(OWN-3035) The Essentials of “Appropriation Projects” in the Upstream Industry for Oil and Gas Operation Companies
Author(s)/Presenter(s): Chad Itagi, P.Eng. CCP CEP PSP; Nanda Itagi, CCP
The oil and gas industry has been experiencing a period of major investment crunch, with upstream spending topping “$700 billion in 2013 reduced to $ 180 billion in 2018”. This record level of low investment is set against a backdrop of volatile crude oil price and world market. Despite the industry’s immense appetite for capital, compared to other capital intensive industries, it has been relatively conservative when it comes to financial structuring.
During ongoing capital crunch, individual (CAPEX) Projects within International Oil Companies (IOC) and National Oil Companies (NOC) compete each other for funding. Apart from several factors, one of the major influencing factor for funding project in IOC & NOC is outcome impacts to operations including Upstream, Downstream and Midstream operation.
Upstream CAPEX projects funding includes “Appropriation CAPEX Funding”. Based on the nature of Appropriation, each individual project act like CAPEX project. This paper will guides and introduce project control professionals to “Appropriation Projects” in regards to “Scope, Cost and Time”. The conclusion of paper highlights the essential obligation of an “Appropriation Project” including Pro’s and Con’s to regular CAPEX projects.
(OWN-3056) Time For a Reality Check! Reference Class Forecasting
Author(s)/Presenter(s): J. Michael Devine, CCP
Project planning often contains several elements of optimism bias. Even when project planners are aware of the potential to do so, overly optimistic cost estimates and schedules are produced. Also, all too often, risks tend to be overlooked or downplayed during the planning process. The tendency to “bake in” overly optimistic outcomes into project planning, per several well -know, analytical studies, is simply human nature. Information, supporting this tendency is presented within this report.
Several different approaches and guidance have been developed and deployed by different professional organizations and government agencies to help alleviate overly optimistic project planning. This paper introduces the concept of Reference Class Forecasting (RCF) which, when properly implemented, can improve project planning and more accurately predict final project outcomes. To implement RCF it is important to identify relevant past projects, or applicable elements of past projects, that can be used as reference points or benchmarks. Once these relevant benchmarks have been established and converted into a meaningful reference class distribution, project planners can use these known external elements for comparison to help alleviate optimism bias in their project plans. Recognition and treatment of project risk is also improved through this process. This methodology can produce a project plan that is more likely to approximate a project’s outcome.
(OWN-3109) How Can Nuclear Construction Costs Be Reduced? Five Practical Tips to Improve Nuclear Project Economics
Author(s)/Presenter(s): Arnaldo M. Angelini, PE; Apostolos (Tolis) Chatzisymeon
In the actual low carbon economy it is recognized that nuclear energy renaissance could have a fundamental place together with other renewables energy sources as wind and solar. It is a well established fact that nuclear projects are facing rising costs and slipping schedules all around the world. This includes nuclear power plants, reprocessing facilities, decommissioning and fusion energy infrastructures.
These projects are often unproven first of a kind technologies, of high complexity, unique quality assurance requirements, and high safety regulation cost impacts.
It seems essential that research and development should focus primarily on ways to reduce nuclear and facility power construction costs and schedules.
Five effective tips are presented to reduce construction costs and schedule delays:
- Value engineering review of detail design being completed before construction starts;
- Development of advanced and disciplined cost and schedule estimates (database driven systems, BIM models, and benchmarking);
- Contracting strategies in procurement to increase competition between contractors;
- Establishing a reliable performance measurement (scope, schedule and cost ) baseline;
- Schedule and cost progress monitoring for each project phase (engineering, procurement, construction and commissioning): implementation of accurate Earned Value Management System (EVMS);
Some critical case studies are presented from large International projects such as Mixed Oxide Fuel Fabrication Facility in USA, Magnox decommissioning program in UK, European Pressurised Water Reactor, EPR under construction in Europe, and ITER nuclear fusion plant.
(OWN-3134) Estimate Integration: A Case Study of How an Estimating Solution Was Integrated in One of the Nation’s Largest Gas Utilities
Author(s)/Presenter(s): Kristine Kent; James Wolf, CCP; Phil Baranowski
This paper will present a case study of one of the nation’s largest gas utilities and its implementation of a standardized framework for construction cost estimating. The paper will provide an overview of the gas utility, including its capital portfolio and its estimating organization. It will then review the estimating framework, including how it aligned with AACE recommended practices and recently published utility standards. An in-depth analysis will be provided regarding an integrated technology solution to support detailed estimating, including integrations with core enterprise systems such as ERP and scheduling applications. Finally, a statistical analysis of the estimate accuracy results will be discussed, with the end result being improvements in contingency determination and project delivery process.
(OWN-3143) Key Strategies Initiatives Undertaken by an Operator to Reduce Oil and Gas Operator Costs and to Improve Margins
Author(s)/Presenter(s): Tina S. Thomas
With the fall in oil prices in 2014, oil revenues fell, and oil and gas companies became distressed. The net profits were impacted and the going concern was questioned for many companies. The costs for developing and operating the oil and gas fields kept increasing over time and hence a high breakeven oil price was required to maintain the profitability of these projects.
Companies which initiated internal changes to improve the financial and operational efficiency through strategic changes survived the period and emerged fitter at the end of the downturn. This paper presents an in-depth analysis of four key strategic changes undertook by ENI to reduce costs and to improve the net profit margin, thereby increasing the value to shareholders during the period between 2015 and 2017.
(OWN-3168) Estimating the Optimal Size of the Project Management Team
Author(s)/Presenter(s): Aileen Anne Jamieson
It has been well documented in the public domain that capex and schedule success rates of large, complex offshore projects have been low, with over half of projects spending more than sanctioned budget and completing late. There are many credible reasons put forward to explain this, however, what is little understood is the connection between the owner’s project management team (PMT) size and the performance of the project. Analysis undertaken for this paper has examined the industry trend and range of PMT headcount versus project size, using field data from a joint industry project which has been benchmarking completed offshore projects for over twenty years. Further analysis has determined which of these projects measured well at close-out against standard benchmarks of project performance for similar projects. Initial results have shown that the projects with the lowest number of PMT were noticeably outliers in terms of capex performance, often having final costs well above the upper range of acceptable cost. This paper will provide a rule of thumb for owners to estimate the optimal size of the PMT for their projects, and may warn that reducing headcount too much can negatively impact on a project’s final cost and schedule performance.
(OWN-3174) Project Controls within the Technology Industry
Author(s)/Presenter(s): Melvin K. Earley, CCP
A relatively small number of very large technology companies dominate markets and play a pivotal role in our everyday lives. This paper seeks to identify how such companies seek to use project controls and quantity surveying knowledge and techniques to complement their success and continued growth of their overall global strategy and as part of their competitive advantage.
(OWN-3182) Linear Planning Model for the Selection of PPP Projects under Risky Environment
Author(s)/Presenter(s): Xiang Wenwu; Zhang Daping; Jin Feng; Zhang Bocheng
Due to the limitation of annual fiscal budget for the PPP projects provided by the public sector, for example, not more than 10% of the total budget in China, it was necessary for the public sector to propose an effective model to optimize the selection and ranking of PPP projects with some constraints in the total project cost under some risks. Based on this philosophy, an optimal model for the afore issue was proposed. Firstly, the total project cost provided by the public sector was simulated by Monte Carlo method in the principle of risk driver’s theory. Then, the model of Linear Planning, together with the lowest level of risk exposure, was established to maximize the total NPVs of PPP projects portfolio under a constraint of the total project cost less than the fiscal budget by the public sector. Finally, one case was studied deeply to illustrate the validity the proposed model.
(OWN-3185) Planning the Future: Estimating Infrastructure Costs for the U.S. Nuclear Stockpile
Author(s)/Presenter(s): Cash Fitzpatrick; Fana Gebeyehu-Houston; Julie Anderson; Charles Loelius; Christopher Massey
The cost estimating methodology in this paper is used to produce long-term budget projections for the National Nuclear Security Administration (NNSA) construction portfolio. The organization produces early-stage and defensible cost estimates across its eight sites to aid in planning purposes, specifically projects which initiate in the next 25 years. A parametric cost estimating relationship (CER) was developed from historic data across the nuclear defense complex to produce cost estimates using gross square footage, facility hazard classification, and programmatic equipment as the primary parameters. The CER handles technical uncertainty in the range of project inputs and cost uncertainty via the underlying cost ranges, and then performs a Monte Carlo simulation to produce a resulting “s-curve” cost range for each project. A schedule estimating relationship (SER) using a Weibull distribution and based on historic schedule durations and total project costs was also developed. The combination of the CER and SER enables the development of planning scenarios which are essential to corporate planning and identifying long-term portfolio needs. These estimates are performed and published annually in NNSA’s strategic planning document called the “Stockpile Stewardship and Management Plan” (SSMP).
(OWN-3187) Los Angeles Metro Fast-Track Capital Program Management Best Practices
Author(s)/Presenter(s): Julie K. Owen, CCP PSP FAACE; Sean A. VonFeldt
Los Angeles County is the world’s nineteenth largest economy and home to 10.1 million people and growing. Recent infrastructure investment initiatives have committed $160B to Los Angeles Metro for transportation upgrades. Adding further pressure to transportation infrastructure is that Los Angeles was chosen to host the 2028 Olympics.
Large capital investments (mega projects >$1B) can involve higher risk of delayed projects and cost overruns. As such the Metro Office of the Inspector General initiated a study to identify best practices for improving the planning, management, oversight, innovation, delivery processes, and accountability of major construction projects. The audit bore fruit and served as a catalyst for positive changes in the agency’s program management process and approaches.
In this presentation you will learn how Los Angeles Metro improved its program and project management processes, and implemented policies, procedures and training programs concerning: improved risk management; project delivery method selections; conducting project readiness ‘stage gate’ reviews; and, sharing technical, financial and legal lessons learned across all capital projects within the enterprise.
(OWN-3196) The Role Owner Project Control Plays in Contract Administration
Author(s)/Presenter(s): Stephen L. Cabano; Paul G. Williams
As projects become larger and more complex, the owner’s Project Control responsibilities take on a greater role in the overall Project Management spectrum. Many owner organizations capture the Project Control discipline under a Project Services group that incorporates project controls, contract development and contact administration, and other related project services. One reason for this organizational alignment is the close relationship Project Controls has with contract administration. Well-defined owner contract strategies and contract documents include the contractor’s responsibility to report and manage their scope of work in the agreed upon manner. Project Controls needs to make sure these operational protocols are being met and the project is on track against established contractual baselines. Another major Project Control responsibility, performed in conjunction with the project management team, is change management, which supports not only keeping the project on track but also claims avoidance. This paper will outline the details of a well-defined and well-aligned project control/contract administration set of roles and responsibilities.
(OWN-3197) Source of Project Risks: Global Acquisition
Author(s)/Presenter(s): Rebekka Kinney
Global acquisitions add additional challenges to project management regarding risks associated with project location, technology, and the economic, industry, and market environments. Some contributors to these risks specifically include systems, applications, and data management process. The project referenced requires the global organization to fulfill a project request involving the consolidation of key performance indicators for all sites and supported partners to provide data relating to the competitive advantage of the organization by leveraging the benefits associated with the global acquisitions. Through a process of cost-benefit analysis relating to alternative methods to mitigate communication challenges and project execution, the project manager could quantifiably measure results for budget and schedule planning and estimate the expected returns from investments. In this instance, the selection of expanding the project team to include representatives from each site, account, and acquired organization resulted in improved project benefits and expedited schedule by improving the change process for operational entities, regardless of the extended costs for the extended participation.
(OWN-3222) Progress Measurement for Owners
Author(s)/Presenter(s): Ferdinand R. Karbowski, Jr. CCP
Progress Measurement from an owner’s perspective is always a challenge. One must consider many aspects to achieve a balance between the level of detail a contractor provides versus the level of detail an owner must have to perform essential verification and validation of the work. A clearly communicated strategic direction and philosophy is essential as a foundation for effective progress measurement. Certainly the work breakdown structure (WBS), the methods used for measuring progress, the accuracy of data, and the system of record are all important factors for progress measurement. In the end, a sound mechanism can deliver on the expected progress reporting results.
This paper will focus on what an owner can do to better define a methodology for progress measurement, with emphasis on:
• Providing formal instructions and requirements to contractors for required information.
• Instituting standardization of rules of credit.
• Providing a stable platform for collecting progress measurement data to facilitate reporting.
This paper will provide examples of tools and techniques to implement a sustainable progress measurement methodology from an owner’s perspective that can be used to mitigate the challenges of accurately measuring projects.
(OWN-3229) What If the System Doesn't Fit? - A Proposal Classifying Estimates for Tooling Projects
Author(s)/Presenter(s): Shoshanna Fraizinger, CCP
The recent trend is the Canadian Nuclear industry is greater reliance and incorporation of Industry Best Practices for cost estimate preparation and development. Owners and Operators are specifically calling for internal and vendor estimates to be prepared and submitted in compliance to 18R-97, cost estimate classification system – as applied in engineering, procurement and construction for the process industries (as that which is the most applicable estimate classification system document). However, not all projects in the nuclear industry proceed from the scope defining documents and deliverables relied upon in 18R-97 for maturity level of project definition assessment. One such example are the projects related to the design and production of custom tooling supporting on-going maintenance and operations in nuclear facilities. This paper presents a proposal, which seeks to correlate the technical readiness assessment process using the nine technology readiness levels presented in the GAO technology readiness assessment guide to the estimate classification system. The aim of the proposal is the provision of guidance to companies, which seek to produce cost estimates for tooling projects in the nuclear industry, such that they can show estimate development and characterization in compliance with AACE Total Cost Management Expectations.
(OWN-3236) Optimizing Your Management Reserve
Author(s)/Presenter(s): J. Gustavo Vinueza
Contingency and management reserve definition are critical issues in any mid or large project. Any time that contingency is not sufficient to cover critical events, the project leader and the company’s management team may need to make use of the management reserve, which is a last resort source of funding that projects can only access in extreme situations, with appropriate justifications.
Different companies approach the use of management reserves in different ways, with a few common methods analyzed in this document. Depending on the degree of centralized / devolved control, the company could either let projects manage their own reserves almost independently, or a central bucket of money will be setup where all projects consolidate and draw down from where needed. Different ramifications in-between are analyzed as well, considering variables such as intermediate financing layers or shared portions of reserve.
This work supports the Management Reserve selection process with a simulation and optimization model that attempts to replicate different scenarios from a fictitious program within a company. An optimization will then be run, in order to recommend the best scenario for the company, based on sensitivity analyses of the number and magnitude of the projects.
(OWN-3241) Commissioning Oil and Gas Facilities
Author(s)/Presenter(s): Dennis Sundgaard, P.Eng.; Dr. George F. Jergeas, P.Eng.
This paper documents the findings of detailed discussions and interviews between a project management academic, and an industry practitioner with extensive experience in project delivery and the commissioning of oil and gas facilities. The interviews focus on industry best practices for commissioning new oil and gas facilities, including: gathering systems, oil and gas treatment plants and oil sands facilities (both onshore and offshore).
The commissioning of new facilities is a challenging commitment for the Owner’s project team and operations. This paper provides a holistic approach for the Owner’s Project Team to significantly improve the probability of successful project completion and handover to Operations. It uses a well-established project delivery model as a framework for planning and executing the commissioning function concurrently with other well-known functions, such as engineering, procurement, construction, etc. It considers Operations to be a close, essential partner as the project progresses through to start-up. This practical paper is also believed to be one of the very few to date to address commissioning. The authors hope this paper will encourage researchers and practitioners to start new research collaborations and pay more attention to commissioning.
(OWN-3249) A Model for Project Governance for Major Construction Projects – An Owner’s Perspective
Author(s)/Presenter(s): Tariq Hussain
A research was conducted to evaluate the current understanding of project governance in the construction industry, recognize the current governance practices, and evaluate the existing project governance structures. Findings of the research revealed various levels of understanding of project governance and a range of governance structures in practice within industry. In this paper a new project governance model is proposed. The model recommends project owner organizations to reorganize their project governance structures, improve their policies and procedures, develop tools that support project governance, make it mandatory for project personnel to follow governance procedures, improve the governance role of Project Management Office (PMO), do audits for compliance, keep processes updated, and use lessons learned. The researcher concludes that the new governance model applied proficiently will help project owners improve governance and oversight and project predictability.
(OWN-3273) Understanding Airport's Airside Operations from an Owner's Perspective During Construction
Author(s)/Presenter(s): Aleemuddin Muzammil Mohammed
In recent years, there has been unprecedented growth in Aviation travel putting extensive burden on Airport Owner's to constantly expand and upgrade their Airfield to cater to ever increasing Aircraft movements and keep Airline customers happy. A huge challenge for Project Professionals is to deliver these expansion/upgrade projects in live airfield environment within tight Schedules/Budget with minimal disruption to Airline Operations. Understanding Airside Operations and their regulatory requirement to comply with safety is critical and poses a challenge to delivering Airfield projects Under Budget and within tight Timelines. This paper introduces the reader to some of the basics of Airside Operations and build a solid foundation while Planning/Scheduling Airfield Projects. This paper intends to educate the Airport Owner on the importance of having an Integrated Schedule and for Contractor's appreciate the challenges/troubles the Owner's Airside Operations faces when delays take place.
(OWN-3306) (Presentation Only) Survey of Project Controls in the Utility and Energy Industries
Author(s)/Presenter(s): Anthony M. Woodrich, CCP
In 2010, a major investor owned electric utility requested a survey of utility companies and to provide benchmarked information regarding project controls for capital projects, minor projects, plant projects, and turn arounds. This survey was organized into three major subject areas:
1) responsibility of project controls team;
2) company’s organizational structure for project controls; and
3) tools used by the project controls team and related training of project controls staff.
After presentation of this utility benchmark information at the 2010 AACE conference in Anaheim, California, this survey information was provided to AACE International’s Utility and Energy Special Interest Group (U&E SIG). Beginning in 2017, the AACE U&E SIG conducted a follow-up survey relating to this information. This presentation will present the results of that follow-up survey.