smartplanningandexecution ahandbook

38 economicPLANT 3-2014

SMART PLANNING AND EXECUTION

A handbookfor project practitionersin EPC businesses

Excellence in project management is a key success factor in doing

business across all industries. Globally recognized project

management standards and guidelines, such as the Project

Management Body of Knowledge (PMBoK by PMI), ISO 21 500 or the

IPMA Competence Baseline have evolved during the last years to a

universality that they can be applied to any project, no matter what

size, no matter the nature of business. And exactly that universality

is the challenge we face in the EPC business in the large-scale plant

industry writes FRANK-PETER RITSCHE

Project handling is aquestion of profoundexpertise. Our pictureis provided by Inter-Cargo, an interna-tional transportationand logistics companyspecialized in out ofgauge cargo, heavylift cargo and projectcargo charter

600 PM Ritsche mit Anzeige fu?r PDF:200 20.11.2014 12:40 Uhr Seite 38

economicPLANT 3-2014 39

Acouple of good project managementguidelines have developed around the

globe that summarize and standardize suchbasis project management principles. Iconsider the Project Management Body ofKnowledge (“PMBoK”) of the US-based Proj-ect Management Institute (1) (PMI) the mostaccurate and internationally recognizedstandard in the world. The certificationscheme provided by PMI — the “ProjectManagement Professional” (PMP) — hasevolved to the leading certification pro-gram for project managers worldwide.In 2005 the PMI had registered100 000 certified PMPs, within a fewyears the number has rocketed to anamazing 600 000 in 2013 — figures thatexplain themselves.The PMI model (PMBoK, fifth edition,2013) breaks down the project lifecycleinto 47 processes organized in the fiveprocess groups of the project lifecycle:initiating, planning, executing, con-trolling, and closing. In addition theseprocesses can be assigned to ten“knowledge areas”: Integration, Scope,Time, Cost, Quality, Human Resour-ces, Communication, Risk, Procure-ment, and Stakeholder.The PMBoK knowledge areas can becorrelated 1:1 with the ISO 21500standard (Guidance on Project Mana-gement), a new standard by the In-ternational Standardization Organi-zation that was edited just in 2012.With this correlation the PMI model isclearly the dominating project man-agement model, and banned com-peting standards into the second line,such as the British Standard BS 6 079or the International Project Manage-ment Association (IPMA) with the IPMACompetence Baseline (ICB).The creation of ISO 21500 started in 2006,when the British Standardization Institute(BSI) submitted a proposal to ISO for thedevelopment of a Project ManagementStatement based on the BSI Project Man-agement Standard — BS 6079. FollowingISO’s standard procedures, once the pro-

posal was received, it was sent to the 157member national organizations that makeISO’s review board. In February 2007, theISO Technical Management Committee metto review the feedback from the membercountries and voted to create a ProjectsCommittee PC236 to develop a ProjectManagement Standard. The Chair position ofPC236 was given to BSI and the Secretariatgiven to the American National Standards In-stitute (ANSI). Membership of the PC236

was made up of 20 participating countriesand 3 observing countries plus IPMA withobserver status. PC236 had formalized threeworking groups:� WG1 — Terminology (using the PMBoKGuide Glossary as a basis)

� WG2 — Processes (using input fromPMBoK, BSI 6079, and IPMA)

� WG3 — Informative Guidance.All these standards and guidelines haveevolved during the last years to a universalitythat they can be applied to any project, nomatter what size, no matter the nature ofbusiness. And exactly that universality is thechallenge we face in the EPC business.

Large manufacturing plants:most complex projectsThe construction projects of large manufac-

turing plants are among the most com-plex projects. Construction companieswhich cover the engineering, pro-curement, construction and commis-sioning (EPC) of these plants are facingchallenges that significantly differ fromthe characteristics of projects in otherindustries. I have been working in EPCprojects since more than 20 years, inproject management and engineeringoffices, in manufacturing facilities andon construction sites, in projects fromsome hundred thousand Euros up toseveral billion Euros. I always wasmissing a guideline that translates thecommon project management stan-dards into the complex and specificworld of the EPC business, and I wasnot the only one. Many of my fellowcolleagues were struggling with theuniversality of the “big” projectmanagement guidelines. This is thereason why I finally started writing the“Project Management Handbook forEPC”. The first edition has just beenpublished in August 2014.(2)The know-how compiled in this bookhas been gained during more than 20years of professional life. The pro-cesses, methods and tools are orig-inating from the “real life” of project

management in companies that I have beenworking for; however none of them are pro-prietary to one of these companies. I had theopportunity to exchange my own experi-ences with colleagues across the world,from the same or from different industries,during professional audits, during bench-marking sessions, during training courses,

PROJECT MANAGEMENT

Lifecycle ofprojectmanagementaccordingto PMI

Sour

ce:P

MI

Close

Initiate

Plan

Control

Execute

Pict

ure:

Valn

ion

Frank-PeterRitsche


40 economicPLANT 3-2014

during international conferences. I haveoverseen hundreds of contracts with variousclients and with various contractors that pro-vided insight in their project managementand EPC processes. This insight refined thematerial that I collected during all theseyears. It is not proprietary know-how of sin-gle companies, but the collectively recog-nized common work practices across theEPC business that I will share with the EPCcommunity with this book.But what makes project management in theEPC business so very special? To answer thisquestion let’s have a closer look at theheadlines of the “PM Handbook for EPC”.

Module 1: The Project PlanThe book gives clear instruction about thecontent of a project plan for a (large) EPCproject. Each following PM module will comeback to the project plan and will suggest cor-responding procedures to be issued in aproject manual. And in large projects thereare several hierarchies of procedures: in-ternal procedures, external procedures, pro-cedures with the client, with main con-tractors or consortium partners, with sub-contractors and suppliers.

Module 2: The Project OrganizationThere are internal project organizations de-picting the operational and support func-tions in a project team; there are externalproject organizations depicting the rela-tionship between client, authorities, archi-tect engineer, partially consortium leaderand consortium partners, some main con-tractors. There are job descriptions of themajor project management functions. Whatis the purpose of a steering committee? Thespecial case of a project joint venture orconsortium is discussed — what is the role ofa consortium leader?

Module 3: Project StructuresThe work-breakdown structure (WBS) de-fines work-packages and their hierarchicalstructure. The responsibility-assignment-matrix correlates the WBS with theorganization structure. There’s a plant break-down structure (a so-called plant coding sys-tem), a material breakdown structure and soon. And all must be defined from the start!Later changes are costly, if not impossible.

Module 4: Communication ManagementCommunication is a wide area to look at.Meetings, correspondence, action tracking,crisis management. How to consider lessonslearned? Something just for the project startand the project closure, or isn’t it better tomanage lessons learned in a continuous pro-cess? These topics are discussed in thischapter.

Module 5: Contract ManagementI wonder how short all these guidelines andstandards are with regard to contract man-agement. PMI covers contract managementas part of procurement, but from the per-spective of the project director of an EPCcontractor the management of the clientcontract is probably the area that deservesmost of the attention. It starts with con-tracting: the bid phase, which is by the waythe phase where most of the projectplanning is done. The project director is theintegration manager of technical, commer-cial and legal aspects in the contract — ajack-of-all-trades! Dealing with assumptions,clarifications, exclusions, preventive and ac-tive claim management, the management ofscope or cost or schedule changes — thedaily challenges in EPC projects.

Module 6: Time and ResourcesManagementScheduling has a lot to deal with the tool weuse, most often Primavera. The schedulehierarchy from the overall schedule down tothe detailed schedules, the schedules wegenerate using filters and sorting functions,the baseline schedule, reference schedulesfrom the previous reporting periods — all thatshall be produced from one consistentdatabase.

Module 7: Cost ManagementCost planning and cost control is well de-fined in the PMI space, but I did not find anysingle word about cash-flow? Isn’t it equallyimportant to plan and control the cash-in, aswe plan and control the cash-out? Financing,taxes, bonds and guarantees, insurances —more about money in this module.

Module 8: Risk ManagementRisk management is well standardized. Butdo you really know your current risk ex-posure in terms of money, and does it fit tothe risk reserves you have at hand? And howdoes your project risk management corre-spond with your enterprise risk manage-ment? We all hope that statistics will work —this is the business model of insurances —,but how to deal with a very big risk with avery small probability?

Module 9: QHSE ManagementPMI and ISO 21500 talk about quality — inEPC we talk about “QHSE”. Quality based onISO 9001 or ASME or equivalent, health andsafety based on OSHAS 18001 or SCC, envi-ronmental management based on ISO14 001 – a highly regulated field in our in-dustry.

Module 10: Progress ReportingProgress reporting as part of project control

happens on any level of the projectorganization, but where the project directorneeds KPIs and S-Curves to keep control thework-package manager has to dig throughdetailed reports and data.

Module 11: Document ManagementI have seen no EPC project manual withoutan exhaustive document management pro-cedure. The process for the review and ap-proval of documents with client andeventually involved authorities could kill aproject, if it does not work. And again there’sa lot of IT involved in this: codification, clas-sification, workflows, revision control, ren-dition management, just to mention a few.

PM Module 12: Information ManagementProject specific IT architecture? I work in amodern state-of-the-art company. We havean IT department with an IT policy and wehave defined tools and software within ourorganization that has been configured to fitour business processes. We will not inventnew project-specific IT solutions just be-cause we win another big contract! True?Wrong! In a global project involving severalglobal organizations exchanging data acrosscompanies’ boundaries it is mandatory todefine the way how your IT system willinteract with our project partners’ systems.And this always is different from project toproject.

EngineeringThere are engineering processes and pro-cedures in EPC projects that are commonacross Energy, Oil & Gas or the Chemical in-dustries. There’s civil work, there’s me-chanical systems engineering, plant layout,electrical, instrumentation, and controlengineering. There’s a technical configu-ration management with design reviews anddesign freezes, design configurationbaselines and change management, there’sFEED (front-end engineering and design),basic design, detailed design. The “PMHandbook for EPC” is not an engineeringhandbook, but it describes the role of theproject manager in the engineering process.

ProcurementProcurement of material for an EPC projecthas its own procedures: The material take-off that in EPC generally is generated fromengineering tools, the solicitation into pur-chase orders and delivery lots, the selectionof suppliers, manufacturing, transportation,eventually export, finally the reception onsite and warehousing.

Construction and CommissioningThe site manager with his site organizationsomewhere at the remote end of the world

SMART PLANNING & EXECUTION


economicPLANT 3-2014 41

will have his own procedures. At the end ofthe day he is the one called to courtwhenever national laws applicable in thecountry of construction are violated. Not on-ly the construction sequences must bescheduled, also site infrastructure andlogistics, temporary facilities, scaffolding,horizontal and vertical transports must beplanned and coordinated. A work ordersystem, a lock-out procedure, field engineer-ing, inspection and supervision, finally me-chanical completion management and thetesting and commissioning of the equipmentand the plant systems — there are many veryspecial fields in EPC project managementspace.

Closing remarksI have been learning project managementfrom the “rough” side. Many years I havebeen on construction sites climbing acrosspipes and structures before entering thecosy chairs in engineering and projectmanagement offices. I celebrated my 50thbirthday this year and suddenly found outthat they call me a “senior” manager. I amrepresenting the generation that grew upwith a Commodore computer — does any ofthe younger kids know what I mean? When Istarted my first projects we were shifting

tons of paper. We built mega plants withoutany computers — surprisingly in time and incost schedule! My son is communicatingacross continents with Skype, Facebook, orWhatsApp. I am still the old-fashioned one topick-up the phone or walk and talk directlyface-to-face, instead of sending SMS or e-mails.But: The progress of IT has revolutionizedthe way we manage projects, especiallylarge EPC projects. The tools we use inengineering, in commercial management orproject management are no longer stand-alone-systems, special applications con-figured for a special business process. In-tegration is key, and the more the IT vendorscome up with integrated solutions on themarket the higher the efficiency of interfacemanagement in EPC projects.The book that I have written is taking strongreference to the recognized standards ofPMI and ISO. These standards have amaturity that make them extremely valuablefor anybody working in this business. We usethe same terminology, we have a commonsense of understanding business processes,whether I talk with my partner in Europe, theUS, the Middle East, India or China. Butsometimes these standards appear “old-fashioned” and do not really recognize the

work practices in a modern state-of-the-artIT-supported real-life project managementorganization. I would wish that my book willclose this gap. And I invite every reader tofeed back his/her experiences, ideas, sug-gestions, remarks in order to make this bookeven better for the future.

PROJECT MANAGEMENT

REFERENCES

(1) www.pmi.org(2) Ritsche, F.-P.,“Project ManagementHandbook for EPC”First Edition – August 2014,ISBN 978-3-00-046425-6www.project-team.org

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