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Management of Medium-Size /

Revamping Projects
Oil & Gas Downstream Projects
8. Project Control

RC - PR GES - 08174_A_A - Rev.1 - 18/07/2013


Management of Medium-Size /
Revamping Projects: course content
I. Introduction
II. Preliminary Studies
III. Basic Engineering (or FEED)
IV. EPC Contracting
V. Organization and Engineering
VI. Procurement
VII. HSE, Quality and Risk Management
VIII. Project Control (cost/schedule)

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IX. Construction and Fabrication Management
X. Completion / Commissioning / Start-up / Closure

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Module 7 Contents

1. Project control 04 - 06

2. Scheduling and progress control 07 - 26

3. Cost estimating and control 27 - 55

ATTACHMENTS (slides 56 to 82)

I. WBS and Schedule examples

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II. More about Progress Control

III. Cost Reporting details/examples

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Project Control
Scope / Objectives

 Scope:
• Engineering, Procurement and Construction stages of the project
(including main Contractor, Subcontractors and Suppliers)
• Mainly Cost and Schedule (for HSE and Quality: see previous chapter)
 Schedule Control objectives:
• Establish an optimized project schedule, accepted by all contributors
• Determine constraints and critical path
• Define method to measure progress, and apply it throughout execution
 Cost Control objectives:
• According to Owner cost structure, produce an optimized Cost Estimate
• Make sure the budget is kept under control
− Using appropriate tools

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− Defining roles and responsibilities at all levels

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Project Control
« FEEDBACK »
Process
PROCESSES

PROJECT (Monthly)
SCHEDULE Baseline CONTROL Schedule
SCHEDULE
SYSTEM (e.g CPM) Schedule ACTION Status
STATUS LINE

PROJECT Trend Analysis


WORK
BREAK PROJECT PROGRESS (Monthly)
DOWN CONTROL SYSTEM Planned CONTROL PROGRESS Actual
(WBS) (Activities weights Progress ACTION CALCULATION Progress
STRUCTURE: USD, mhrs)
Activities Progress Analysis
Split Progress Forecast

PROJECT COST (Monthly)


Initial CONTROL Expenses &

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CONTROL SYSTEM COST
Budget ACTION Committments
(USD) CALCULATION

Cost Analysis Cost


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Forecast 5
Project Control
Communication / Reporting

 Frequent communication / reporting is critical for performance


 It enables the Project Manager to obtain
• A clear picture of the Project progress vs budget and schedule
• A timely identification of adverse trends / threats
 It allows the Project Team:
• To react and take immediate corrective actions,
• If necessary, to design strategic recovery plans
• To communicate with Owner and avoid last-minute surprises
 Cost and Schedule can be both critical (but it depends on contract type)
• To Owner (more often, Schedule)
• To Engineering Contractor (more often, Cost)

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Scheduling and progress control
 Owner Scheduling
• Work Breakdown Structure
• Scheduling, Schedule levels
• Critical path
• Schedule revisions
• Scheduling tool

 Contractor Scheduling
• Same content as above

 Progress Control
• Progress measurement

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• Recovery Plan
• Schedule re-baselining

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Owner Scheduling
Work Breakdown Structure

 The objective of the WBS is to provide an organised structure


covering the whole content of the project and to include, at
different levels of detail, the information necessary to monitor,
control and correctly report all project activities
 The project WBS takes consideration of:
• Project configuration (size, geographical and technical nature)
• Project management considerations (split of responsibilities, contracting
strategy / packages, reporting requirements)
 It is generally organized (for an EPC schedule), by:
• A geographical divisions: Work Packages / Areas / units

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• Work subdivisions (engineering disciplines, construction trades...)
See examples in Attachment I

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Owner Scheduling
Purpose

 Owner may have to prepare a Schedule for various reasons, e.g.:


• A consolidated Project schedule (Project split into several EPC packages)
• Preliminary Project schedule at pre-Project stage (Owner leader)
• Commercial reasons (e.g. external customer commitments)
• Schedule with contingency, vs. the one discussed with EPC Contractor

 Level-0 Owner schedule will generally be presented as a Bart Chart

 More detailed levels will also be developed, using PERT/CPM

 Schedule presentation will be consistent with Owner WBS

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Owner Scheduling
Bart Chart example for 4 packages

year J F M A M J J A S O N D J F MA M J J AS O N D J F M A M J J A S O
JACKET & FLARE 4
Basic Engineering 4
CFT - EPCI 5
Detail Engineering
Procurement 8
Construction 1
Installation
TOPSIDES 4
Basic Engineering 4
CFT - EPCI 8
Detail Engineering 10
Procurement 11
Construction & Transportation
Installation
Hook up & commissionning
PIPELINES & CABLES 3
Engineering 3
CFT 9
Procurement & transport

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Installation
DRILLING & COMPLETION
PRODUCTION 27

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Owner Scheduling
Schedule types

Scheduling: a fundamental task of Project Management

 In Revamp projects, Schedule and Cost can be closely interrelated

 Bar Chart: common way to prepare the first-pass schedule


• Easy to prepare, to read (condensed format, 1 line per activity)
• More difficult to see critical path and to evaluate impact of changes

 PERT (Project Evaluation and Review Technique) ... then PDM


• Determination of Critical Path
• Sequencing logics is built into the schedule
• Then, bar charts can be produced from the network

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Owner Scheduling
Schedule levels

 Level 0 – Project Master Schedule:


• Executive summary schedule used for reporting at Management level
• Frozen at Project Sanction = Initial Baseline Schedule
• Shows target dates, key milestones and main phases
 Level 1 – Integrated Project Control Schedule:
• Time-scale logic diagram
• Decision steps, contracts sequence, work package summary activities, LLIs
• Major milestones and overall project critical path
 Level 2 and 3 – Contractor and sub-contractor Schedules
• Cover all the activities/tasks of the Contracts
• All milestones necessary to control contractors’ physical progress

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• Procurement of main equipment and fabrication, construction,
installation, commissioning, with the critical path

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Owner Scheduling
Links between activities and critical path

 Network is built with activities predecessors and followers &,


linked by End-Start, Start-Start, or End-End link
Critical Path

Critical Path
Critical Path

Float Critical Path


Float

 Critical path: path of activities with no float


• Provides shortest project duration

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• Goes through a series of activities from Project Start to Project
Completion (e.g. studies and technical evaluation, delivery of some
equipment, fabrication, site installation, hook-up, drilling)
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Owner Scheduling
Example: Gantt bar chart

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Owner Scheduling
Schedule revisions

 Baseline Schedule revisions performed on Project Manager


decision in case of significant changes or delays
 Detailed assessment, based on Level 2 schedule, of all remaining
activities (internal / contractors), duration & sequences including:
• Actual physical progress and achieved milestones
• Manhours progress and actual vs estimated productivity
• Upcoming Change Orders (requested or potential) impacts on
schedules
• Performance of simulation schedules and “what-if” scenario as well
as detailed schedules risks analysis performed by/with the Risks
Assessment Manager.
Contractors may also need to revise their Baseline Schedules

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which may cause a revision of Company schedule

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Owner Scheduling
Common softwares

 Scheduling: common softwares for Medium & Small Projects:


• MS-Project for small EPC projects, preliminary studies, FEED
• Primavera for EPC phase (and FEED if necessary)

 For presentation purposes:


• Level 0 (on Excel, with information extracted from Primavera Level 1)
• Level 1 or 2 only for specific critical activities
 Progress reports : often prepared with Excel

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Contractor Scheduling
Differences

 Scheduling by EPC Contractor: more detailed than Owner


• A detailed WBS/OBS is prepared to define areas and work phases
for the project schedule & progress reporting
• Scheduling hierarchy generally includes 4 main Levels for the
concerned EPC contract, plus many sub-level schedules
 Contractor responsibility on schedule compliance
• Depends on the contract type (and therefore on Owner priorities)
• May have financial consequences for him (or not)
 Owner control on Contractor progress has to be applied

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Contractor Scheduling
EPC schedule hierarchy
 Level 0 schedule: Project Master Schedule: milestones dates and main work phases
 Level 1: Overall Project Schedule with, for major WBS areas:
• Engineering by discipline (major engg milestones: PIDs, Plot Plan, MTOs,
Reviews...),
• Procurement with LLIs and major equipment purchasing / delivery,
• Construction by trade, pre-com/com, milestones dates (MC, RFC, RFSU…)
• Critical path
 Level 2 schedule: Areas Schedule: CPM network; all activities according to WBS / OBS
• All engineering activities by discipline and deliverables category,
• Procurement activities for all equipment & bulks requisitions,
• Construction by trade or construction packages, pre-com / com,

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• Detail critical path from CPM

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Contractor Scheduling
EPC schedule hierarchy

 Level 3: Detailed Schedules


• Engineering deliverables (usually with engineering progress measurement system)
• Procurement schedule (may be with procurement progress measurement system)
• Site Level 3 CPM construction schedule, with Level 3 construction contractor
subcontract schedules, in line with Level 2 schedule; used for progress reporting
• Site CPM pre-commissioning / commissioning schedule detailed by Areas / Units /
Systems / Tasks and used for progress reporting
• For Revamped areas: Shut-down schedules by Job Cards
A 3 months look-ahead schedule may be used for reporting

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Contractor Scheduling
Key elements to consider

 Contractual milestones for achievements of the whole project or intermediary.


 LLI (Long Lead Items), when applicable: items on the project critical path
 Global project size and engineering, procurement and construction resources
requirements versus their availability for the concerned project / site (progress
rates) will translate into required manhours at peak and feasible progress rate
 For Revamping projects: Planned shut-downs calendar times and durations
 Standard « statistic » progress curves with % completion vs. project duration in
% are available to provide a reference progress for each activity:
• Engineering by discipline (process, equipment, civil, piping, E/I/A)
• Procurement (main equipment, bulk material)
• Construction (For each trade: Civil, U/G piping, Piping pre-fabrication,

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equipment erection, piping erection, instrumentation, painting, insulation)

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Contractor Scheduling
Typical critical path

 Typical critical path for an E/P onshore project usually includes:


• Long Lead Items (including erection and installation)
• Process PIDs (approved by Owner for design)
• Main equipment purchases (including inspection/transportation)
• Piping isometrics, pre-fabrication and installation
• Control loop checks at the end of construction

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Contractor Scheduling
Schedule of Revamp projects

Revamping Project Schedule is strongly influenced by:


 Production objectives vs time: new production milestones after revamp

 « Usual shut-downs » planned time and duration (need to minimize production


outage time, including upstream and/or downstream facilities)
 Work authorised during pre-shutdown phases in live facilities: if too limited,
amount of work during S/D and construction may become:
• More/very expensive
• Higher HSE/Reliability risk
• Even unrealistic  delays and/or major Quality concerns
 Consider using available Owner supervision & commissioning staff

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Carefully review schedule constraints with Owner during FEED,
to avoid subsequent trouble and change orders

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Progress control
Purpose

 Compare actual progress vs schedule. Several ways:


• Milestones
• Overall physical progress
• Physical progress of the Critical Path
• Expected completion date vs plan
• Manhours progress vs detailed schedule

 Analyze trends to decide if corrective actions are necessary

 Depending on contract type, Owner validation may be required

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Progress control
Progress reporting

 Periodic Progress Reports: a key Project Management tool

 Address progress, but also all key events, problem areas and
higher level problem areas (« areas of concern »)

 Prepared:
• Daily at site (construction / pre-com / com).
• Weekly for Head Office activities and for construction
• Monthly
• Issued before periodic Owner / Main Contractor review meetings

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Progress control
Progress reporting

COMPANY PROJECT MANAGEMENT TEAM


JV
Prepares STEERING COMMITTEE
Daily report (constr) MONTHLY MEETING
Weekly report MONTHLY MEETING
Monthly reprt WEEKLY MEETING
Monitors,
Feedback Monthly
Incident CONTRACTOR PROJECT MANAGEMENT TEAM
Close-out
Reviews, Responds,
CONTRACTORS Consolidates Oper. Centers
& Site Reports
MONTHLY MEETING Prepares Alerts
WEEKLY MEETING Daily report (constr) Feedback
Weekly report Incident
DAILY MEETING (Constr.) Monthly report Close-out CONTRACTOR
Alerts MANAGEMENT
SUB CONTRACTORS Feedback
Incident
Prepares Monitors,
Close-out
Daily report (constr) Recommends
Weekly report Monthly
Monthly reprt Incident
Alerts Close-out

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Feedback
Incident
Close-out

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Progress control
Progress reporting

Typical CONTENT  Major events, achievements, problem areas,


highlights

 Executive Summary  HSE statistics, near misses register

 HSE performance  Progress S curves, tabulations: planned, actual,


forecast for Project, Work Packages, global E,
Disciplines, P, global C, C by areas/ units, C by trades
 Engineering
 Milestones status
 Procurement
 COI/COR register
 Subcontracting
 Invoices register
 Construction
 Cash flow actual & predictions
 Pre-com / Com
 Procurement materials status reports
 Project Controls
 NCR register
 Quality
 Documents register
 Areas of Concern
Level 1 Project Schedule with progress status; Trend

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analysis; recovery plan
 Manpower histograms planned & actual

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Progress control
Progress measurement

 Split project activities according to structure close to the WBS


 Define weights to each line, using adequate units (€, manhours…)
 For each Work package, aggregate these tasks by Levels :
• 1: Work-Package or sub-project
• 2: Categories: home office services, procurement, construction…
• 3: Sub-categories: engineering discipline, requisition, construction trade
• 4: Tasks: engineering deliverables, equipment, construction items
• 5: Elementary steps: drawings, fabrication, construction works

 During execution:
• Measure progress achieved for each elementary step
• Then, aggregate to the different Levels and compute overall progress

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See examples/illustrations in Attachment II

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Progress control
Progress curves
TYPICAL PROGRESS CURVES

100% 100%
99%
97%
95%
92%
90% 90%
87%
84%85%
82%
80% 79%
76%
73%
70% 70%
67%

60% 61%
56%
50% 51%
46%
40% 40%
35%
30% 30%
25%
20% 20%
17%
14%
10% 11%
9%
6% 7%
2% 3% 4%
0% 0% 0% 1%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36
Months

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Engineering Procurement Fabrication
Construction Commissioning Total

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Progress control
Progress curves

 Engineering « S » progress curves are prepared from Level 3 schedule


(typically during the first 3 months of the contract)

 More detailed “S” curves are prepared during Execution:


• Detailed construction / fabrication curve
• Field erection curve
• Installation / commissioning curve

 First « S » progress curves and histograms can be prepared from Level 2


schedule and manhours estimates; they allow to check that
construction scheme is realistic for construction contractors

 Until the Project EPC schedule is issued, a 3-month look-ahead schedule


is prepared to anticipate short-term schedule and resource concerns

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Progress control
Typical causes for EPC contractors delays

 Insufficient manpower resources (quantity and/or quality)

 Supplier or Subcontractors (careful on sub-sub-contracting !)

 Strikes, disturbances related to local environment

 Underestimates (manhours, bulk quantities)

 Equipment Quality unacceptable non-conformances

 Late information, comments or reviews from Owner

This list is incomplete. Other ideas ?...

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Cost Estimating and Control
• Cost estimating

• Cost reporting and control

• Change Management

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Cost Estimating and control
Scope and objectives
 Scope: Project CAPEX (OPEX is not in the scope)
 Objectives:
• Estimate the project CAPEX and propose the overall budget
• Make sure that this budget is acceptable to all contributors
− Sufficient to assure Project HSE/Quality performance
− Generating acceptable profit for each stakeholder
» Owner
» EPC contractor
» Suppliers and Subcontractors
− Consistent with the cost and schedule constraints
− Allowing adequate risk management
• Organize the Cost Reporting/Control process (involving Owner)

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• Define the Change Management process (involving Owner)

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Cost Estimating
Budget

 Any Project has a controlled and approved Budget

 The Budget may be adjusted (Revised Budget) during the Project Life:
• Budget transfer from other projects
• Scope deletions or additions, approved by Owner

 Structurally, the budget is expected to increase as Project develops

 At the end of the Project:


• Cost analysis will establish the “Final cost”
− After Mechanical Completion and Handover
− Once claims are settled and invoices paid

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• The final Cost Control report is issued
• Comparison with Revised Budget allows to draw feedback lessons

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Cost estimating
Methodology

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Cost estimating
Structure

Main Equipment
Bulk Direct Costs
Fabrication/Construction(onshore/offshore)
+
Transportation
Temporary Facilities Indirect Costs
Construction camps
+
Engineering Services General
Management & Supervision Expenses
Surveys +
Associated Expenses
Insurance
Commissioning +
Contingencies
=

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Direct Costs + Indirect Costs = Technical Costs Facilities Cost Estimate

Fabrication / Construction cost are the highest costs and the most difficult to estimate,
in particular for works in revamped process units and brown field; they are very site dependent (productivity)
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Cost estimating
Preliminary Estimate: a Challenge

 CAPEX estimate usual desired accuracy is +/- 30% for « new » or « expanded »
parts of projects in existing facilities, which may be relatively easy if the Plant
is recent and cost data base available or difficult depending on:
• Project complexity and location
• Onshore or Offshore projects
• Concerned facilities
• Modifications to facilities (Expansion, Debottleneck, Upgrade, Revamp)

 The CAPEX estimating method will depend on:


• Cost data base (Owner and/or Contractor) for works at that location
• Nature of facilities (onshore or offshore, subsea or surface, new or
revamped process units, interconnecting with work in brown field…),

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 The CAPEX estimate should be prepared with a memorandum underlying
assumptions, estimating methodology, uncertainties and risks

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Cost estimating
Preliminary Estimate: a Challenge

 Estimating methods are global as project details such as P&IDs are not prepared; the
estimating methodology will combine available cost data base and estimating tool box.

 Estimators use cost data breakdowns, unit costs, etc. from similar recent project units at
the location, or at similar (in terms of cost) location, with corrections for location
(importance of construction cost), escalation, and other foreseen different project
conditions. (Often the estimators will use units information from several projects).

 Many « factors » are used for so called « factored estimates »:


• Scaling factor: P1 / Po = (C1 / Co)0.65
• Factored estimate from equipment cost: P installed= K x P equipment
K may range from 2 to 6 depending on equipment type
For revamped areas an other K1 factor is to be applied on top
• Global factor on top of Direct Costs: Total cost = K x Project Direct Cost

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• A cost factor can be used for transportation (onshore projects)

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Cost estimating
Preliminary Estimate: a Challenge

 Cost information is gathered from all possible sources at the time, e.g:
• Major / special equipment or packages (glycol treatment, water
treatment, utilities and power packages, etc.): prices from Vendors
« budget » quotes.
• Interconnecting preliminary quantities estimated by engineering from
preliminary MTOs & unit costs used from previous project at the facilities,
for bulks cost & for construction cost; quotations from Vendors for large
pipe / pipelines
• Engineering, construction supervision manhours may be estimated by
ratios.
• Contingencies or CRP (Contingency, Risks and Profit) factor, added on top
of estimate

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Cost estimating
CAPEX estimate during FEED

 CAPEX estimate prepared according WBS/OBS; desired accuracy +/- 15%

 Estimate is Quantities x Unit Costs

 Construction cost is all-in construction mhrs rates x construction mhrs

 Construction cost: the most important cost item, the most difficult to estimate

 CRP (Contingency, Risks and Profit factor) is added on top of the cost estimate

 CAPEX estimate prepared with a memorandum underlying assumptions,


estimating methodology, uncertainties and risks.

 Estimating methodology principles are presented on next slides

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Cost estimating
CAPEX estimate during FEED

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RC - PR GES - 08174_A_A - Rev.1 - 18/07/2013 40
Cost estimating
CAPEX estimate during FEED

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Cost Control process
Owner perspective

 Owner cost control process and involvement in tracking cost


components depends on the type of EPC contract

 If a contract is on Reimbursable basis, Owner will have access to


all cost elements and is responsible for the complete Project cost

 If a contract is on a Lump Sum basis, Owner will have access only


to the cost items specified in the contract

 Owner will have access to the cost estimate to support change


orders, approve them, and include them to Cost Control process

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Cost Reporting and Control
Forecast

 Purpose : determine the Forecast to Complete

 Cost Forecast is updated on a regular basis (typically, monthly)

 Cost Forecast may anticipate on non-finalized commitments

 Cost Forecast requires a good knowledge of technical matters

 Cost Forecast may introduce some budget transfer

 Cost Forecast includes proper management of Contingencies


• Advisable not to consume them during the early stages
• Corporate rules (Owner and/or Contractor) may exist

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• The Project Manager has ultimate authority

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Cost Reporting and Control
Organisation principles
Cost control organisation includes mainly:

 Cost Control Manager, assisted by Cost Controllers depending on


Project size, responsible for global project cost control and
reporting to operationally to the Project Control Manager and
functionnaly to the Contractor Management (in case of a JV, will
report to JV Project Manager on one hand and, on the other
hand, to Partner Management within its own organisation, issues
being then adressed if necessary by the JV Steering Committee)

 Site Cost Control Manager responsible for cost control at the site
and reporting operationnally to the Site Manager but functionally
to the Cost Control Manager

 Cost Estimators to estimate project cost changes and reporting to

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the Project Control Manager

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Cost Reporting and Control
Cost Controller duties (1/2)
Mainly coordinates with:
 Engineering and scheduling / progress control organisations to control engineering
manhours cost expenditure, planned mobilisation and trends from productivity
and personnel mhrs rates, and to control bulks quantities trends considering
MTOs vs their engineering documents basis
 Procurement to control Vendors offers versus budget (advise budget target before
negotiations, check and approve CBTs and Vendor price), and track P.Os change
trends
 Fabrication / construction contracts management to control cost and trends versus
budget (before transfer of construction contracts administration the site)
 Site cost control to control site costs and trends
 Project Management for allocation and use of technical cost contingencies or
global project risks provisions

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Prepares costs expenses reports, forecast and monthly cost reports; also prepares
change orders

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Cost Reporting and Control
Cost Controller duties (2/2)
Mainly Coordinates with:
 Fabrication / Construction / Pre-com / com Management to control site
supervision cost (mobilised cost, planned mobilisation, daily rates costs...)
 Site Contracts Administrator(s) / quantities surveyors and Scheduling /
Progress Control Manager to control current construction cost, establish
forecasts from anticipated quantities variations, productivity, and additional
work orders
 Site procurement for local purchases
 Site Administration Manager for site running costs control (accommodation /
camps, TCF...)
 Prepares back-charges to Vendors and Construction Contractors as applicable,
insurance claims in case of damages during transport or at site

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 Prepares site costs expenses reports, forecast and monthly cost reports; also
prepares change orders

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Cost Reporting and Control
Periodic actions

 Day-to-day:
• Review work progress and consistency with contract terms
• Inform Management of any non-budgeted items
• Review all invoices received and consistency with contract terms
 Typically on a monthly basis:
• Calculate the escalation formulae and price revisions, if any
• Manage the various provisions
• Review the estimate to complete and the final forecast
 Less frequently (quarterly, annually, or ad hoc):
• Formal reporting to EPC Management, Owner and Partners
• Regulatory reporting if applicable (e.g. tax)

© 2011 - IFP Training


• Propose budget revisions

RC - PR GES - 08174_A_A - Rev.1 - 18/07/2013 48


Cost Reporting and Control
Keys of effective cost control

 Timely and serious estimate of Engineering Manhours


 Bulk Quantities estimate based on complete detail engineering
 Check of Suppliers and Fabrication/Construction contracts:
• Estimates based on up-to-date verified info
• Actual costs timely compared to estimate, and challenged
• Rigorous Procurement procedures, no by-pass
 Schedule changes: careful about cost consequences
 Rigourous Change Management
 Accurate and timely Reporting / Forecasting to Management

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 Timely followup of cost control actions decided by the team

RC - PR GES - 08174_A_A - Rev.1 - 18/07/2013 49


Management of change
Process

Management of Change Change Order Procedure


Covers all changes to contract • Covers Additions, Modifications
and Deletions to Project scope,
with impact on Project cost,
Engineering Deviation Requests schedule, process performance
• Cover deviations to contractual
reference standards or already • Procedure includes:
Approved Design Specifications − Change Process
• Written Procedure − Change Orders Log
• Deviation Requests Register − Approvals
• Clear Owner approval authority
• Change Requests Register

© 2011 - IFP Training


RC - PR GES - 08174_A_A - Rev.1 - 18/07/2013 50
Management of change
Deviation requests/engineering queries

 Clarify or ask a deviation to a contractual document, for the purpose of


developing the detail engineering and procurement requisitions

Usually due to:


• Conflicting requirements in different documents
• Proposal of an engineering improvement
• Required materials not consistent with local availability

 Ask a deviation to already approved requisition documents

Usually due to:


• Proposal of a supply improvement
• Availability of raw materials different from requirements
• Vendors fabrication or test standards different from requirements

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• Standard packages or skids

RC - PR GES - 08174_A_A - Rev.1 - 18/07/2013 51


Management of change
Change order procedure
A “Change Order” is not an anomaly
• When cost variations are not due to Contractor and potentially give rise to
a Change Order: Contractor notifies Company and prepares a Change
Order Request (COR) with an estimate and formal request to be usually
submitted within 2 weeks maximum to Company.
• Company may also need to change the scope, or to exert Options provided
under the contract, or for any reason to ask Contractor to change its work
thru a Change Order Instruction (COI). Company then notifies Contractor
with an estimate to be usually submitted within 2 weeks maximum to
Company.
• Change Orders are monitored by the Project Cost Management team and
recorded as soon as they are identified on a Change Order Register.
• Change Orders estimates are evaluated by the Contractor (using contract
unit costs as available), and checked by Company Cost Management team.

© 2011 - IFP Training


• Change Orders need to be formalized and agreed by all Parties and will
therefore be transferred to Project budgets (Company and Contractor)
only after Approval by Company.
RC - PR GES - 08174_A_A - Rev.1 - 18/07/2013 52
Management of change
Cost trends caused by Owner

 Project definition unclear or incomplete

 Scope changes during execution

 Delayed access to construction areas

 Missing elements or information

 Wrong assumptions on market costs

 Unclear interfaces between contractors

 Conflicts with EPC Contractor, or Suppliers, or Subcontractors

 Insufficient quality of Project Management Team

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 Delays in achieving Owner tasks

RC - PR GES - 08174_A_A - Rev.1 - 18/07/2013 53


Management of change
Cost trends caused by Environment

 Unplanned inflation rate or exchange rate changes

 Weather catastrophy (cyclones, flooding, earthquakes)

 Political trouble (strikes, wars, unplanned regulatory changes)

 Delays to obtain working visas

 Unexpectedly low productivity due to bad weather

 Unforeseen difficulties (soils or sea bed conditions)

© 2011 - IFP Training


RC - PR GES - 08174_A_A - Rev.1 - 18/07/2013 54
Management of change
Cost trends caused by EPC Contractor

 Initial Price too low

 Insufficient qualification of Project Management Team

 Inability to forecast on time

 Sub-contractors lack of performance

 Estimating errors (incomplete/incorrect technical info)

 Insufficient provisions or contingency

 Missing cost elements

 Wrong assumptions on supplier/subcontractor markets

© 2011 - IFP Training


RC - PR GES - 08174_A_A - Rev.1 - 18/07/2013 55
Project control

Key points to keep in mind

 Owner has a critical role in controlling EPC Contractor performance


 This role depends on the contract type but is always to be assured
 Scheduling:
• May be quite critical on Revamping projects (shutdown windows)
• Smaller projects need simpler tools
• Critical path should be clearly identified and optimized
 Cost estimating:
• Up-to-date cost databases are a key to effective estimating
• Accuracy of Cost Control estimate should be around 10%
• Estimate used for approval (FEED stage) should be based on quantities
 Cost and Schedule control:

© 2011 - IFP Training


• Monitoring methods should be clearly defined in the EPC contract
• For Revamping projects, may be closely inter-related

RC - PR GES - 08174_A_A - Rev.1 - 18/07/2013 56


ATTACHMENTS
I. WBS and Schedule examples

II. More about progress control

III. Cost reporting details/examples

© 2011 - IFP Training


RC - PR GES - 08174_A_A - Rev.1 - 18/07/2013 57
ATTACHMENT I
WBS and Schedule examples

© 2011 - IFP Training


RC - PR GES - 08174_A_A - Rev.1 - 18/07/2013 58
ATTACHMENT II
More about Progress Control

© 2011 - IFP Training


RC - PR GES - 08174_A_A - Rev.1 - 18/07/2013 65
Principle split

OVERALL
PROJECT

WORK PACKAGE 1 WORK PACKAGE 2

HOME OFFICE MANUFACTURING CONSTRUCTION AND HOME OFFICE MANUFACTURING CONSTRUCTION AND
SERVICES DELIVERY PRECOMMISSIONING SERVICES DELIVERY PRECOMMISSIONING

© 2011 - IFP Training


15% 35% 50% 15% 35% 50%

% according to USD values

RC - PR GES - 08174_A_A - Rev.1 - 18/07/2013 66


Principle split – Weights sample onshore

© 2011 - IFP Training


% according to mhrs for services and USD for procurement
RC - PR GES - 08174_A_A - Rev.1 - 18/07/2013 67
Progress measurement: Weighting sample offshore
FPSO 28,6%
TOPSIDES
Engineering 10,6%
Procurement 34,2%
Construction 16,8%
Integration 3,3%
Towing FPSO & Flotel 2,1%
Tie-in precomm and Comm 1,8%
HULL & L Q 31,2%

SPS 14,3%
Engineering 4,0%
Procurement 22,1%
Manufacturing 67,3%
Systems Testing 3,3%
Transport 3,3%

UFR 24,5%
Engineering 4,5%
Procurement 36,2%
Construction 14,5%
Offshore Installation 27,8%
OLT 17,0%

© 2011 - IFP Training


DRILLING 32,7%
Drilling Rig 42,8%
Rig Contract Services 57,2%

TOTAL 100,0%
RC - PR GES - 08174_A_A - Rev.1 - 18/07/2013 68
Recovery plan example: loss of mobilisation at year end
and drifting

RECOVERY PLAN:
INCREASE MOBILISATION
TO INCREASE PROGRESS

ACTUAL PROGRESS
ON TIME UNTIL END DEC.
BUT DRIFTING

© 2011 - IFP Training


RC - PR GES - 08174_A_A - Rev.1 - 18/07/2013 71
Project Schedule sample: Gas Plant 2 Trains extension and
upgrade – S/Ds Planning

Four S/Ds
at actual
EPC time
start

One
major S/D
initially

© 2011 - IFP Training


RC - PR GES - 08174_A_A - Rev.1 - 18/07/2013 72
Progress curves: Schedule Baseline Revisions

© 2011 - IFP Training


RC - PR GES - 08174_A_A - Rev.1 - 18/07/2013 73
JC preparation progress curve

© 2011 - IFP Training


Preparation of JCs may take several months: procedure for
preparation, progress control to be implemented
RC - PR GES - 08174_A_A - Rev.1 - 18/07/2013 74
Fabrication scheduling

© 2011 - IFP Training


RC - PR GES - 08174_A_A - Rev.1 - 18/07/2013 75
Scheduling transportation to site

 Transportation to site of the main components is not very difficult


by itself, but the coordination of this activity can be a real
challenge

 The speed of the spread(s) transporting the main components is


directly calculated from the distance and the marine spread
speed + some provisions for bad weather, adverse wind, …

 The capacity of the transportation barge or vessel must be


assessed carefully: transporting 2000 tons, 5000 tons or even
30000 tons is a case by case study

© 2011 - IFP Training


RC - PR GES - 08174_A_A - Rev.1 - 18/07/2013 76
Scheduling offshore installation

Initial scheduling of offshore installation requires:

 Detailed analysis of the scope: number and main characteristics


of all modules / decks / jackets / pipelines / floating storage…

 Evaluation of the marine construction equipment required:


• Derrick barge – crane capacity
• Pipe Laying Barge – stinger – max pipe size – type of welding
• Offshore tie-in means: ROV…
• Trenching, shore approach equipment
• Drilling rigs type…

© 2011 - IFP Training


The schedule will be reviewed after contractors selection

RC - PR GES - 08174_A_A - Rev.1 - 18/07/2013 77


Scheduling offshore installation

© 2011 - IFP Training


RC - PR GES - 08174_A_A - Rev.1 - 18/07/2013 78
Scheduling hook-up

 Hook-up time is highly dependant upon the yard fabrication and


its level of completion

 It is fundamental to reduce as much as possible the hook-up


work: hook-up is very costly and always critical

 No hook-up without accommodation

 No hook-up without a good logistic and supporting equipment

© 2011 - IFP Training


RC - PR GES - 08174_A_A - Rev.1 - 18/07/2013 79
ATTACHMENT III
Cost Reporting details/examples

© 2011 - IFP Training


RC - PR GES - 08174_A_A - Rev.1 - 18/07/2013 80
Company Cost Report Format Principles

Project Level*
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
Approve Scope Budget Current Commit Estimate Forecast Variance Expend. Approved
Description d Change Transfer Budget To (5+6) (+/-) Incurred Invoices
Budget (1+2+3) Complete (4-7)
AFE
X 100 0 0 100 90 12 102 2 70 65
Y 50 0 10 60 60 0 60 0 60 60
Z 90 0 - 10 80 80 -5 75 -5 73 65

Sub-total 240 0 0 240 230 7 237 -3 203 190

Provisions
Contingen 24 0 0 24 0 22 22 -2 0 0
cy
Total 264 0 0 264 230 29 259 -5 203 190

© 2011 - IFP Training


* Level 0 = Project
1 = Phase
2 = Major Work Split
3 = Commitment
4 = Work Package

RC - PR GES - 08174_A_A - Rev.1 - 18/07/2013 82


Cost monitoring example
TOTAL E&P XXXX PROJECT: ANGELA PAPYRUS
DATE: OCT 2003 ALL IN k US$
LEVEL 0
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
CURRENT Variance
APPROVED SCOPE BUDGET ESTIMATE to FORECAST Expenditure Approved
CODE
TOTAL E&P XXXX DESCRIPTION BUDGET COMMITMENT (+/ -) (7- ALL IN k US$
BUDGET CHANGE TRANSFER COMPLETE (5+6) Incurred Invoices
DATE: OCT 2004 PROJECT: ANGELA PAPYRUS (1+2+3) 4)
Initial Studies
100 13350 0 0 13350 13350 0 13350 0
Wellhead Connect.
200 54550
LEVEL
0
1 WELLHEAD
0 54550
PF & CONNECTION
51550 3000 54550 0 30 26
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
300 Production Pltf 137320 0 -10000 127320 118380 8940 127320 0 12760 10000
400 Quarter Pltf 37070 0 CURRENT
-500 36570
34500 ESTIMATE
2070to 36570 Variance0 6383 5073
APPROVED SCOPE BUDGET FORECAST Expenditure Approved
CODE DESCRIPTION
500 FPSO 42430 0 2700BUDGET 45130 COMMITMENT
43170 1960 45130 (+/ -) 0 18823 16450
TOTAL E&P XXXX600 Buoy & SealinesBUDGET CHANGE TRANSFER
0 PROJECT:
COMPLETE (5+6) Incurred Invoices
12900 0 ANGELA
(1+2+3) 12900 PAPYRUS 0 12900 12900 (7-4) 0 ALL IN k US$45 42
DATE:
210OCT 2004
Gen. Mngt700
& Serv
Management 2200 5600 0 0 0 0 22005600 2200 0 5600 0 56002200 0 0 350
15 150
220Engineering 4400 323 LEVEL 0 1 Production4723 Platform 4523
200 4723 0 0 0
230 Mal & Eqpt supply Sub-Total (1) 8500 303220 (2)645 0 (3) 0-7800 295420
(4) 9145 (5) 260950
9045 34470
(6) 100 295420
(7) 9145 (8) 0 0 38056
(9) 0 31606
(10) 0
240 Onshore fab 22500 1682 0 24182 23582 600 24182 0 0 0
800 Provisions (rate) 2100 0 CURRENT
-10 2090 0 2090 2090 Variance 0 10 10
250 Transportation APPROVED3550 SCOPE 0 BUDGET0 3550 3450 ESTIMATE 100to FORECAST 3550 0 Expenditures 0 Approved 0
CODE 900 Contingency
DESCRIPTION 12430 0 BUDGET
0 12430 COMMITMENT 0 12430 12430 (+/ -) 0 0 0
260 Offshore
TOTAL E&P XXXX Works BUDGET
16500 CHANGE 0 TRANSFER-500 16000 15800 COMPLETE 200 (5+6) 16000 0 Incurred 0 Invoices 0
PROJECT: (1+2+3) ANGELA PAPYRUS (7-4) ALL IN k US$
270 Hook-up Wks 6200 0 0 6200 6000 200 6200 0 0 0
DATE: OCT 2004
310 Commissioning
280 Long lead Items sup
**** TOTAL 3200 317750
28630 0 0 0 LEVEL
-4200 -7810 1 24430
-1800 Quarter
1400
309940 Platform 1000
24430
260950 48990400 0 309940 1400
24430 0 00 0
38066 4800 0
316162400
320 Spare
290 Gen. parts
Mngt & Serv 950
2640
(1) (2)
0 0
(3)
-350 0
(4)
600
2640 (5)
550
2400 (6)
50
240 (7)
600
2640 (8)
00
(9)
0 240
(10)
0240
330 Engineering 4680 0 -700 3980 3600 380 3980 0 720 360
CURRENT Variance
340 Mal & Eqpt supply 45840
APPROVED SCOPE 0 -5100
BUDGET 40740 40300 ESTIMATE440 to FORECAST 40740 0 Expenditure4500Approved4500
CODE DESCRIPTION BUDGET COMMITMENT (+/ -)
2*** Onshore
350 TOTAL fab BUDGET
16480
68000 CHANGE
2650 0 TRANSFER
-2650 0 16480
68000 16150
66150 COMPLETE 330
1850 (5+6)68000
16480 0 Incurred3502500 Invoices 2500
TOTAL E&P XXXX (1+2+3) (7-4)ALL0IN k US$ 0
360 Transportation
DATE: OCT 2004
4500 0 PROJECT: 0 ANGELA
4500 PAPYRUS 4500 0 4500 0 0 0
370 410 Long Works
Offshore lead Items 18000 2560 0 0 00 2560
18000 2560
14500 35000 2560
18000 00 2560 0 1250 0
380 420 Gen. Mngt
Hook-up Wks & Serv 8500 1200 0 0
LEVEL
00
18500
FPSO & BUOY
1200 1200
6200 23000 1200
8500 00 240 0 240 0
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
380 430 Engineering sup
Commissioning 4850 2150 0 0 00 2150
4850 2050
3800 100
1050 2150
4850 00 410 0 410 0
390 440 Malparts
Spare & Eqpt supply 12720
3200 0 0 -250
0 CURRENT 12470
3200 11890
2500 ESTIMATE 580 700 FORECAST 3200 Variance
12470 00 2600 0 2600 0
APPROVED SCOPE BUDGET to Expenditure Approved
CODE
450 Onshore DESCRIPTION
fab 6140 0 0 BUDGET 6140 COMMITMENT 5725 415 6140 (+/ -) 0 573 573
BUDGET CHANGE TRANSFER COMPLETE (5+6) Incurred Invoices
460 Transportation 2200 0 0 (1+2+3) 2200 2125 75 2200 (7-4) 0 0 0
3*** 470 Offshore
TOTAL
510 Works
Purchase Hull 5400
137320
12500 0 00 -10000 0
1500 5400
127320
14000 5100
118380
14000 300
8940
0 5400
127320
14000 0 00 0
14000 12760 14000 0
10000
Hook-up
480520 Wks& Serv
Gen. Mngt 3600
1500 00 -250 0 3350
1500 2950
1400 400
100 3350
1500 0 0 240 0 240 0
Commissioning
480530 Engineering sup 800
3650 00 00 800
3650 600
3500 200
150 3650800 0 0 410 0 410 0
Spare
490540 parts
Mal & Eqpt supply 300
10200 00 00 300
10200 300
9900 300 0 10200300 0 0 3600 0 1800 0

© 2011 - IFP Training


550 Onshore fab 6500 0 0 6500 5900 600 6500 0 573 0
560 Towing 1800 0 0 1800 1800 0 1800 0 0 0
TOTAL
4*** 570 Offshore Works 37070
2500 00 -500 0 36570
2500 34500
2200 2070
300 36570
2500 0 0 6383
0 5073
0
580 Hook-up Wks 2280 0 1200 3480 3100 380 3480 0 0 0
580 Commissioning sup 1100 0 0 1100 970 130 1100 0 0 0
590 Spare parts 400 0 0 400 400 0 400 0 0 0

5*** TOTAL 42430 0 2700 45130 43170 1960 45130 0 18823 16450

RC - PR GES - 08174_A_A - Rev.1 - 18/07/2013 83