keynote address by sgc - wordpress.com

Engineer/Owner and Contractor

A Perfect Union ?- and Some Other Insights

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by Harry Sambells

Sambells Global Consulting

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Agenda

Keynote address to Western Canadian Construction Contractor

1. The Engineers Weakest Links – some insight

2. A Perfect Union of Engineer and Contractor ! -$300 million and < 0.3% change! – WHY?

3. Some Thoughts Going Forward

The Engineers Weakest Links

…and some insights

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What Do Engineers Fail At ?

S You will be surprised !

S The list is not much different than Construction

S Change management is as much as failure in the Engineering execution as the Construction execution

S Are the Engineer’s failures, a Construction Contractors opportunity ? à Possibly

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Top Ten Failure List

1. Poor FEED Package – clearly not following gated process –incomplete information for subsequent phases

2. Inability of Owner not to ‘Tinker’ once the scope is ‘frozen’

3. Poor Communication – in all areas by all parties

4. Poor or unavailable Vendor data – expedite, expedite and when you think you can’t do it anymore call again or visit the shop

5. Ineffective Materials / Quantity Management

6. Poorly managed Risk Program – no effective follow through

7. Poor Planning – not scheduling

8. Somebody else ‘will catch it’ or ‘do it’ and ‘fix it’

9. Competition for resources – client, vendor, engineer, constructor

10. Not giving Engineering enough time to do it right !5

Engineers Are Not Perfect

S They can’t be – the sheer number of deliverables means there will be human error

S Few are catastrophic – we hope!

S They cost money to fix

S They take time to fix

S They impact the existing work and sequence

S Quality programs are great but errors still occur

S So….

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Why Do Errors Occur?

S Schedules are rushed – never enough time to do engineering right

S Poor internal quality checking – it happens

S Numerous interfaces – not properly defined

S Impact from vendors – drawings incomplete, old revisions, late changes by vendor

S Impact from suppliers – valve quality, pipe quality

S Specification changes – lateness of revisions

S Late piping stress changes – impacts pipe supports etc.

S Scope change by owner – rushed implementation7

Obstacles in Recognizing Change

S Poor Baseline Information – schedule, cost, productivity

S Poor Change mechanism by Contractor – trend alerts, trend notice à contract change order

S Poor Backup – document the reasons well – know the impacts to the work at hand and the subsequent sequence and interfaces – be prepared to defend

S Poor Tracking of Productivity – it must be current and defendable

S Poor Planning – schedules are ‘pretty pictures’ but have you planned the work

Manage the work like a LUMP SUM – the Owner will appreciate it

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Opportunities for Contactor

S Quantities – growth will occur throughout the design phase – if your bid is based on preliminary data then monitor the changes it’s a reason to raise a CO

S Engineers have trouble obtaining final data from the vendors – this can impact piping stress hence the piping runs, pipe supports etc. – monitor closely it’s a reason to raise a CO

S Vendors cause the engineer problems – some of these changes are discovered late - so focus on the package and ensure the scope is as you were given – if not it’s a reason to raise a CO

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Opportunities for Contactor

S Piping is the most troublesome discipline – your focus should be on changes emanating from that discipline more than any other – the changes impact structural supports, hangars etc., cable trays, instrument boxes, other pipe -monitor the changes it’s a reason to raise a CO

S Change is not just the item in front of you – it encompasses the impact to all work both completed and uncompleted –be thorough on the impact – don’t limit your review – sequence of work is another impact – they are all reasons to raise a CO

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Other Thoughts

S If you have an RFI then ensure the issues are closed quickly as per the contract by the owner/engineer, keep on top of them – it can be a reason for a CO

S Don’t delay in raising a change – early is better the owner/engineer should be more receptive – take action early

S Document the change and communicate by letter – minutes of meetings are a poor tool to convey instructions – if it goes to court have the details to support your position - send letters to close the issues

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A Perfect Union of Owner and Contractor !

Is that Possible? $300 million and < 0.3% change!

WHY?

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Project Description

S Project – Husky Tucker Lake SAGD Central Plant

S Client – Husky Oil Operations Limited

S EPC Contractor – SNC-Lavalin Inc. and PCL Industrial Management Inc. – Joint Venture

S Schedule – Start EPC, July 2004 – MC, July 2006

S Cost - ~$300 million for Central Plant only

S Contract Format – LS EPC

S Risk – carried by EPC Contractor – quantities, material and equipment cost, labour productivity and availability, escalation

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The Setting

S The owner desired cost and schedule certainty

S The owner wishes to avoid RISK

S Don’t confuse EPC LS with reimbursable, unit price, unit rates or a target price - they are all different !

S Typically EPC LS is not common on Alberta industrial projects but is internationally

S Construction work is typically reimbursable, unit price, some LS (more in commercial)

S The following slides apply whether EPC LS or LS Construction or Reimbursable Construction

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Some Questions?

S Is the scope frozen ?

S Can the Owner/Engineer stop ‘tinkering’ ?

S Does the Owner/Engineer and Contractor have the right culture ?

S Who finally has the RISK ? – who can manage it best and who has incentive to control it ?

S Are the Market Conditions right ?

S Does it fit your Corporate Strategy ?

S Do you know the Owner ?

S Is there a lot of competition ?

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More Questions

S Commercial and Contractual Issues

S Do you have the “A” Team ?

S Have you done this before ?

S How ‘good’ is the ‘bid’ package ?

S What is the effort / cost to bid ?

S What is the schedule ?

S Do you need a partner ?

S How competitive is the market in construction ?

S What is the RISK ? Is it Manageable ?

S Can you win the bid ? – Do you want to ?

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Husky Tucker Lake Site

February 2005

Project Site

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What are the Factors for Success ?S Above all else be SAFES The TeamS No Change CultureS Effective Governance / AccountabilityS Well-Defined ScopeS Execution PlanS Provide the ToolsS Materials ManagementS Know and Manage the RISKS

Factors for Success in LS Execution

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The TeamS Includes EPC Contractor and OwnerS Similar mind setsS Team familiar with LS ExecutionS The attitude of “tomorrow is another day” à doesn’t

cut itS Must be business focusedS Attitude – how would you spend your own money !?!

Factors for Success in LS Execution (Cont’d)

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No Change Culture S The Owner was committed to no changeS If its safe, operable and maintainable – no changeS As Contractor we pushed back – no changeS Open communication and frank discussionS Some changes occurred after MC but still minorS Change Management process was followed rigorously

– trend alert (Y/N), trend notice (Y/N) à Contract CO


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Effective Governance / AccountabilityS Well defined in both EPC and ClientS Clear communicationS Clear interfacesS Approval Matrix S Clear Standards and SpecificationsS Clear list of Deliverables and TasksS Clear MC Checklist


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Well Defined ScopeS If it’s not defined get it defined ! - or your doomed

to failure !S Control change and eliminate if possible S Use VIP’s (Value Engineering and other methods) S Close the open items quicklyS Keep the efforts focused

Usually

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S Execution PlanS Know the scope and schedule – plan, plan and plan

and then follow the plan !S Place the orders – committing the mechanical

orders – receiving the vendor data - criticalS You ‘live or die’ with piping – modeling, ISOs and

spool production and fabricationS Keep a schedule focus at all timesS Well defined Construction Work Packages (CWP’s)S Respond to Request for Information (RFI’s)S Support the Field and Support the Field

Usually

A Concern

Usually


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Provide the ToolsS 3D CADD SystemS Project Management System (PM+)S Know your costs, know where your quantities and

costs are going (trending and forecasting), and control your costs – cost reporting does you no good !

S Track the deliverablesS 80/100 Rule is sound BUT be able to manage

change to get civil and undergrounds completeBe Flexible


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S Materials ManagementS Potential cost exposureS Track material quantities rigorouslyS Can impact scheduleS Greatest impact is the potential increase in field hoursS Need clear division between home-office and site

purchasesS Know your vendors, inspect and expedite, and then

expedite some more S Know the commodity marketS Fab shops (piping and steel) abilities and priorities

A Concern A Concern

Absolutely


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R I S K Evaluation and ManagementS It’s the unknown – unknownsS It’s not contingency – contingency will be usedS Analyze Risks as the FEED is preparedS Involve the TeamS Do some benchmarkingS Follow a process S Constantly manage – don’t lose focusS Don’t compromise – its your money !


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Project Results

S Safety – 0 LTI’s, 6 MA’s, 0.94 TRIF

S Completed on budget with less than $1 million in changes (~0.25%) – client did not “Tinker”

S Slightly ahead of schedule ~2 weeks

S Completed in 24 months from start of engineering to Mechanical Completion

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Project Description – 5 Months Later


June 2005

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July 2007

Project Description – Finished Project

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Was Execution Success Achieved ?

S Right Client – Husky understood LS and requested few changes (no tinkering) and were part of the Team

S Right Team – Engineering and construction teams worked exceptionally well together

S Right Time – just prior to major increase in materials and equipment – some vendor issues

S Right Place – Cold Lake region had most trades available –some challenges

S Right Contractual Structure

S SLI / PCL Managed the Risks

S SLI / PCL Followed the Factors for Success

YES !

Going Forward

S Communication – verbal, written – written is better in court

S Know your scope, quantities and productivity – stay on top

S It’s your job to monitor change and get resolution

S Many Engineers are not that good at change management in construction

S Scope is many times fluid – freeze it and then CO it

S Know what your contract says – a ‘Change’ is clearly defined

S Change will happen – take the time to manage it – your success is at stake – maybe even your bonus!

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Engineer/Owner and Contractor

A Perfect Union ?- and Some Other Insights

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by Harry Sambells

Sambells Global Consulting

keynote address by sgc - wordpress.com

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