keys to capital project success for epcs and owner-operators

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Keys to Capital Project Success for EPCs and Owner-Operators

How an integrated information platform can improve results and reduce risks on large-scale projects

Refinery complexCourtesy of Dassault Systèmes

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Large Scale, Large Risks

Projects in the oil and gas, chemical, and power industries rank among the largest and most complex in the world, with pre-commissioning capital expenditures frequently exceeding one billion US dollars. These costs are only the beginning—combined capital expenditures for post-commissioning operations and maintenance typically exceed construction costs over the lifecycle of a project.1

Everything about these projects is complex, from their financing structures to risk management, design, construction, regulatory, and safety considerations.

Unmet Expectations

Per a recent study by Bent Flyvbjerg of Oxford University, roughly 90% of megaprojects (i.e., projects costing more than US$1B) experience cost overruns. The same study reported that overruns of up to 50% are

common.2 Project budgets routinely include 10% for contingencies.

Global Impact

Highlighting the scale of just one part of the capital project landscape—energy and power projects—demonstrates their vast economic impact. The International Energy Agency estimated global investment for power generation at US$420B in 2015, with an additional US$250B invested into midstream and downstream oil and gas supply.3

To put this into perspective, a typical 10% contingency budget, extrapolated across global spending, accounts for more than US$65B. Non-budgeted cost overruns further inflate this figure.

Capital projects in the oil and gas, chemical, and power industries involve large scale risks and create significant economic challenges

High Stakes: Addressing Capital Project Challenges

Opportunity for Improvement

Fiatech, an international organization dedicated to improving capital project efficiency, has established Productivity Advancement Targets (PATs) addressing several areas within project lifecycles. The following PATs represent seven of the twelve PATs that Fiatech has targeted:4

70% reduction in owner initiated change orders

25% improvement in project cost and schedule predictability

80% reduction in review cycle times

10% improvement in construction productivity

33% reduction in construction schedule and cost

40% improvement in cycle time for field data collection or information access

20% reduction in schedule delays

Citations in endnotes


Right from the Start

Get Control of Change

Build on a Solid Information Foundation

Integrated Project Execution

Multidisciplinary Engineering

Standardization and Modularization

Integrated Construction Planning

Optimizing Operational Efficiency

Justifying AdoptionCapital project planningCourtesy of Dassault Systèmes


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Early Choices Determine Project Success

To a great extent, the ultimate success of a project is determined by choices made before the first design model is created. No single stakeholder has access to all the information needed to balance requirements, propose and choose alternatives, and make the most optimal decisions. Estimates and assumptions can be inaccurate, especially when a project involves new business partners, unfamiliar geographical locations, and/or new technologies.

Similarly, it is impossible for individual disciplines to develop optimal plans and designs in relative isolation from each other. Traditional divisions of responsibility are inadequate to manage highly complex capital projects.

Collaboration is the Key

Collaboration throughout the lifecycle, across organizations, and across disciplines is essential. A financially successful project starts with an accurate and complete proposal, something that is possible only with accurate supporting details.

Improved collaboration between the Owner-Operator and Engineering, Procurement, and Construction (EPC) firm at project initiation provides both parties with confidence in project requirements, design choices, schedules, quality, and costs. Early collaboration is cost effective as well—changes are much less expensive when they are made early in a project.

Early decisions cast a long shadow, and improved performance depends upon upfront collaboration and joint analysis of project details and options


Adapted from Managing Risk in Construction Projects5










Justifying Adoption


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Change is Inevitable, Risk is Not

Even the most carefully planned projects encounter the need for changes. If these changes are not managed effectively, the risk of problems can multiply as changes accumulate. A single change can affect many disciplines across the project team.

Some of the risks of inadequate change management include:

Design incompatibilities Procurement delays Lack of visibility into costs Changes approved but not

funded Regulatory approval problems Inefficient resource utilization Construction delays Compromised operational

performance

Fortunately, it is possible to manage change effectively to minimize risks, but this requires a new approach that breaks down traditional siloes among different disciplines and organizations.

Project Delivery Integration

Integrating change management with project delivery reduces risk by linking stakeholders across multiple disciplines to a single source of truth, which explicitly reflects changes and their status. Approval and notification workflows can be extended to stakeholders in multiple organizations, improving the visibility and traceability of changes.

This approach provides additional commercial benefits by incorporating estimates of the cost impact of changes, and ensuring that the responsible party accepts and approves related requests for information.

Fine-Grained, Broad Access

Successful change management depends upon integrating change processes within the digital tools that stakeholders use to deliver the project. This results in fine-grained insight and eliminates the need for redundant change tracking.

Integrated Change Benefits

Integrating change management with project delivery can result in:

Fewer design conflicts Reduced costs More accurate cost controls Improved visibility for all project

stakeholders Informed decision making Improved project management

accuracy Reduced project risk


High complexity combined with long project timelines inevitably results in changes—it is how these changes are managed that determines risk










Justifying Adoption Nuclear reactor modelCourtesy of Dassault Systèmes


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The Document Dilemma

Documents are commonly used throughout the lifecycle of a typical EPC project. Regulatory filings, proposals, requests for information (RFIs), specifications, piping and instrumentation diagrams, piping isometrics, and construction drawings are a few of the many documents generated for a typical project. Document management systems are often used to manage the resulting complexity.

Unfortunately, documents suffer from fundamental weaknesses. They are often static snapshots of a project. It is difficult to securely share documents. Most importantly, they are passive and depend upon skilled workers to identify potential issues and/or inconsistencies. The complexity of even a smaller scale EPC project can quickly overwhelm document-based processes.

Data, Not Documents

The data contained within documents is the key to their value.

Properly structured, this data can be used directly to support a variety of project activities. Changes to data can be visible and traceable, and these changes can trigger notifications and action. Automated processes can identify inconsistencies. Access rights can be managed based upon factors such as approval state, role, location, and project phase.

Integrated Information Platform

The logical extension of data-based processes is the adoption of an integrated information platform. Such a platform supports access and activities for multiple disciplines, and can be extended across multiple organizations. This is very similar to the concept of a Common Data Environment (CDE) for projects within the AEC industry.

This platform can also support integrations with other systems. For example, an EPC can integrate the platform with an ERP system to optimize material ordering and scheduling.

Model Data at the Core

At its core, an integrated information platform is built upon model data, including the 3D representation of systems, structures, components, the 2D representation of schematics, and other technical information. A complete representation of a project builds upon this core model to include project and business related information.


An integrated information platform can provide a shared environment for collaboration across organizations and disciplines










Justifying Adoption


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One or Many Versions of Truth?

Traditional project management activities are layered on top of project execution. Project managers must continually request updates, and update project status and forecasts based upon reported progress. The result is extra workload not only for the project managers, but also the individuals and organizations responsible for project delivery.

This divided project management model can lead to delays, inaccuracies, and misrepresentations that often cloud a true understanding of project status. This in turn can restrict proactive decision making and corrective actions, and can lead to unpleasant surprises.

Integrity Through Integration

A project based on an integrated information platform can leverage this information to improve project management. When work processes are digitized, they can be directly connected to project management activities, eliminating both lags and inaccuracies.

Many key project activities and deliverables can be integrated. For example, the approval status of a process flow simulation can be directly linked to the associated task status in a project management system. Similarly, digital records of the installation and inspection of equipment can be directly tied into project status reporting and forecasting.

Integrating project management with project execution activities can improve efficiency, visibility, and accuracy

Integrated Project ExecutionHigh Stakes: Addressing Capital Project Challenges









Justifying Adoption


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Many Domains, Many Models

A typical EPC project contains engineering data represented in many different forms. Some design information, for example material or process specifications, exists as metadata. Piping and instrumentation diagrams (P&ID) are represented as 2D schematics. Control logic is described by schematic blocks and code modules. Pipe routing may be defined as a 3D plant model, while purchased equipment is represented in a 3D mechanical computer-aided design (MCAD) model.

The reality is that interdependencies and inconsistencies among the different engineering disciplines are often not completely resolved prior to procurement and construction. The challenge of integrating these pieces into a coherent whole is even greater in the face of ongoing design changes. Once problems exist in physical form, they are much more costly and time-consuming to resolve.

Standards-Based Integration

ISO 15926 is an open, neutral format supported by leading solution providers that represents the structure, attributes, and geometry for 2D schematics and 3D models, and can represent process parameters and control system behaviors. XMpLant is an example of a technology that implements an ISO 15926 compliant schema to provide a solution to multidisciplinary engineering integration for capital projects.

The AEC industry has proven the value of exchanging BIM data using the IFC standard. For EPC projects, adopting open standards enables the integration of multidisciplinary design data to be continually reconciled with changes throughout the project lifecycle and across stakeholders.

A Lifecycle Approach

ISO 15926 supports a lifecycle approach to EPC projects, with the ability to represent a facility in 4D (3D plus time) and support for operations and maintenance processes post-commissioning.


Deep interdependencies among different design disciplines must be balanced and resolved prior to procurement and construction










Justifying Adoption Multidisciplinary engineeringCourtesy of Dassault Systèmes


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Standardize and Reuse

For most projects, detailed design is performed on a custom basis to meet specific requirements. Engineers may borrow concepts and specifications from previous projects, but the design content itself is often unique.

Configuration of standardized process and equipment modules offers many advantages over clean-sheet designs, including lower risk of design errors, more robust designs, predictable fabrication and installation, and economies of scale for equipment procurement. Module design and configuration details can be refined over time to cumulatively incorporate lessons learned.

Adopting standard modules is a real business transformation that requires significant investment as well as some specification flexibility on the part of the owner-operator, but it can deliver far greater efficiency and performance.

Modular Construction

Just as the use of reconfigurable design modules can provide engineering and procurement efficiencies, a modular approach can also benefit construction.

Offsite fabrication and assembly facilities can take advantage of advanced manufacturing automation technologies to deliver complex products in less time with better quality and lower cost compared to onsite fabrication and assembly.

Preassembled and pretested modules reduce the need for onsite assembly, connection, testing, and rework.

Some EPCs are now incorporating fabrication into their offerings, and are rebranding themselves as EPFC (Engineering, Procurement, Fabrication, and Construction) organizations.


Adopting modular design and construction techniques can save time, improve quality, reduce cost, and result in more predictable project delivery










Justifying Adoption

Model of a preassembled moduleCourtesy of Dassault Systèmes


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Missed Potential

In an ideal construction project, material is installed on schedule and as designed, no workers are injured, rework is not needed, and the project experiences zero delays. Few projects today meet this ideal standard. Effective multidisciplinary engineering can avoid design errors, but more is needed for trouble-free construction.

Integrated Planning

Integrating construction planning into the lifecycle enables EPCs to optimize installation sequencing, equipment access, and resource utilization. An integrated information platform can contain the information needed to perform this planning, and provides access to the project team members responsible for creating, reviewing, and executing the plan.

Sensitive and complex construction activities, such as the installation of process equipment, can be dynamically simulated in detail so that issues are resolved in advance.

Lean Construction

Lean manufacturing was pioneered decades ago by Toyota Motor Corporation, and is part of their continuous improvement culture. Countless manufacturers have adopted lean manufacturing, resulting in impressive productivity growth. Lean construction borrows from techniques used in lean manufacturing, and adapts them for use in a project environment.

Lean construction is a way of eliminating waste by applying principles for organizing the flow of information, material, and workers. Other specific techniques, such as error proofing, quick-change, and visual control, augment these core principles.

Continuous Improvement

Digitizing the construction process by using integrated project execution can provide real-time insight into performance and data that can be analyzed to drive continuous improvement for future projects.


Avoiding waste and errors in construction requires precise planning combined with a learning culture










Justifying Adoption

Integrated 4D construction planningCourtesy of Dassault Systèmes


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A Long Shadow

Decisions made at the earliest project stages can have implications for decades. The costs of operations and maintenance typically exceed construction costs over the lifecycle of a project.1

A Common View

Establishing an integrated information platform for a project provides a means for an owner-operator to collaborate upfront with the EPC to ensure that design choices fully consider the impact to safety and efficiency during operations and maintenance. The same techniques used for integrated construction planning can be used to plan heavy maintenance processes that need to be carried out during operations.

Ensuring a Smooth Transition

Traditional handover processes involve transferring documents to the owner-operator. The information in these documents must be incorporated into operational systems, which involves interpreting and re-entering data. This inevitably results in incomplete and/or inaccurate information that can have negative effects later.

The consistent adoption of standards such as ISO 15926 and the establishment of an integrated information platform can both enable significant improvements to the commissioning and handover process. This information can be mapped into enterprise asset management systems and maintenance systems, providing an accurate reference for ongoing facility operations.

The efficiency of plant operations and maintenance depends heavily on decisions made early in a project

Optimizing Operational EfficiencyHigh Stakes: Addressing Capital Project Challenges









Justifying Adoption

Configuration Management

Within the nuclear industry, configuration management is used to ensure that information about a facility consistently reflects its real-time state throughout its lifecycle, from design to decommissioning and dismantling. More recently, digital tools have been employed to improve the integrity and efficiency of nuclear plant configuration management.Depiction of digital handover for operations

Courtesy of Dassault Systèmes


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Justification is Within Reach

Globally, more than US$65B is allocated to capital project contingencies in the energy, power, process, and utility industries. At a smaller scale, even a modest project can easily justify the investment in technology, process, and training to establish an integrated information platform.

Past projects provide all of the information needed to justify investment for the future. Evaluate one or more past projects and document the changes, deviations, cost overruns, and project delays. Establish estimated savings that could result from improved model integrity and better collaboration.

Beyond the direct financial benefits, adopting an integrated information platform also provides deeper and more immediate insight into project delivery and supports better decision making.

Past projects are a guide to targeting and justifying investments in technology, process improvement, and training

Justifying Adoption

Copyright © 2017 by CIMdata, Inc.

1 “Cost and Performance Data for Power Generation Technologies.” US National Renewable Energy Laboratory, February 2012.2 Flyvbjerg, Bent. “What You Should Know about Megaprojects and Why: An Overview.” Project Management Journal,

vol. 45, no. 2, April-May 2014.3 “15th International Energy Forum Ministerial Meeting.” Background paper. International Energy Agency, Algiers, September 2016.4 “Leadership Initiatives for Productivity Advancement.” Fiatech. Accessed January 15, 2017. http://www.cvent.com/events/

fiatech-productivity-advancement-targets-pats-/event-summary-c31d590310ae40ed93f5f593a5904f95.aspx.5 Smith, Nigel J., Tony Merna, and Paul Jobling. Managing risk in construction projects. 2nd ed. Oxford: Blackwell Pub., 2006.6 “Nizhny Novgorod Atomenergoproject Engineering Company.” Energy, Process & Utilities Case Study. Dassault Systemes, 2013.

External consultants can assist in the justification process by providing a structure for gathering and analyzing needed information and identifying the related improvement potential.

EPC Example: ASE Group of Companies (ASE), part of Rosatom Group

ASE has implemented Dassault Systemes’ 3DEXPERIENCE platform to integrate process engineering, design, and construction with a unified digital model according to ISO 15926 for multi-CAD data interoperability. According to Valery Limarenko, President of ASE, “We have an integrated environment for collaboration and data exchange. All project participants experience a sense of unity, working together closely using the same process. They get feedback in real time, implement changes on a daily basis, and work out problems faster than before.”6










Justifying Adoption

