ID: 58095

Lessons learned in engineering development for Major Projects

CERTIFICATION PAPER FOR CCE/CCC exam.

May 07, 2011

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 Table of Contents
ABSTRACT ............................................................................................................................................................................. 4
INTRODUCTION AND PROBLEM STATEMENT ..................................................................................................................... 5
CRITICALITY OF DETAILED ENGINEERING ............................................................................................................................ 6
HOW MAJOR PROJECTS DIFFER FROM SMALLER PROJECTS?............................................................................................. 6
SCOPE OF THE STUDY ........................................................................................................................................................... 7
LESSONS LEARNED MAP ...................................................................................................................................................... 9
FEL (FEED) DEVELOPMENT: ........................................................................................................................................ 9
PROJECT EXECUTION: ............................................................................................................................................... 13
ORGANIZATION CAPABILITY: ................................................................................................................................... 19
PROJECT CONTROLS AND ESTIMATING: .................................................................................................................. 20
CONCLUSION ...................................................................................................................................................................... 23

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 List of Tables
Table 1: Scope of study ......................................................................................................................... 7
Table 2: PEP content findings .......................................................................................................... 14
Table 3: Phased vs. all at once approach - Pros and Cons .................................................................. 15
Table 4: Procurement and contracting strategy - lessons learned ..................................................... 16
Table 5: Engineering norms sample for estimate validation .............................................................. 22

List of Figures

Figure 1: Stage gate process ................................................................................................................. 5

Figure 2: Factors impacted by detailed engineering ............................................................................ 6
Figure 3: Study: project cost growth..................................................................................................... 8
Figure 4: Study - home office cost growth............................................................................................ 8
Figure 5: Lessons learned map ............................................................................................................. 9
Figure 6: Permitting timeline sample ................................................................................................. 10
Figure 7: Pending change orders at end of FEED ................................................................................ 11
Figure 8: Impact of open scope at the end of FEED ........................................................................... 12
Figure 9: FEED - Detail engineering overlap ....................................................................................... 13
Figure 10: Health and process safety studies road map ..................................................................... 13
Figure 11: Phased vs. all at once execution ........................................................................................ 15
Figure 13: Quality management lessons learned ............................................................................... 17
Figure 14: Sample KPI report .............................................................................................................. 18
Figure 15: Engineering / Construction overlap ................................................................................... 19
Figure 16: Sample engineering budget development ........................................................................ 21
Figure 17: Schedule assurance lessons learned.................................................................................. 21
Figure 18: Sample engineering discipline progress report ................................................................. 22

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Abstract
Over the last ten years, the market has witnessed an increased number of major refinery projects
that were executed to meet the market demand and reap the benefits of commercial
opportunities. These projects often intended to reposition and expand existing refineries through
building new process units and revamping existing ones. This resulted in complex engineering
scope requirements and hence execution challenges and significant performance issues. From
experience, projects that fail in engineering often end up with construction and field problems,
operability issues, start up delays and significant budget and schedule overrun. This paper
examines the challenges faced by five major projects during the front-end engineering and design
(FEED) phase that led to significant performance issues and deliver a lessons learned map of key
areas of interest to best develop and execute the detailed engineering phase.

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Introduction and problem statement

The decisions to execute major projects are typically based on the competitive analysis, scope
definition and execution planning performed during the FEED stage. The FEED is the most critical
stage where its easy to influence the design at a relatively low cost [7]. Unfortunately, projects that
are under time constraints often shorten the timing of the FEED stage to meet their respective
schedule. The perception is that any open scope and planning deliverables can be finalized after
project sanction. However, without the appropriate scope definition, the sanction estimates will
not carry the level of confidence needed at this stage. This exposes the project to the risk of major
issues in detailed engineering, field construction and eventually start up and commissioning.

Most of the owner companies now adopt a stage gate process for the execution of their projects as
shown in figure 1. The process emphasize on completing the deliverables at each stage and going
through a stringent decision making process before proceeding forward. The process reaches a
major decision point at the end of the FEED phase where project sanction (full authorization and
funding) is sought.

Figure 1: Stage gate process

The FEED phase typically focuses on preliminary design and execution planning deliverables that
helps the stakeholders understand the process systems capabilities, execution difficulties,
schedules and most importantly the economics of the projects. At the end of this stage, the project
team will request full authorization to commit to procurement activities and detailed engineering
work. The authorization request is typically supported by +/- 20% estimate and appropriate
schedule to depict the execution path of the project. Its fair to say then that if the FEED phase is
not complete, yet the project is authorized to move forward to detailed engineering, authorization
estimates and schedules may have been based on incomplete scope definition.

The incomplete scope and poor planning will creep to the detailed engineering phase and cause
rework in engineering deliverables produced during the FEED. This will eventually lengthen the
detailed engineering and construction phase.

This paper examines the challenges faced by five major projects during the FEED that led to
significant projects performance issues. Lessons learned map detailing key areas of interest is also
presented to help direct the managers attention to some of the common occurrences during the
life the project that often leads to poor performances.

The paper is structured as follows:

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I will first address the criticality of the detailed engineering phase. Since the study focuses on the
detailed engineering aspect of major projects, I will discuss what characterize major projects and
add to their complexity. Using data from the five major projects, I will then construct a lessons
learned map and discuss the respective areas of interest.

Criticality of detailed engineering

Engineering performance will likely affect the parameters listed in Figure 2. To declare a failure in
detailed engineering in a specific project will be dependent on cost and schedule overruns, process
safety issues and if the unit is not performing according to design specs (operability). The
magnitude of cost and schedule overrun and how acceptable they are, is mainly dependent on the
stakeholder requirements and analysis of the overall project. Its important to note that a 10%
engineering overrun will increase the project cost by 2% (impact of engineering only). Additionally,
the greater impact will be due to the extension of the engineering schedule, field rework, delay in
construction and start up and operability problems. One must consider the impact this has on the
project economics and project feasibility. Is the project still economical with this overrun? These
overruns can definitely be avoided!

Figure 2: Factors impacted by detailed engineering

How major projects differ from smaller projects?

The Projects cost is 200MM 1BB - This is however is not a standard

May trigger complex environmental and regulatory requirements - The

environmental and regulatory requirements may dictate the availability of permit
before authorization. In some projects, this may trigger changes in scope. For
example, building a new process unit to handle sulfur levels or firing limits.

Will stir the labor market (engineering and construction) - Due to their size, these
projects will require huge labor pool to execute engineering and constructions. This
becomes extremely challenging if different projects are competing for these

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 resources which will impact cost and schedule (projects will pay more to acquire
these resources).

Have longer schedules > 40 months, from alternative selection through start up.

Process engineering and OSBL (outside boundary limit) complexity the complexity
in the ISBL (inside boundary limit) will drive complexity in the OSBL. Since OSBL
engineering often lags ISBL, OSBL estimates are often understated.

May require the use of several contractors - This also poses a challenge and requires
stringent plan to manage the interface among the various parties.

Requires significant owners organization and financial profile It is extremely

important for the projects to have dedicated owners team to oversee and review the
work being executed by the contractors.

May be part of a program Major projects are often part of major modernization
programs. The execution requires an integrated project management team to
manage the changes and scope evolution and assess the impact on other projects
within the same program.

Scope of the study

Lessons learned were based on a study performed on five major projects as outlined in the table
below:
Project Execution Schedules 2003 - 2007
Project Sanctioned Cost 280MM 850MM
Project Type 3 Greenfield
All Process Units (projects C, D & E)
2 Mix of Revamp, Brownfield & Greenfield
(projects A&B)
Owners Companies represented 3
EPCm represented 2
Table 1: Scope of study

A series of interviews were conducted by the project team with 15-25 people on each project.

Upon analysis of the project data, it was found that the average cost overrun for these five projects
was about 6% and ranged from 4% to 9% as seen in figure 3. This increase is above the project
contingency plus management reserves. Projects that consisted of revamp and brownfield scope
have typically experienced more cost growth than those of a greenfield type projects. This is not
uncommon considering the amount of discovery that could be encountered on site, specifically for

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older process units. This would result in engineering design rework and field delays which can
extend the turnaround (TAR) window.

Total Project - Cost Growth

10%
Mix of Revamp, Brow nfield
9%
& Greenfield
8%
7% Greenfield
6%
5%
4%
3%
2%
1%
0%
Project A Project B Project C Project D Project E

Figure 3: Study: project cost growth

Furthermore, the average home office cost growth for these five projects was about 14% and
ranged from 11% to 19% as shown in figure 4. Its important to note that projects with highest
engineering growth contributed to the highest overall cost growth.

Project Definition & Detailed Engineering

Cost Growth
30%
Project Definition Detailed Engineering
25%
20%
15%
10%
5%
0%
Project A Project B Project C Project D Project E

Mix Greenfield

Figure 4: Study - home office cost growth

One may perceive the results as typical cost growth (9% isnt that bad). I believe an acceptable level
of overrun, is dependent on the stakeholder requirements, market strategy and conditions.
However, when considering the impact of the overrun on the IRR and the economic feasibility of
the project, this may present a serious issue. Additionally, if the project was built as part of a
program, the impact of the scope change and cost overrun will drive changes downstream on other
projects being executed. The 9% overrun becomes multiplied for the overall program.

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Regardless of the magnitude of the overrun and the perception of its adequacy or not, these
challenges can be minimized and even avoided by simply following best and recommended
practices around project execution and understanding business priorities.

I intend to present some of the shortcomings that major projects always experience and how they
can be converted into lessons learned to help deliver projects with best in class safety, cost,
schedule and operability performance.

Lessons learned map

The lessons learned on these projects were generated using workshops at close out, a series of
questionnaires to the project team and personal interviews. The results were then analyzed and
categorized into four different main categories and six sub categories as shown in figure 5.

Figure 5: Lessons learned map

FEL (FEED) Development:

Research in the construction industry has always identified good scope definition as a critical
factor in executing a successful project [3,4] Without the appropriate definition, any work that is
estimated and planned may not reflect a true picture of what the project is intending to build.

The lessons learned generated around this area were focused on the teams understanding of the
business priorities, the level of scope definition and the impact of the environmental regulations on

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the scope and schedule. This area also tested the importance of applying the value improvement
practices and the outcome they generated.

Clear business objectives: it was found that projects personnel didnt believe they had a
clear understanding of the business objectives and even when decision criterias and
boundary conditions were set on the project, they were changed multiple times causing
the development of more project alternatives. When the business objectives remained
unclear after sanction, they triggered major late scope changes which are costly. It was
also noted during one of the interviews that economical evaluations of the alternatives
didnt consider any inherent specific risks or opportunities within each alternative. A
SWOT (strength-weakness-opportunities-threat) workshop would have generated risks
or opportunities list to support the financial analysis. This would have also supported
minimizing the number of alternatives going into the next stage and hence shorten the
FEED duration.

Environmental regulations and requirements: During the feed development, some

projects didnt identify accurately the impact of permitting and potential environmental
regulations on the cost and schedule for each alternative. For example, the change in
sulfur specifications would have increased the estimated cost for one project by more
than 50 million but was not incorporated until late FEED. This caused not just an
increase in the project cost but delayed the schedule as well. Additionally, the early
project schedules didnt allow sufficient time for the receipt of permit (sample high level
schedule in figure 6). If the permit application from submittal to receipt required two
years, this might have rendered some alternatives infeasible. This might also require the
team to commit funding before sanction which increases the risks of regret spend in the
case the permit was not approved.

Year 2011 2012 2013

Quarter 1 2 3 4 1 2 3 4 1 2 3

Project Selection

Review Permit Strategy

Prepare Permit Application

Application Submittal

Permit Review & Issuance

Project Sanction
Figure 6: Permitting timeline sample

Soil data and site information: The workshop conducted revealed that soil data and
hydrology were not definitive by the end of the FEED stage. As such the test for
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 contamination was not done and triggered the involvement of the remediation
contractors which extended the project schedule. Furthermore, some of the
assumptions around site plan could have been narrowed if several walkthroughs were
conducted with the engineering and construction contractor and led by the site
operations team.

Value improvement practices (VIP): All project team personnel reported pressure from
senior management to apply as much VIPs as possible. This would have helped the
project in increasing their FEED score when external and internal reviews are conducted.
The teams felt however that some VIPs workshops were compressed to the point they
lost their true value and noted more benefits could have been attained if only critical
and relevant VIPs were conducted.

Scope definition and offsite utility requirements: The analysis of the data set as shown
in figure 7 depicts that all projects in this study had pending design changes that rolled
over to detailed engineering. This might have been a reflection of unclear business
objectives but the correlation with the cost overrun was expected.

Pending Changes Count @ End of FEL

20 30%
Pending Changes Count

Det. Eng Cost Grow th

16 25%

% Cost Growth
Pending Changes
20%
12

15%
8
10%
4
5%
- 0%
Project A Project B Project C Project D Project E

Mix Greenfield

Figure 7: Pending change orders at end of FEED

Projects were allowed to go through to detail engineering knowing too many scope items
were still open. This would typically happen because the business would like to maintain
some flexibility as the project go through the stage gate process. This need for flexibility
resulted in significant project cost and schedule overrun. Figure 8 below supports this
argument.

The first Gantt chart depicts high level project schedule with a common overlap between
engineering and schedule. Typically, 70-80% engineering complete will support the start of
construction effort, specifically in site and civil work.

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 Figure 8: Impact of open scope at the end of FEED

The second Gantt chart depicts a project with open scope items at the end of FEED. Because
there is a perception that these open items can be finalized in execute without any impact
to the schedule, the project is allowed to go through the stage gate. Once in the execute
stage; the project team finds themselves doing the actual FEED work in execute. This
typically results in delays in the engineering schedule and eventually delays in the
construction schedule and start up.

In the third Gantt chart, the team realizes that the engineering schedule is slipping but
decides to maintain the construction schedule as is, to finish the project on time. However,
maintaining the construction schedule would mean that construction work would start
early. This results in major rework when engineering deliverables and issue for construction
(IFC) are issued.

Some projects overlaps the FEED with detail engineering. While this is typically done to
accelerate the schedule, the results are weak engineering products and cost overrun.
Figure 8 shows how the overlap undermines the importance of the FEED stage and
increases the projects minimum exposure / cancelation costs.

Other engineering schedule slippage revolved around underestimating the OSBL scope of
the project. Most projects in this set didnt perform any comprehensive OSBL scope studies
in the FEED and allowed for a percentage in their estimate. Unfortunately, changes in ISBL
costs and schedule drove changes in the OSBL scope, cost and schedule.

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 Figure 9: FEED - Detail engineering overlap

For health, environmental and process safety studies, the questionnaires identified the
criticality of conducting process safety studies early in FEED. This would help ensure that the
alternative selection process account for the process safety risks that would be
incorporated into the preliminary design for that selected option. Furthermore, hazop
(hazard and operability study should be performed on IFD (Issue for design) drawings at the
end of FEED to assess any risks/ causes of loss of containment and the existing safe guards
and whether they are sufficient. These studies would be eventually be followed by a
detailed review on mature and vendor packages P&IDs (Process and instrumentation
diagrams) before IFC are issued.

The road map outlined below depicts the teams perception of what process safety and
health studies need to be completed over the project life cycle.

Figure 10: Health and process safety studies road map

Project Execution:
The success of major projects largely depends on how well the team plan the work and work the
plan to achieve the project objectives, while maintaining good cohesion between all aspects of the
project [6,10]. The questionnaires and interviews focused next on the project execution plan (PEP)
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developed for each project during the FEED stage. The critical performance indicator here was to
ensure that the final PEP addressed all project functions to close out. Additionally, topics such as
procurement and contracting, quality management, cashflow constraints and the interface with the
plant projects and turnaround process were assessed.

Project execution plan: Table 2 finalizes the findings from the different projects in this
study regarding the content of the project execution plan.

PEP document length PEP should be concise and simple and

Roles and Responsibilities
Stage gate review timeline
Permitting timeline
Interface with the
turnaround / shutdown
Delegation of authority /
Financial authority
Table 2: PEP content findings
reference the what in the project. The PEP
should reference detail plans to address the
hows
This was an area that caused issues and
scope shifts in three of the five projects. The
PEP should clearly state the scope areas and
responsibility division between the owner
and contractor. This should also be part of
the estimate assurance review to ensure that
the estimate covers all costs.
The PEP should include key dates for any
reviews needed in the schedule. This will
allow internal and external stakeholder to
account for these reviews in their schedule. If
the project is being done under a joint
venture (JV) umbrella, some stakeholders
may require thirty to sixty days to make a
decision on specific gate. If this is not
planned from the outset, schedule delays is
expected.
As addressed in the previous section, key
permitting dates and assumptions should be
stated in the PEP.
The TAR process in most of the companies
may include constraints regarding the review
of IFCs, material on site and any other plant
reviews. Projects should incorporate these
specific milestones in their schedule and
state the assumptions clearly in the PEP.
Some projects faced serious schedule issues
due to change order approval delay. The PEP
should include the first line approval
authorities and their delegates in the instant
critical approvals are sought.

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 Program / project interface: The survey questioned the considerations that were
assessed for each project that was executed within a program. It was realized that in
this study set, multiple major projects were executed concurrently within the program
which posed various execution challenges. To understand the consequences of this
approach, a comparison was made between programs that utilized a phased approach
for their execution against projects that were executed concurrently (figure 11).
PROJ A

PROJ B
PROGRAM A
Phased PROJ C
approach
PROJ D

PROJ A

PROJ B
PROGRAM B
all at once
PROJ C

PROJ D
Figure 11: Phased vs. all at once execution

While the impact affected procurement and construction, the emphasis here was on the
FEED and detailed engineering work. Table 3 depicts the advantages and disadvantages
of the two approaches.
Program B Program A
Engineering design Risk that changes in design in one
project are not incorporated into other
projects
Possibility of Rework
Team & knowledge Potential Project team
transfer continuity/learning curve
benefits
OSBL Can be negatively impacted by
inefficient construction of
infrastructure to support the phased
investment.
Labor shortage Significant need for large and skilled
pool of labor
Team interface Larger Owners organization to manage
the interface.
Cash flows Heavy annual cash flow is needed. If
program becomes cash flow
constrained, problem is magnified.

Table 3: Phased vs. all at once approach - Pros and Cons

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 Procurement and Contracting Strategy: The lessons learned identified in the survey are
summarized in table 4 for procurement and contracting:

Procurement Contracting

Projects must invest some time in FEED
(through a contract strategy workshop)
investigating an effective form of
performance or hybrid contracts (mixed
strategy contracts)
Project controls must participate in
shaping the contracting and procurement
strategy. This will help set the standard for
effective execution and a contract that can
be easily controlled
Consideration a competitive bid process
for FEED and detail engineering if the
schedule allows. This would prevent the
existing contractor from becoming
complacent.
Ordering equipment during FEED will help
set the pace for a faster execution and
provide an understanding of the project
scope which will drive minimum scope
changes.
Since minimum exposure is increased now
for the project (if cancelled), consider
negotiating cancellation terms or pay only
for preliminary vendor engineering data to
support the preliminary design at the end
of FEED
Vendor and fabrication shops limited
capabilities may add significant time to the
schedule. Hence the importance of
historical experiences and prequalification
assessments in understanding the vendors
performance and impact on schedule.

Allow sufficient time in the schedule for a Allow the risk analysis workshop
contractor change out. If there is a shift conducted early FEED to reflect the risks of
in contractors, consider the time and cost major equipment fabrication and delivery
it takes for a smooth handover. cycle time.

Develop a licensor-EPC interface plan /

clarify roles and responsibilities regarding
design package delivery.

Table 4: Procurement and contracting strategy - lessons learned

Cashflow constraints /Schedule driven projects: Multiple projects in this set had
experienced cashflow constraints several times during their life cycle. The cashflow
constraints triggered major changes to project execution planning, staffing and caused
the loss of key team members. This impact was even multiplied when the project was
schedule driven. Team members reported that a thorough analysis of the impact of the
cashflow constraint was never conducted by the respective personnel. Surprisingly, the
message to senior management was the ability of the project to conform to the
cashflow constraints and still meet the project schedule.
This was demonstrated by the team going through the FEL 2 and FEL 3 stages with
incomplete deliverables because the funds were not available. The incomplete FEED
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 work was thought to be non-critical because deliverables would be finalized in execute.
The results were deliverables rework, inconclusive scope and major execute stage
delays.

Quality management: A quality management system (QMS) provides the basis to

develop and deliver quality requirements by integrating quality management processes
into the design, procurement, construction and handover activities. The study
conducted on the five projects revealed areas that were not incorporated as part of the
PEP, or didnt work according to plan. The areas are highlighted in figure 12 in the
context of the standard quality management processes; 1) quality planning, 2) quality
assurance, 3) quality controls and 4) quality improvements.

Figure 12: Quality management lessons learned

Main findings as noted by the core teams in these projects were around having
ambiguous roles and responsibilities, the lack of a clear interface plan with the
contractors and suppliers and lack of standard tools to measure key performance
indicators on the projects. Furthermore, the team noted that contractors in three of the
projects didnt provide any details on how they would go about self assessing their
quality levels, specifically around the design. Typically every discipline would have an
activity plan that determines all procedures to be followed. This also would serve as a
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 checklist for future quality audits. One contractor did have an activity plan for each
discipline but upon review, it was found out that the discipline lead didnt need to
comply with all checklist requirements in some areas. This for example should have
checked by the owners lead during the FEED for compliance versus their policy and
procedures.

The commitment to improvement as viewed by these projects should have been

apparent by the team dedication to record all issues and disseminate the information
internally and externally as part of a bigger knowledge management effort. Root cause
analysis should have been done also to understand reoccurring quality issues.

A sample KPI report is shown in figure 13. The KPI report could assesses the number of
non conformance reports generated on design versus or number of audits performed
versus planned.

Figure 13: Sample KPI report

Engineering / Construction interface: Engineering typically should not overlap

construction by more than 30- 40% [1]. This is mainly because if the overlap is larger,

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 engineering is still not matured enough to start construction. The early construction
efforts will likely trigger rework in the field as engineering deliverables are finalized.

Figure 14: Engineering / Construction overlap

Organization capability:
The criticality of the availability and dedication of resources to the project success are often
understated. Project teams often reports that they dont have the resources to provide the
necessary oversight on the project. This in turn affects cost and schedule. This area is also
overlooked when assessing the capability of the contractors, suppliers and fabricators. The lessons
learned recorded from the five projects emphasized the same message.

Market conditions and labor shortage: With the execution of more major and mega
projects, the market ability to respond to the demand is often constrained by the
availability of the resources in both the owner and contractor organization. The project
schedule must allow time for the ramp up of the resources. Additionally, the project
team must assess carefully the quality of the resources brought on the project during
peak time. In three of the projects in this study, project managers responded to
schedule delays by bringing in more labor, only to realize the additional labor was not as
efficient as they expected.

Owners organization: The owners team is the backbone to the success of any project.
Any deliverables produced on the project will require the owners team approval before
proceeding forward. Projects often underestimate the size of the owners team and in
many cases resources are brought in at partial capacity (resources not fully dedicated to
the project). This contributed to the schedule delays in two projects in this study.

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 Stakeholder management: The lessons learned recorded in this study suggested that
stakeholders might not have been involved enough in the stage gate review and
decision making process. Their late involvement caused rework issues and had greater
impact on the schedule.

Peer review: Peer reviews are always planned on the project for assurance purposes
and to capture the peers experience in executing similar projects. However, due to the
wide range of resources needed in the peer review, early planning is needed to secure
their attendance at the meeting.

Team alignment / retaining: Managers always agree that people is the number one
contributor to the project success. Hence, retaining key team resources must be a
priority in all projects. This task not only fosters a homogeneous environment within the
team, but is critical for knowledge management transfer internally within the project
and externally with the business.

Project controls and estimating:

A successful project controls system will serve as an early alarm system to depict deviation from
the project plan and recommend the appropriate actions. A successful system will start with the
development of processes and procedures for effective budget and schedule development and the
respective monitoring and reporting effort. Key lessons learned identified in this area are shown
below.
Project controls requirements: Effective project controls starts with strict project
controls requirements. The effective planning for project controls should start early in
FEED and involve owners and contractor team members. One of the early activities
would be in finalizing the project controls calendar for cost and schedule reporting
timeline. Additionally:
o For projects executed by multiple contractors, standard reporting template
would support and accelerate the reporting process.
o The contractors physically progressing procedures should be evaluated,
understood and audited consistently.
o Detailed engineering estimates should be based on discipline hours by drawings
and should directly link to the engineering schedule.
o A rigorous change management program should be implemented early in the
process. Potential changes should be identified regardless of the teams
conception of their relevance and size.
o A cost risk analysis must also reflect the changes and risks identified in the
schedule. Schedules and estimates cant be divorced.

Budget development: An effective way to develop engineering budgets is to prepare a

deliverable based cost estimate by determining at the discipline level, the amount of
hours needed by drawings, allowing for supervision hours, recycling and revisions. The
hours generated by discipline are then reflected in the detailed engineering schedule
and resource leveling occurs to ensure a feasible schedule. The resource loaded
schedule generates the resource histograms and man-hours curves. A sample
engineering budget template for mechanical engineering is shown in figure 15.

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 Figure 15: Sample engineering budget development

Schedule assurance: There are many papers that identified excellent techniques for
evaluating and assessing the quality of the schedules [1,2]. Schedule assurance activities
may depict areas of concerns in the native file, the basis of schedule or quantitatively
through benchmarking with industry projects. This is shown in figure 16.

SCHEDULE
ASSURANCE

SCHEDULE SYSTEM
QUALITATIVE QUANTITIAVE
VALIDATION

Alignment of the
schedule with the
business objectives

Permitting timeline
Review of the native
files High level project
Contracting strategy
Constraints duration comparisons
Average activity float against similar industry
Procurement long lead
Resource loading projects
items
Schedule logic review
Excessive lag check Other metrics check
Cashflow assumptions
Project schedule Drawings IFCs to
Progress stated installation
Critical path

Risk analysis

Design model reviews

timeline

Figure 16: Schedule assurance lessons learned

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 Estimate validation: Current trends in cost estimation of major projects are driving
owners to emphasize on the importance of producing reliable and accurate estimates to
avoid any potential overruns [5,8,11] .The estimate validation process in general should
assess alignment of the estimate with the schedule and execution plans. Additionally,
quantitative analysis could address engineering norms such as:

Engineering norms
Detailed engineering costs as a % of Isometric drawings per piece of
Total costs, field or equipment costs. equipment.
Engineering hours per drawing type. Construction quantities per piece
Engineering hours per construction of equipment.
quantities. Staffing plan analysis in
Engineering labor rate / use of comparison to the schedule.
international offices.
Table 5: Engineering norms sample for estimate validation

Productivity measurements: This area is concerned by having a detailed physical

progressing plan that has been reviewed and agreed on among all parties. One of the
key issues that projects experienced in this study was the inconsistent and out of
order reporting of physical progress (for example: piping leading process engineering).
Figure 17 depicts a sample progress report that could be utilized to verify the
contractors progress:

Figure 17: Sample engineering discipline progress report

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 Change management: The following are essential for implementing an effective change
management program:
Changes in scope that impacted the estimates from FEL1 and FEL 2 must be
recorded because the trend in estimates from the early feed phases to sanction
often catches the stakeholders by surprise [9].
A clear process to accept/ reject a change should be documented and agreed.
The team should be encouraged to freeze the design and execution strategy by the
end of FEED stage.
Methodologies for scope deletion / scope addition change order estimates should
be agreed.

Project controls audits: The owners team must always be involved in auditing the
contractors processes and procedures, cost and schedule reporting. The audits should
be planned per the quality control audit schedules and should be as periodic as needed
to assure continuous compliance and improvements.

Conclusion
This paper presented metrics and analysis on detailed engineering from five major refinery
projects. The analysis was married with a study on the lessons learned captured from these
projects to demonstrate how certain aspects of the planning and scoping during FEED may have
contributed to the cost growth.

This study concludes in general that projects that are pushed through a concise FEED stage often
end with significant cost overruns and delays. This does not mean that projects should take their
time during the FEED, but it means that the scope and planning basis should be complete to enable
the projects to move forward with minimal changes.

The study revealed that successful projects will have clear business objectives; ambiguous business
objectives will often result in major late changes. Additionally, a scope and design basis that is
frozen at the end of the FEED stage will help accelerate the schedule and minimize changes in the
detailed engineering phase and eventually rework in construction.

Projects must spend sufficient time developing a project execution plan that emphasizes a good
contracting and procurement strategy and understands the impact of the interface with other
projects being executed concurrently. Projects must define the quality control requirements and
set the process to periodically evaluate and measure improvements in all aspects of the project.

This study also reviewed the impact of the organization capability on the performance of the
project. It was concluded that projects must have sufficient and dedicated resources to execute the
work and provide adequate oversight. The impact of market conditions on the availability and
quality of resources must be taken into consideration during the planning phase of the project.

An efficient project controls system will allow for detailed estimate and schedule reviews before a
baseline is finalized. The project controls organization must also participate in shaping the
contracting strategy in order to support the controlling of the cost and schedule. One area that is
found to be typically weak is the assurance about the physical progress reporting system. Owner
must review, understand and periodically audit this system for inconsistency or overstatement.
23
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2007 AACE INTERNATIONAL TRANSACTIONS

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Change Management During FEED an Owner's Case Study
2008 AACE INTERNATIONAL TRANSACTIONS

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