Technical Program Abstracts

(OWN) Owner Issues

NOTE: Program Subject to Change

(OWN-3056) Reference Class Forecasting: Theory and Practical Application

Author(s)/Presenters(s): J. Michael Devine, CCP; Rob Adkison, PE CCP

Time/Room: SUN 1:00-2:00/Oak Alley

Abstract:

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. However, RCF, on its own, may not be the fully recommended approach.

To implement RCF it is important to identify relevant past projects, or applicable elements of past project scope, 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 to improve project planning and 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.

Project planning often contains 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-known, analytical studies and scholars [1], is simply human nature. Also, several different approaches and guidance have been developed and deployed by different professional organizations and government agencies [2] to reduce or alleviate overly optimistic project planning.

 

(OWN-3109) How Can Nuclear Construction Costs Be Reduced? Five Practical Tips to Improve Nuclear Project Economics

Author(s)/Presenters(s): Arnaldo M. Angelini, PE; Apostolos (Tolis) Chatzisymeon; Sean T. Regan, CCP CEP EVP PSP FAACE

Time/Room: MON 4:00-5:00/Bayside B

Abstract:

In the actual low carbon economy, there is a growing interest in the utilization of nuclear fission energy and in the long term of nuclear fusion energy. But It is a well-known fact that nuclear projects are facing rising costs and slipping schedules all around the world. It is imperative to improve nuclear project economics, particularly the high upfront capital cost of new build reactors. The managers first should identify the scope, and develop accurate estimates for costs to improve quality, shortens time taken for the project, and keeps the budget on track.

Every project starts with a cost estimate. The estimate is a decisive and critical part of whether a project is initiated after scope and schedule development. Dealing with uncertainty that arises from cost issues is an important aspect of risk management. This is a significant element impacting the overall cost of large projects. As the impacts of poor estimating are varied and serious, the process should be managed continuously appropriately all along the project life cycle. Moreover, the success of any project is linked to other aspects as well, including the accuracy of the analysis, the application of high-quality engineering design, a good supply chain, project controls and communication and coordination between the stakeholders.

This study looks at the possible ways to reduce construction costs through the application of total cost management best practices to high quality cost estimating processes, value engineering analysis, procurement and contracting strategies along with advanced project control strategies for each project discipline with the best project management practices and standards. As part of the Total Cost Management (TCM) Framework approach, cost estimating, value engineering, contracting and project control processes are essential ingredients for project success.

 

(OWN-3168) Estimating the Optimal Size of the Project Management Team

Author(s)/Presenters(s): Aileen A. Jamieson

Time/Room: TUE 10:15-11:15/Bayside A

Abstract:

It has been well documented in the public domain that capex and schedule success rates on 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 twenty-five 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 warns that reducing headcount too much can negatively impact a project’s final cost and schedule performance.

 

(OWN-3185) Planning the Future: Estimating U.S. Nuclear Stockpile Infrastructure Costs

Author(s)/Presenters(s): Fana Gebeyehu-Houston; Charles Loelius; Cash Fitzpatrick; Dipali Amin; Julie Anderson; Charles Ballowe; Jeff Beck; Chad Daughters; Connor Jones; Al Levinson; Christopher Massey; Matt Proveaux

Time/Room: TUE 4:00-5:00/Bayside A

Abstract:

The Department of Energy’s National Nuclear Security Administration (NNSA) uses the cost estimating methodology in this paper to produce long-term budget projections for its construction portfolio. NNSA produces early-stage and defensible cost estimates across its eight laboratories, plants, and sites to ensure that adequate resources are available to support its modernization plans. A parametric cost estimating relationship (CER) developed from historic data across the nuclear security enterprise is used to produce cost estimates using gross square footage, facility hazard classification, and programmatic equipment as the primary parameters. The CER accounts for technical uncertainty in the range of project inputs and cost uncertainty via ranges of historic cost actuals. The CER is submitted to a Monte Carlo simulation to produce an “s-curve” distribution for each project. A schedule estimating relationship (SER), based on historic schedule durations with respect to total project costs, was also developed. The combination of the CER and SER enables the development of planning scenarios essential to federal planning and identifies long-term portfolio needs. NNSA annually updates and publicly releases these estimates as part of the updated 25-year programmatic line-item plan in the NNSA strategic planning document titled the Stockpile Stewardship and Management Plan (SSMP).

 

(OWN-3187) Los Angeles Metro Fast-Track Capital Program Management Best Practices

Author(s)/Presenters(s): Julie K. Owen, CCP PSP FAACE; Sean A. VonFeldt

Time/Room: MON 10:15-11:15/Oak Alley

Abstract:

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 the timely delivery of these transportation improvements, 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.

This paper will discuss 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)/Presenters(s): Christopher F. Michalak; Paul G. Williams

Time/Room: MON 4:00-5:00/Oak Alley

Abstract:

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 contract 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-3222) Progress Measurement for Owners

Author(s)/Presenters(s): Ferdinand R. Karbowski, Jr. PSP

Time/Room: SUN 2:15-3:15/Oak Alley

Abstract:

Progress measurement from an owner’s perspective is always a challenge. Many aspects to achieve a balance between the levels of detail a contractor provides versus the level of detail an owner must have to perform essential verification and validation of the work should be considered. 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. A sound mechanism can deliver 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 for Classifying Nuclear Tooling & Maintenance Project Estimates Using GAO’s Technical Readiness Assessment)

Author(s)/Presenters(s): Shoshanna Fraizinger, CCP

Time/Room: TUE 2:15-3:15/Bayside A

Abstract:

The recent trend of the Canadian nuclear industry is a greater reliance and incorporation of industry best practices for cost estimate preparation and development. Owners and operators are explicitly calling for internal and vendor estimates to be prepared and submitted in compliance to AACE 18R-97, Cost Estimate Classification System – As Applied in Engineering, Procurement, and Construction for the Process Industries. Recommended practice AACE 18R-97 is the most applicable estimate classification system document that can be utilized for this effort However, not all projects in the nuclear industry proceed from the scope defining documents and deliverables relied upon in 18R-97 for the maturity level of project definition.  For example, projects related to the design and production of custom tooling, supporting on-going maintenance and operations, in nuclear facilities, don’t comply (verbatim) with AACE 18R-97.

This paper presents a proposal, which seeks to correlate the technical assessment process using the nine technology readiness levels presented in the GAO technology readiness assessment guide in AACE 18R-97 estimate classification system. The aim of the proposal is to provide guidance to companies seeking to produce cost estimates for tooling projects in the nuclear industry, such that they can demonstrate estimate development and characterization in compliance with AACE total cost management expectations.

 

(OWN-3236) Optimizing Your Management Reserve

Author(s)/Presenters(s): J. Gustavo Vinueza C.

Time/Room: MON 2:15-3:15/Rhythms 3

Abstract:

Management reserve and contingency definitions 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, either the company could 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.  One ramification is analyzed as well, which considers an intermediate financing layer.

This work supports the reserve allocation process supported in a simulation model that attempts to replicate different scenarios from a fictitious program within a company.  An optimization will 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-3306) (Presentation Only) Survey of Project Controls in the Utility and Energy Industries

Author(s)/Presenters(s): Anthony M. Woodrich, CCP

Time/Room: WED 8:00-9:00/Bayside C

Abstract:

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.

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