world-class project performance with value improving / best practices
DESCRIPTION
World-Class Project Performance with Value Improving / Best Practices. Dr. Nick J. Lavingia, P.E. Chevron Project Management Consultant APEGGA Annual Conference, Calgary April 26-27, 2007. Dr. Nick J. Lavingia, P.E. Project Management Consultant Chevron. - PowerPoint PPT PresentationTRANSCRIPT
Nick Lavingia 1
World-Class Project Performance with Value Improving / Best Practices
Dr. Nick J. Lavingia, P.E.
Chevron
Project Management Consultant
APEGGA Annual Conference, Calgary
April 26-27, 2007
Nick Lavingia 2
Dr. Nick J. Lavingia, P.E.Project Management ConsultantChevron
Nick has over 30 years of Global Project Engineering, Management, Consulting and Training experience in the Energy industry. As a Project Management Consultant at Chevron, he provides Consultation and Training to Project Professionals worldwide.
Nick has a B.S. and M.S. in Chemical & Petroleum-Refining Engineering and a Ph.D. in Engineering Economics & Management from the Colorado School of Mines. He is a registered Professional Chemical Engineer in the State of California.
Nick is a member of Project Management subcommittee for Athabasca Oil Sands expansion project. He has published and presented many papers at technical organizations and is a recipient of industry award from Pathfinder for outstanding Contribution to the advancement of Project Management Technology and Chevron Chairman’s award for implementing Value Engineering throughout the corporation.
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Agenda
• What are Value Improving / Best Practices?• What is the Impact of these Practices on the
Bottom Line?• When to Conduct these Practices?• What is Selection Criteria for Applicable
Practices?• Who should Participate in the Workshops?• What Information is Needed for the Workshops?
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• Pre-Funding Assessment
• Value Improving Practices by IPA
• Peer Review
(Share)
• Decision & Risk Analysis
• Project Execution Planning
• Lessons Learned
(Seek)
Legend: AFE = Appropriation for Expenditure D = Decision Point PFD = Process Flow Diagram IPA = Independent Project Analysis, Inc. P&ID = Piping & Instrumentation Diagram
P&ID$
EST AFEPFD D D D D D$
EST
Phase 1IDENTIFY & Assess
Opportunities
Phase 2SELECT fromAlternatives
Phase 3 DEVELOP Preferred Alternative
Phase 4EXECUTE
(Detail EPC)
Phase 5OPERATE &
Evaluate
Value Improving / Best Practices
• Post Project Assessment
• Business Evaluation
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Project Execution Planning--Part A(The Strategic Project Planner by Richard Westney)
Defining the business goals that will determine project success
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Project Execution Planning--Part B(The Strategic Project Planner by Richard Westney)
Defining major phases, milestones, risks, organization, staffing and best practices to be used
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Project Execution Planning--Part C(The Strategic Project Planner by Richard Westney)
How time, cost, quality and resources will be managed
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What are Value Improving Practices (VIPs)?According to IPA: “VIPs are out-of-the-ordinary practices used to improve cost, schedule and reliability of capital projects”.• Used primarily during Front-End Loading• Formal, documented practices involving a repeatable work process with measurable results• Almost always facilitated by specialists from outside the project teamThere are dozens of special practices used in the industry that are possible VIPs such as team building, peer reviews, etc. Only practices with a demonstrated, statistically reliable connection between use and better outcomes are deemed VIPs.VIPs are more than:• “Just good engineering”• A special look at some aspect of the project• Cost reduction exercises• Audits• Project readiness reviews
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Impact of FEL & VIPs (from IPA)
1.0
1.1
1.2
0.9
Rel
ativ
e C
apit
al C
ost
Best Practical Good Fair Poor
Industry Average Cost = 1.0
FEL Improvement plus VIPs
FEL Improvement Only
FEL Rating
RELATIVE CAPITAL COST AS A FUNCTION OF FEL
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Value Improving Practices by IPA*
• Classes of Plant Quality
• Technology Selection
• Process Simplification • Design to Capacity - System Levels
• Constructability • Customized Standards • Waste Minimization • Energy Optimization
• Process Reliability Modeling
• 3-D CAD
Phase 1IDENTIFY & Assess
Opportunities
Phase 2SELECT fromAlternatives
Phase 3DEVELOP Preferred Alternative
Phase 4EXECUTE
(Detail EPC)
Phase 5 OPERATE & Evaluate
• Value Engineering
- Equipment Sizing
• Predictive Maintenance
Legend: AFE = Appropriation For Expenditure (Full Funding) EPC = Engineer, Procure & ConstructCAD = Computer Aided Design PFD = Process Flow Diagram D = Decision Point P&ID = Piping & Instrumentation Diagram
P&ID$
EST AFEPFD D D D D D$
EST
* IPA’s Value Improving Practices are Statistically Correlated with added value.
AFE
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Classes of Plant Quality
“A structured team review focused on validating project objectives and establishing the corresponding purpose design approach that best correlates with business needs. Also establishes the necessary facility to meet business goals. Characteristics such as capacity, life, product quality, flexibility, expandability, reliability, etc. are agreed to with decision maker”.Selection criteria:• Required on ALL projects to align project team with business objectivesDocuments required:• Spreadsheet with information on all 4 categoriesWho should attend:• Project Team and Project SponsorWhen Used:• Phase 2
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Classes of Plant Quality--Categories
RANGE from CATEGORY I TO CATEGORY IV
CAPACITY
PLANT LIFE
PRODUCT QUALITY
FLEXIBILITY
MARGINAL INVESTMENT CRITERIA
EXPANDABILITY
RELIABILITY
CONTROLS
MAINTENANCE
Designed for specific capacity
2-5 years
Meets specifications at one setof conditions
Little with limited turndown
Not considered even if highpayout
Difficult, tight plot plan
Sparing for orderly shutdownonly, less than 80% operatingfactor.
Simple, labor intensive
Little maintenance facilities,high maintenance costs
Over capacity expected
20 + years
Exceeds specifications
A lot with high turndown
Could be less than project payout
Easier, open plot plan
Sparing to keep plant up, 95% +operating factor
Complex, highly automated
Good accessibility, no majormaintenance costs contemplated
CHARACTERISTICS
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Technology Selection
“A formal systematic process by which a company searches for technology outside of the company (or, in some instances, in other divisions within the company) that may be superior to what is currently employed”.Selection criteria—Use this VIP if:• Alternate technologies are available• There are significant benefits in new technology• Future position in market can be enhanced• Risks and rewards for new technology are understood• There are various types of equipment to perform process functionDocuments required:• PFDs and cost estimateWho should attend:• Project Team and Technical ExpertsWhen Used:• Phase 2
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Technology Selection--Ranking CriteriaTECHNOLOGY SELECTION
POTENTIAL RANKING CRITERIA (Determined by Project Objectives)
FINANCIAL Rate of Return Net Present Value Life Cycle Cost Capital Constraints Low Cost Producer
WEIGHTING FACTOR
TECHINOLOGY Degree of Commercialization Process Risk License Fees Cost of Additional Development Time to Implement Yield Advantage
WEIGHTING FACTOR
ENVIRONMENTAL/SAFETY Emissions Incident Rate Potential Future Liability
LICENSOR Experience with the Technology Ability to do Total Process
Scope Experience with Retrofits
OPERABILITY Feedstock/Rate Variability Product Specification Ease of Handling Upsets
OTHER
MECHANICAL Reliability East of Maintenance Utility Requirements Plot Space Constraints Ease of Retrofit
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Process Simplification
“A disciplined analytical method for reducing investment costs--and often operating costs as well—by combining or eliminating one or more unnecessary process steps. This VIP uses the traditional Value Engineering methodology (Functional Analysis) to focus on process steps rather than individual equipment”.Selection criteria—Use this VIP if:• Project involves large number of process steps• There are alternative options for performing process functionDocuments required:• PFDs and cost estimateWho should attend:• Project Team and Process RepresentativesWhen Used:• Phase 2
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Value Engineering
“A disciplined method used during design, often involving the use of an internal or external V.E. consultant, aimed at eliminating or modifying items that do not contribute to meeting business needs. V.E. is a creative and organized method for optimizing the cost and performance of a facility. It is a function-oriented, systematic approach to eliminate and prevent unnecessary costs. The purpose of a V.E. study is to improve decision making and obtain lowest life-cycle cost without reducing quality.”.Selection criteria—Use this VIP if:• Capital investment is a key driverDocuments required:• PFDs, Plot Plan, P&IDs and cost estimateWho should attend:• Project Team, Experts from outside the Project Team and V.E. FacilitatorWhen Used:• Phase 3
Nick Lavingia 1796-06-10
Function of a Pencil
CO
MP
AN
Y
Component Function(s) Cost ($)
Eraser
Band
Wood
Paint
Lead
Alternatives--Mechanical Pencil, Marker, Chalk, etc.B = Basic FunctionS = Support Function
Logo
0.05
0.03
0.09
0.03
0.02
0.18
Pencil
B S
0.40
xx
x
x
xx
Make Marks
Remove Marks
Secure Eraser
Improve Appearance
Support Lead
Transmit Force
Display Info
Protect Wood
Improve Appearance
Advertise Company
Make Marks
xx
x
x
x
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FAST Diagram -- Definition
DESIGN
CONSTRAINTS
HOW
SCOPE LIMIT
SAMETIME
PRIORLATER SCOPE LIMIT
INPUT
LOWER FUNCTION
CRITICAL PATH
WHY
• Identify functions, not equipment.• Breaks large complex problem down into manageable pieces to facilitate evaluation.• Good basis for brainstorming.• Look for non-value adding steps; Functions that you Do and then Undo:
• Cool off, then heat.• Solidify, then melt.• Let down, then repressure.• Dissolve, then dry.• Store, then retrieve.
• Use in conjunction with cost information.
OUTPUT
HIGHER FUNCTION
CONCURRENTOR
SUPPORTINGFUNCTION
BASIC FUNCTION
SEQUENTIAL FUNCTION
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FAST Diagram--Big Oil Example
R EM O VEM ER C APTA N S
STA BALIZEC R U D E
SEPAR AT ELIQ U ID /V APO R
C O M PR ESSVAPO R
D ESALTC R U D E
TR EA TPR O D U C ED
W A TER
SW EETENG AS
D R YG AS
FR AC T IO N AT ELIQ U ID S
TR EA TAC ID G AS
M EETC R U D E P IPELIN ESPEC IF IC AT IO N S
C O LLEC TW E LL
PR O D U C TIO N
F.A.S.T. D IAGRAMBIG O IL PROJECT
SC O PELIN E
SC O PELIN E
DESIGN CRITERIA
K.I.S .S .
PR O JEC T F AC IL ITYO BJEC TIVE S
9 IT EM S
R EU SE BO U G H TEQ U IPM EN T
M EET N EWPIP ELIN E SC H ED U LE
6%
13%
19%
38%C LA U S - 22%
S C O T - 15%S U LF U R H A N D LIN G - 1%
W hyH ow
4%
20%
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FAST Diagram--Offplot Facilities Example
LOADPRODUCT
TESTPRODUCT
TRANSFERPRODUCT
OPERATEPIPELINES
BURNVAPOR
OPERATEPUMPS
SHIPPRODUCT
PRODUCEPRODUCT
F.A.S.T. DIAGRAMOFFPLOT FACILITIES
SCOPELINE
SCOPELINE
WhyHow
OPERATELOADING
ARMS
BURNVAPOR
STOREOFFSITE
BURNVAPOR
METERPRODUCT
TRANSFERPRODUCT
OPERATEPIPELINES
OPERATEPUMPS
RECYCLEOFFTESTPRODUCT
STOREOFFPLOT
TRANSFERPRODUCT
OPERATEPIPELINES
OPERATEPUMPS
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FAST Diagram—Office Building
HOW? WHY?
F.A.S. T. = Functional Analysis System Technique
Provide Heat
Distibute Air
Transport Air
CoolAir
Induce Outside Air
Control Temp
TenantsWork
Return AirPump
Chilled Air
Filter AirProvide Cooling
MixAir
HVACNeeded
Exhaust Air
$130K
$40K
$85K$2,600K
$510K$2,000K$1,600K
$1,000K
$70K
$130K
$35K$1,600K
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Value Engineering Documentation
No. FAST
Block
Idea Advantages Disadvantages Potential
(Cost) or Savings
Action
Item
Who When
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Design to Capacity
“The heart of this VIP is choosing how much allowance should be added to each major piece of equipment or system to meet business requirements. This practice is to set the lowest practical over-design factors to minimize excess capacity. Different equipment types or parts of the plant may be built to different levels of conservatism”.Selection criteria—Use this VIP if:• There is complex process with a number of process steps• Equipment costs represent a major portion of total project cost• Future expandability is critical• Significant pre-investment options exist• Significant cost increase of major equipment at specific capacity pointsDocuments required:• PFDs, equipment drawings and cost estimateWho should attend:• Project Team, Process Representatives and Equipment ExpertsWhen Used: • Phases 2 and 3
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Design-to-Capacity - Level Objectives
EQUIPMENT DESIGN-TO-CAPACITY LEVELS
EQUIPMENT Level 1 Level 2 Level 3 TYPICAL PAST PRACTICE
COLUMNS 1.0 1.10 1.25 1.25HEAT EXCHANGERS 1.0 1.10 1.25 1.25REACTORS 1.0 1.10 NOTE 1 1.0API FURNACES 1.0 NOTE 2 NOTE 2 1.0LEVEL CONTROLLED
PUMPS (NOTE 3)1.0 1.10 1.25 1.0
FLOW CONTROLLEDPUMPS (NOTE 3)
1.0 1.10 1.25 1.10
PIPING 1.0 N/A - NOTE 4 N/A - NOTE 4 1.0 - NOTE 5
RECYCLE CENTRIF.
COMPRESSOR1.0 1.10 NOTE 6 1.05
RECIPROCATING COMPRESSOR 1.0 N/A - NOTE 7 N/A - NOTE 7 1.0
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Design to Capacity--Example
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Design to Capacity Documentation
System / Equipment
Design
Basis
Function List Variables and their Causes
Design Allowance
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Constructability
“Analysis of the design, usually performed by experienced construction manager, to reduce cost or schedule and improve safety in the construction phase”.Selection criteria—Required on ALL projects:• Construction safety is important• Congested plant layout• Require special lifting arrangements• Complex plant for construction or constructed during a plant turnaroundDocuments required:• Plot plans, piping layouts, equipment drawings and craft discipline drawingsWho should attend:• Project Team, Construction Specialist and Heavy Lift ContractorsWhen Used:• Phases 2, 3 and 4
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Customized Standards
“Engineering standards and specifications can affect manufacturing efficiency, product quality, operating costs and employee safety. Sometimes the cost of a facility is increased by the application of codes, standards and specifications that exceed the facility’s needs”.Selection criteria—Use this VIP if the project:• Life cycle cost is the key driver• Owners standards and specs are not mandatory• New specs and standards applyDocuments required:• Local and industry specs and standards and cost estimateWho should attend:• Project Team, Specs and Standards ExpertsWhen Used:• Phase 2
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Waste Minimization
“A stream-by-stream analysis of how waste is generated by a process and how those waste streams can be eliminated, reduced, recycled, turned into saleable by-products or treated”.Selection criteria—Use this VIP if the project:• Is an environmentally driven project• Generates significant waste• Located in environmentally sensitive area Documents required:• Heat & Material Balances and PFDs Who should attend:• Project Team, Licensors and Technical SpecialistsWhen Used:• Phases 2
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Energy Optimization
“A simulation methodology for optimizing the life cycle costs by examining power and heating requirements for a particular process. The objective is to maximize total return based on selecting the most economical methods of heat and power recovery”.Selection criteria—Use this VIP if the project:• Is a significant energy consumer• Alternate designs exist that can reduce energy consumptionDocuments required:• Heat & Material Balances and PFDs Who should attend:• Project Team and Pinch Analysis ExpertsWhen Used:• Phases 2
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Process Reliability Modeling
“Reliability simulation uses sophisticated computer simulation modeling capabilities to simulate the mechanical reliability of a process facility. Reliability modeling is a quantitative analysis of annual production and plant availability aimed at improving overall production capability. The practice is a method for evaluating the affect of different design configurations on plant availability and can help decide what equipment to spare and how to minimize downtime”.Selection criteria—Use this VIP if the project:• Reliability and availability are key project drivers Documents required:• PFDs, Plot Plans, P&IDs and Equipment Failure and Repair DataWho should attend:• Project Team, Reliability Group and Simulation Modeling ExpertWhen Used:• Phases 2 and 3
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Reliability Modeling Vs. Reliability Centered Maintenance
Reliability Modeling
• Reviews impact on total facility
• Highlights areas of opportunity
• Allows unlimited “What-If” cases
• Model can easily be updated
• Highlights impact on revenue stream
• Determines overall plant or facility operating factor
Reliability Centered Maintenance
• Reviews one piece of equipment
• Identifies how to improve operating factor
• Reviews how to decrease maintenance expense
• Develop contingency plans in the event of a failure
• Determine how to mitigate failures
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Reliability Modeling--Data Needed
Operating Rate(Units/Hour)
Scheduled Outages--Frequency (#/Year)
Scheduled Outages--Duration (Hours)
Equipment Description (Model #)
Equipment Failure Rate (#/Year)
Equipment Repair Time (Hours)
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Reliability Modeling--Benefits
• Quantifies Operating Factor
• Provides a Tool for “What if” Cases
• Provides data to justify Capital Expenditures
• Identifies areas for Reliability Centered Maintenance (RCM)
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3-D CAD
“Extensive use of 3D Computer Aided Design (CAD) during FEL and detailed engineering. The objective is to model the project in the computer to reduce the frequency of dimensional errors and spatial conflicts that cause design changes during construction. The use of 3D CAD also improves visualization for operations input and training”.Selection criteria—Use this VIP if the project:• Is a greenfield project or stand alone• Existing facility drawings are available in 3D CADDocuments required:• PFDs, Plot Plans, P&IDs, Detailed Equipment Arrangements and Equipment DrawingsWho should attend:• Process Licensors, Technology Specialists and ContractorsWhen Used:• Phases 2, 3 and 4
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Predictive Maintenance
“An approach to maintaining facilities whereby equipment is monitored and repairs effected as indicated before failure. Predictive maintenance makes use of advances in sensor and instrumentation technology to monitor characteristics such as heat, lubrication, vibration, cracking, noise, and presence of corrosion products”.Selection criteria—Use this VIP if the project:• Involves large rotating equipment or machinery• Reliability and availability are key project drivers Documents required:• PFDs, Plot Plans, P&IDs and Equipment DrawingsWho should attend:• Project Team and Predictive/Preventive Reliability GroupWhen Used:• Phase 3
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Summary
Structured Project Development & ExecutionProcess and Application of Applicable VIPs at the Right Time with the RightParticipants can help achieve World-ClassProject Performance:• Better• Cheaper• Faster• SaferPROJECTS