A Project Approach To Optimize Time and Cost - Petroleumclub.ro

Emerson’s<strong>Project</strong> Execution Methodologyfor the Refining IndustryA <strong>Project</strong> <strong>Approach</strong> <strong>To</strong> <strong>Optimize</strong> <strong>Time</strong> <strong>and</strong> <strong>Cost</strong>:The Main Automation Contractor Model

Agenda1. The case for the Main Automation Contractor model2. The MAC role in the project lifecycle3. MAC Contracting options4. MAC model conclusionsSlide 2

Agenda1. The case for the Main AutomationContractor – MAC – modelSlide 3

Traditional Process Automation <strong>Project</strong>?Mostly LSTK Bidding MAC• Typically only 3 to 5% of a capital expenditure is process automation• It is usually bid late in the project after other infrastructure elements• It is bid piecemeal: Instruments, Valves, DCS, SIS, APC, PI, etc.Why Change From Traditional LSTK to MAC?Although Process Automation represents just 3 - 5% ofthe original capital expense, it is one of the mostimportant factors in successful plant operation.Slide 4

LSTK Model often leads to scope “creep”schedule delays <strong>and</strong> cost overruns• Process Automation specs must be generalized inorder to allow multiple bidders.• Extra time spent in spec writing making sure basesare covered.• Bid evaluation time delays contractor engagement.• Without foreknowledge of winning bidders, it isimpossible to know if all vendors will integrateseamlessly. They rarely do!• Extras abound as contractors look for ways toincrease scope of work.• The end product is of necessity a compromise.Slide 5

The Construction Industry InstituteRecognized The ProblemCII studied the effect of earlyinvolvement of strategic suppliersThe recommendation was tomodify the current EPC model:PEpC approach– P: Procure strategic suppliers first<strong>and</strong> early– E: Engineer (by contractorpartnered with strategic supplier)– p: Procure commodity items– C: ConstructIn Automation terms - MACSlide 6

Findings of the CII Study“Using a sophisticated simulation model of theclassic EPC process, the research teamcompared the impact of the PEpC approach tothe project execution with traditional EPC.In both theoretical <strong>and</strong> field implementations,the results indicated that PEpC could producesavings in excess of 10% to 15% of the time<strong>and</strong> 4% to 8% percent of the cost of thetraditional EPC process”* Quote from Edward M. Ruane, Head of CII Research Team, CII Research Summary 130-1; Page 5Slide 7

MAC Concept Definition• A highly qualified, large-project experienced, <strong>and</strong> wellresourced control systems specialist assigned tomanage, engineer, manufacture/procure <strong>and</strong>deliver instrumentation, valves, control systems,safety systems <strong>and</strong> associated interfaces for allproject components <strong>and</strong> facilities.• Assigned responsibilities are those the MAC is bestqualified to h<strong>and</strong>le.• Risk for the entire automation scope implementationis borne by the MAC.Slide 8

Motivation for MAC• Highly applicable to the downstream businesses.• Stewarding the execution of several grass-roots orrevamping projects simultaneously.• Capitalizing on st<strong>and</strong>ardized processes, highly-skilledcore resources <strong>and</strong> increased concept re-usability.• Equally successful in project locations throughout theworld with little or poor infra-structure.• Short project cycle time, high integrity of execution.• Early involvement in conceptual design <strong>and</strong> FEEDensures uniformity <strong>and</strong> consistency throughout allproject execution stages.Slide 9

The Main Automation Contractor ModelOld Way -Emerson supplied automation equipment & services to anEngineering, Procurement <strong>and</strong> Construction ContractorConceptFront EndEngineeringExecuteOperateNew Way -Emerson Product Bid to EPCEmerson supplies Consulting, Engineering & Design <strong>and</strong>Supply of Automation Equipment <strong>and</strong> Services to EPC/OwnerConceptFront EndEngineeringExecute OperateConsulting FEED EMR Product ServicesNew role, Emerson partnering with EPC as Strategic Automation SupplierSlide 10

Agenda2. The MAC role in the <strong>Project</strong>lifecycleSlide 11

The <strong>Project</strong> LifecyclePhase 1APPRAISEPhase 2SELECTPhase 3DEFINEPhase 4EXECUTEPhase 5OPERATEIntegrate thediversegroups ofideas <strong>and</strong>possibilitiesto evaluatethe projectCONSULTINGCONCEPTSelect thepreferredprojectoption(s)Establish aPlantWebfoundationFEED PHASEFinalizeprojectscope, cost,& schedule<strong>and</strong> awardcontracts.MAC SCOPEManageproject withword classexcellenceOperatortrainingAssetOptimizationAdvancedcontrolimplementationThe MAC is critically important in 2 project phases1. Front End Engineering Design2. <strong>Project</strong> Execution

What is FEED ?FEED covers the basic & conceptual engineeringdone for the project prior to commencing the detailedproject execution.Objective:• <strong>To</strong> provide the detail engineering disciplines with welldefinedengineering packages in order to minimizechanges <strong>and</strong> rework during project execution.FEED offers the greatest opportunity for projectdefinition, pre-planning <strong>and</strong> optimization, to lowerlifecycle cost <strong>and</strong> influence successful completion.Slide 13

Why is FEED critically important?The two main causes of cost overruns & schedule delays:• Poor definition of scope in FEED &• Loss of control of scope during project executionFEED <strong>and</strong> early project planning canreduce project cost with 20%Slide 14

Emerson’s approach to FEED• FEED is the first opportunity to positively influencethe project success with the application of valueimprovement work processes.• Review/update customer engineering st<strong>and</strong>ards.• Define detailed field equipment, DCS <strong>and</strong> SISspecifications.• St<strong>and</strong>ardize systems interfaces <strong>and</strong> ensureconsistency across all 3 rd party packages.• Coordinate engineering st<strong>and</strong>ardization acrossmultiple projects or contractors.• Define project execution strategy & schedule.Slide 15

Considerations during FEED• Clear project objectives• Scope definition & FEED deliverables• <strong>Project</strong> execution plan• Budget estimate• FEED & detailed project execution schedules• <strong>Project</strong> team organization• Lessons learned from previous projects• Life cycle cost optimizationSlide 16

<strong>Project</strong> Execution - Engineering– Design Specifications for field instruments <strong>and</strong> valves, analytical, field packages(metering systems, tank management systems, BMS, gantry automation, etc).– Foundation Fieldbus basic segment design– Asset Management System Specification– Specification of Machinery Health Monitoring systems– Define major third party interfaces <strong>and</strong> common communications st<strong>and</strong>ard– DeltaV & DeltaV SIS System architecture– Create/update I/O database <strong>and</strong> data exchange mechanism (INtools)– FDS of Control Application / Safety Application– Specification of advanced control applications– Hardware specification <strong>and</strong> Control loop design– Generation of C&E diagrams <strong>and</strong> Control narratives– Issue system HW + SW testing <strong>and</strong> integrated testing specifications– Operator Training System SpecificationSlide 17

<strong>Project</strong> Execution – <strong>Project</strong> Management• Establish project execution strategy fully aligned with customer’s requirements.• Develop project schedule (engineering, procurement, construction,commissioning)• Develop budget.• Issue <strong>Project</strong> Execution Plan <strong>and</strong> Quality Plan.• Define Design Freeze points, Change control <strong>and</strong> change management.• Plan transition from FEED to next project phases.• Assign specialists to key positions, manage project team.• Plan strategic procurement. Leverage benefits of alliances <strong>and</strong> best costcentres.• Establish responsibilities matrix. Assume lead role in coordinating 3 rd parties.• Preliminary plan the site support organization.• Actively apply integrated project management to optimize project cost <strong>and</strong>schedule.Slide 18

<strong>Project</strong> Execution <strong>Approach</strong>esTraditional <strong>Approach</strong> (characterized by multiple contractors/suppliers):Contractors• Multiple Engineering Contractors provide all instrumentation <strong>and</strong> controls engineering. 2+Design practices, databases, <strong>and</strong> documentation vary by contractor.• Various control systems suppliers provide vendor data to the EC's <strong>and</strong> equipment to 3+the installation contractors.• Control system integrator configures <strong>and</strong> programs the main control systems. 1 - 2• Installation contractors install the field instruments <strong>and</strong> control systems. 1 - 2• Commissioning contractor commissions the instrument <strong>and</strong> control systems. Included• Various equipment suppliers provide training <strong>and</strong> after-market support NumerousTOTAL 8+MAC <strong>Approach</strong> (characterized by a single point resource):• MAC provides most instrument <strong>and</strong> control engineering 1• MAC supplies core instrumentation <strong>and</strong> controls systems <strong>and</strong> assists with theIncludedprocurement of other instrumentation.• MAC integrates <strong>and</strong> programs all control systems (except packaged systems) Included• MAC supervises the installation of the instrumentation <strong>and</strong> control systems. Included• MAC supports the commissioning of the instrument <strong>and</strong> control systems. Included• MAC provides necessary training <strong>and</strong> training tools for the instrument <strong>and</strong> control Includedsystems <strong>and</strong> all after-market services.TOTAL 1Slide 19

MAC Savings Are ThreefoldLower <strong>Project</strong> <strong>Cost</strong>sFaster / SeamlessStartup100Extras806040200TraditionalCapExEngr.TraditionalMACMACEarly Involvement• Engineering savings 8 – 10%• Capital savings 25%• Fewer extras 10%Operational Efficiency* Excerpt of Shell MAC analysisStart-Up <strong>Time</strong>Long term operationalsavings ~10%

Agenda3. MAC - Contracting OptionsSlide 21

MAC Contracting Options• MAC directly contracted by Owner, utilizing anoptimum combination of reimbursable <strong>and</strong> lumpsum compensations• MAC selected by Owner <strong>and</strong> sub-contracted bya single EPC for the entire project scope• MAC selected by Owner <strong>and</strong> sub-contractedseparately by each EPC ContractorSlide 22

MAC Directly Contracted by OwnerEPC-1Owner<strong>Project</strong> ManagementContractorEPC-2EPC-3EPC-4MACMAC Manages:• ICSS design <strong>and</strong> implementation• Systems interface design• Third party systems interfacespecification• Consistency - hardware <strong>and</strong>software devicesEPC Relationship• Equivalent st<strong>and</strong>ing• Separate but equal contracts• Required interfacing• Deliverables as specified by Owner• Scope boundaries obeyedSlide 23

MAC Selected By Owner <strong>and</strong>sub-contracted by EPCEPC-1Owner<strong>Project</strong> ManagementContractorEPC-2EPC-3MACEPC-4MAC Manages:• ICSS design <strong>and</strong> implementation• Systems interface design• Third party systems interfacespecification• Consistency - hardware <strong>and</strong>software devicesEPC Relationship:• MAC subservient to EPC• MAC scope varies by EPCinterpretation• Scope boundaries grayed• Consistency difficult to manageSlide 24

MAC Scope <strong>and</strong> Contract CompensationCompensationMAC ScopeTRAININGSTART-UPCONSTRUCTIONReimbursable Rates• Difficult to define total requirements <strong>and</strong>/or• Contractor not in control of schedule,sequence & highly dependent on othercontractor activitiesTrainingCommissioning &Startup SupportConstructionSupervisionDetailed Design& HardwareSupplyFEEDEngineeringDETAIL DESIGN&HARDWARESUPPLYLump Sum• Provisional lump sum for major portion ofcontract• Contractors will bid on a “model” systemconfiguration as defined in ITT• “Model” approach keeps all bidders on equal<strong>and</strong> competitive basis• “Model” will be adjusted to actual systemconfiguration at end of FEED; there will beadditions <strong>and</strong> deletions as technical definitionimproves• Additions <strong>and</strong> deletions will be incorporatedinto lump sum based on firm-bid schedule ofrates <strong>and</strong> unit costsOperationsSupport(Lifecycle)FEEDReimbursable Rates• Difficult to define total requirements beforeFEED• MAC must work with multiple contractorswithout control over interfaces, responsetime, <strong>and</strong> changing requirementsSlide 25

MAC Contracting Measures• Steps Taken to Mitigate MAC Impacts to EPC ContractsUnder a Direct Contract:– Owner I&C Engineer assigned to manage the MAC/EPCinterfaces.– Detailed assignment of roles <strong>and</strong> responsibilitiesestablished for the MAC <strong>and</strong> the EPC’s.– MAC personnel assigned to each EPC Team.– All field construction drawings are produced by the EPC.– All field construction activities are assigned to the EPC’s.MAC only provides assistance <strong>and</strong> support.– Commissioning <strong>and</strong> start-up are under EPC control.Slide 26

Agenda4. MAC model conclusionsSlide 27

MAC impact on Life Cycle <strong>Cost</strong>Life Cycle <strong>Cost</strong> = total cost from inception to decommissioningLCC = acquisition cost + sustaining costFEEDDetail engineeringFacilities & equipmentConstruction & startupSupport facilitiesOperationsMaintenanceReplacementFacility usageEnergyWe focus on identifying cost drivers, evaluating alternatives,applying best practices <strong>and</strong> selecting the most efficient concept.We look beyond initial capital costs, take into account <strong>and</strong>optimize all components of operations <strong>and</strong> maintenance.Slide 28

Emerson focus on Life Cycle <strong>Cost</strong>Acquisition cost components:• <strong>Project</strong> management <strong>and</strong> engineering• Equipment & Applications – instruments, valves,analytical, metering, tank gauging, FF, DCS, SIS,AMS, condition monitoring, OTS, APC, Guardian.• Construction <strong>and</strong> commissioning servicesSlide 29

Emerson focus on Life Cycle <strong>Cost</strong>Sustaining cost components:• Effectiveness: robust, reliable systems, applicationsengineered for optimized, agile process control.• Operations: highly intuitive <strong>and</strong> efficient systems<strong>and</strong> applications, integrated DCS & SIS, PlantWeb,embedded APC• Maintenance: intelligent field, FF, PlantWeb, AMSSlide 30

MAC Model Conclusions• Adoption of the MAC concept will result in:– Best available technology with lowest lifecycle costs.– Improved EPC performance & lower project costs.– Improved management of scope <strong>and</strong> schedule.– Lowest risk of scope expansion <strong>and</strong> resulting impacts.• The MAC concept has been:– Proven through numerous completed projects.– Developed as a service by Emerson.– Accepted by the EPC community to reduce overall risk.– Adopted by several customers as their st<strong>and</strong>ard practice.Slide 31

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