorities (finance, investment, economic model, time tomarket, commercial opportunities, business objectives)

Design Definition (Licensing process, engineering, contractingstrategy, procurement, construction, key engineering deliverablescompleteness)

Organization Capability (Owner organization, dedicated owner´s

team for core engineering and construction disciplines andmanaging interfaces)

Project Controls (Level of controls needed, change management,risk management, physical progress attained before moving into

next phase) Mega project / Program Execution

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Mega project Execution (cont.)

Program Execution - Risks and Opportunities

– Integrated Stage-Gate Process (approval of internal and

external stakeholders, partners)

– Engineering/Construction Interface (engineering maturebefore construction starts – evaluate overlap in phases, effectiveinterface management)

• Execution approach (concurrent or phased execution)• Greenfield and Brownfield units/projects

– Construction Costs

• Productivity (scope, construction management, contract and

material management, logistic, weather, site congested, shutdownenvironment, geographical, local regulations)

• Incentives (safety, schedule)

– Cash Flow Constraints (reworking the execution plan, resourcingrequirements, schedule logic, priorities, completion date)

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Program Execution - Risks and Opportunities (cont.)

– Procurement

• Start ahead of sanction for long lead items

• Cancellation terms

• Bulk quantities (buy down /discounts)

– Contracting Strategy (LNTP, LS, LSTK, reimbursable, unit

price, OBE convertible to LS)• Level of project definition

• Schedule constraints

• Market conditions

• Resources – Division of Responsibility

• Break down the scope between engineering, construction, suppliers,licensor and owner’s team

• In alignment with estimate and schedule basis8


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Gatekeeping is a process, not a single person. It encompassesvarious steps. Key steps include:

– Assurance —checking that project deliverables are accurate andof high quality

– Endorsement —a recommendation that the project meets thebusiness need and is ready for execution

– Financial sign-off —agreement that the project is aligned with thecompany’s financial goals and can be authorized for execution

Financial entities requirements ECAs (Export Credit Agencies)

IPA – Independent Project Analysis – VIP (Value Improving practices)

PDRI – Project development rate index

Surveillance Analysis

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Fluor’s Tools and Processes

Project Phase

FEL-1 FEL-2 FEL-3

MarketAssessment

and

BusinessCase

BusinessPlanning

FacilityPlanning

ProjectPlanning

Engineering,Procurement

and

Construction

Turn-overand Start-up

Operations &Maintenance

• Define project objectives

• Identify and defineprocess options

• Test options forconsistency with projectobjectives

• Select project processscheme

• Define scope for market,product, capacity, sitelocation

• Class 5 estimate(Capacity factored)

To provide "what hasto be done"

Gate AReview

To provide correctand completeBaseline Data

To provide correct andcomplete

Basis for ProjectExecution

• Further developselected processoption

• ConceptualEngineering, Definebasis of design (BOD)

• Preparedocumentation forauthority approval (e.g.

EIA)

• Licensor selection

• Class 4 estimate(Equipment factored)

• Finalize scope of theproject

• PreliminaryEngineering, DefineBasic Design Package

• Class 3 estimate(during FEL 3) (Semidetailed)

• Class 2 estimate and(at the End of FEL 3)(Forced Detailed)

• Identify resourcesrequired

• Tendering of long leaditems

• Set up of executionplan

• Detailed Design andEngineering

• Material & EquipmentPOs

• VendorDocumentation

• Installation DesignDrawings (IFC)

• Final ConstructionSchedule

• I,O&M Manuals

• Turn-over, Testingand Start-UpProcedures

To provide correct andcomplete Design for

Construction

Objectives andDeliverables

Gate BReview

Gate CReview

Gates D,EReview

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Agreed Baseline

Project Manager

Lead

Engineering / Design

Baseline:Project Level

Baseline:Discipline Level

Baseline:Activity Level

Analysis andReport

Status andExceptions

Analysis andReport

Status andExceptions

Analysis andReportStatus andExceptions

Progress Report and ReviewFluor (PSR) - Client

Facilitationby ProjectControls

• Contract• Scope• Schedule

• Cost• Risk• Execution Plan

• Changes• Updates• Preventative Actions

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Baseline:Project Level

Baseline:Activity Level

Progress Report and ReviewFluor (PSR) - Client

Facilitationby ProjectControls

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6 Basic Elements

– Scope of Work (Facilities and Services)

– Cost Estimate – Schedule

– Execution Plan and Change Management

– Risk Management

– Prime Contract


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CONCEPTUAL ENGINEERING

ProjectControls

Baseline CentricExecution

RiskManagement Document

ControlMaterials Control

SiteManagement

ContractManagement

ProjectManagement

ENGINEERING

PROCUREMENT

CONSTRUCTION

START UP

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OperationalSupport

Maintenance

Training

Start-up

Construction

Procurement

Design/ Engineering

Basic / Design

Feasibility

ConceptDevelopment

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Phase 5Operate &

Evaluate

Phase 4Execute

EPC

Phase 3Define Project(FEL 2 and 3)

Phase 2

Generate andSelect Alternatives

(FEL 1)

Phase 1Identify & Assess

Opportunity

BusinessPlanning


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PMC/Owner

Project 1

Project 2

Project 3

Project 4

Program Management in MegaProjects must extend across severalEPCs in addition to integrating allsuch EPC into a single Project


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Mega project Opportunities

Uplift employees in developing markets

Develop skilled local workforces Support community outreach programs

Build and sustain ‘world class’ HSE practices

Establish strong business relationships

Leave a positive impression on the societies in which we work Improve Owner competitive advantage

Leave a legacy

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Success or Failure?

There are underlying causes of over budgeted, delayed, andunsafe megaprojects.

We need to ensure a safe and profitable future formegaprojects

There are project best concepts, strategies and practices

that, when delivered in a disciplined manner deliverpredictably good results

“Good” results: – World class safety results

– Completion in accordance with the contract schedule

– Costs in accordance with the budget – Flawless Project startup

– High project quality reflected in plant operation

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Energy & Chemicals in Latin America

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Thanks

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