Ipa Schedulingguide

INDEPENDENT PROJECT ANALYSIS, INCORPORATED
Research and Metrics

Measuring
Capital Project
Best Practices
Presented by: Carlos Tapia
NWCC Meeting
Bellingham, WA
February 25, 2004
THE AMERICAS EUROPE AUSTRALIA CHINA

Focus
• In this presentation we will focus on capital

project Best Practices identified and researched
through the IPA methodology
• These Best Practices have been quantified and

their effect on projects has been measured
• IPA clients routinely apply this knowledge in the

definition and execution of their capital project
portfolio
• What are the keys to successful project

execution?
CONFIDENTIAL 2 INDEPENDENT PROJECT ANALYSIS

Few Projects Meet All Objectives
Schedule
Cost
Cost & Schedule
Cost Pred.
Schedule Pred.
Cost & Sched. Pred.
Operability
All Objectives
0% 20% 40% 60% 80% 100%

% Projects Meeting Performance Objectives

Outline
• IPA Background
• Best Practices: Research and Metrics
• Special Study: Labor Productivity
• The Challenge

IPA Corporate Background
• Founded in 1987 to provide a unique project research

capability for the chemical process, petroleum, and
minerals industries
• Staff includes engineers, economists, scientists,

statisticians, and operations researchers with most
members holding an advanced degree
• Offices in the United States, The Netherlands, China, and

Australia
• Mission is to improve competitiveness of our customers by

improving their use of capital
• Devoted exclusively to the analysis of capital projects as a

field of empirical research

IPA’s Customers
• Petroleum Industry
• Chemical Industry
• Pharmaceutical Industry
• Pulp & Paper Industry
• Specialty chemicals and consumer products
• Mining, Minerals Processing and Metals
• Contractors

Clients Represented in the IPA Databases
Abbott Laboratories Chiyoda ICI PEMEX

ABB Lummus CITGO Iluka Resources Petrobras
Abitibi-Consolidated Clark Refining & Marketing Incitec Petrokemya
AEC East CNRL Inland Paperboard & Packaging Petróleos de Venezuela
Agip Codelco International Paper Pharmacia
AGRA Simons Condea Vista Pillsbury
AIOC Colonial Pipeline Company Iscor
Portland Pipeline
AIR Liquide Comalco (Rio Tinto) Jacobs Potlatch
Air Products Cominco JGC Procter & Gamble Co.
AKZO Nobel ConocoPhillips Kellogg Brown & Root Qatar General Petroleum Co.
Alcan CRI Keyma Quimica Fluor
Alcoa CSR Timber Products Kimberly Clark Repsol YPF
Alyeska CYTEC Koch Rhodia
AMEC DeBeers Diamonds Kodak Rohm & Haas
Amerada Hess Degussa-Hüls Royal Dutch Shell Group
Kvaerner
Amoseas Department of Defense (US) South Australian Magnesium
Anadarko Dofasco Lasmo SAPPI
Appeyl Dow Chemical Company LTV Steel Sasol
Army Corps of Engineers DSM Lundin Malaysia Saudi Aramco
AstraZeneca DuPont Lyondell Citgo Shell Oil Company
Atlantic LNG DuPont Dow Elastomers Magnesium Intl. Ltd. Shell Canada
AtoFina Eastman Chemical Co. Malaysian Refining Co. Shell MIning
Australian Magnesium Corp. EC Erdolchemie Marathon Ashland Solutia
Australian Paper Edison Company Marathon Oil Solvay
BASF Eichleay Engineering Southern Natural Gas
Bayer Elf Atochem Mead Statoil
Bechtel Eli Lilly & Co. Merck & Company, Inc. Stepan
BE&K Entergy Merial Stone & Webster
BHP Billiton Enterprise Oil Ltd. Milliken Suncor Energy
Bluewater ExxonMobil Montell Sunoco
Borealis Fluor Daniel Morton International Syncrude
British Borneo Florida Power & Light NAOC TotalFinaElf
British Gas FMC Corporation Nederlandse Aardoilie Mj. Toyo
British Nuclear Fuels Foster Wheeler Union Carbide Corporation
BP Gaz De France Noranda Falconbridge Unocal
Bristol-Myers Squibb General Electric Norsk Hydro US Gypsum
Caltex GlaxoWellcome North Star Steel US Steel
Cargill Dow Polymers Hammersley iron Nova Chemicals Valero
Chevron Texaco Hoffman-La Roche Nycomed Amersham Wellman
China Three Gorges Project Honeywell Orica Weyerhaeuser
Development Corp. Husky Oil Owens Corning WMC
Woodside
Outline
• IPA Background

• The Challenge

Elements of Capital Effectiveness
Business Technology
Strategy Strategy
Alignment
of Lo
w
Functions Discipline Co
st
Leading SAFETY
Technology Optimal Executed
Scope for With Fast Cycle
Business Minimum Time
Use of
Needs Change
Value Improving BETTER
Practices
ROI
y
Timely Involvement of cilit
Front-End Fa ality
Loading Contractors/Vendors Qu
Key Leading Indicators Key Performance Indicators

Application of the IPA Methodology
Schedule
Histories
Management
Contingencies
Strategies
IPA
Databases
Cost
Performance
Histories
Project Technical
Definition Characteristics
Project Project System

Benchmarking
Evaluations Monitoring

The Approach: Linking Inputs to Outputs
Project Performance Inputs
KEY PROJECT PRACTICES
Parametric
Statistical
Techniques
KEY PROJECT RESULTS
Project Performance Outputs

Team Project
FEL VIPs Technology
Practices Controls
Parametric
Statistical
Techniques
Operational
Safety Cost Schedule
Performance

Outline
• IPA Background

– Safety First
– Front-End Loading
– VIPs
– Teams and Core Competencies
– Project Controls
• The Challenge
Drivers of Project Safety
• IPA research has identified a set of primary

drivers of project safety:
– Excellent Front-End Loading
– Strong, interactive new-hire safety orientation

effort
– Craft worker review of the safety program
– Pre-task planning after changes
– Individual recognition awards for safety

Team Project
FEL VIPs
Practices Controls
Technology
Parametric
Statistical
Techniques
Operational
Performance

What Is Front-End Loading?
Front-End Loading (FEL) is the process by which
an owner develops a detailed definition of the
scope of a capital project to meet business objectives
-- Why
-- What
-- When
-- Where
-- How
-- Who
What Is Front-End Loading?
FEL is
the primary
Best Practice
in project execution

Capital Project Life Cycle
CYCLE
TIME
Phase
Business
Appraisal Value Creation
EXECUTION
Conceptual
Planning Value Addition
Basic Project
Planning
Detailed
Engineering Value
Maintenance
Construction
Startup and
Front-End Loading Value
Turnover
Production
Operations

FEL Drives Absolute Cost Performance
1.2
(Project Cost / Industry Avg. Cost)
Relative Capital Cost
1.1
Industry Average Cost
1.0
0.9
0.8 Best Practical Good Fair Poor Screening
FEL Rating

Better Definition Shortens
Project Schedule Durations
1.15
1.10 Construction
(Industry Average = 1.0)
Execution
1.05
Relative Schedule
Schedule
1.00
Industry Average
Cycle Time
0.95
0.90
0.85
Best Practical Good Fair Poor Screening
3 4 5 6 7 8 9
Front-End Loading

Team Project
FEL VIPs Technology
Practices Controls
Parametric
Statistical
Techniques
Operational
Performance

Value Improving Practices
VIPs are out-of-the-ordinary practices used to improve

cost, schedule, and/or reliability of capital projects
1.2
• Formal, documented
R e la t iv e C a p it a l C o s t
1.1 practices that use a

FEL improvement only repeatable work process
Industry Average
1.0
0.9 • VIPs are almost always

FEL improvement plus VIPs facilitated by specialists
outside the project team
0.8 Best Good Fair Poor Screening
3 Practical
4 5 6 7 8 9
FEL Rating

Value Improving Practices
Technology Selection
Process Simplification (Value Engineering 1)
Classes of Facility Quality
Waste Minimization
Constructability Review (1)
Potential to Impact Value
Process Reliability Modeling

Minimum Standards and Specifications
Predictive Maintenance
Design-to-Capacity
Energy Optimization
3-D CAD (through execute)
Value Engineering (2)
Authorization
Explore Appraise/ Define Execute Operate

Select
Project Phase


Team
Practices: Project
FEL VIPs Technology
Team Controls
Development
Parametric
Statistical
Techniques
Operational
Performance

Team Development
• IPA research and work has shown that well developed
and integrated project teams are a key driver of project
success
– Increased cost effectiveness
– Faster projects
• Project teams must be formed during FEL and remain

stable through execution
• Characteristics of a well developed project team:

– Clearly defined project objectives
– Strong project manager with authority
– Functional representation from key stakeholders
– Clearly defined roles and responsibilities
– Guided by a clear project implementation process


Team
Practices: Project
FEL VIPs Technology
Core Controls
Competencies
Parametric
Statistical
Techniques
Operational
Performance

Background
• Owner companies have downsized and outsourced various

engineering and project management functions for nearly
two decades.
• The effects of downsizing on project performance and the

rationale for downsizing are not clearly understood.
• In 1992, IPA studied contractors’ role in Front-End Loading

(FEL) and concluded that owner leadership during FEL is a
key driver of project success.
• In 2002, IPA studied project competencies and found

distinct cost and schedule advantages to owners retaining
certain competencies in-house.

What Is a Core Competency?
A set of project functions or skills that are
a source of competitive advantage and
that cannot be effectively and reliably

secured from the market

Which competencies are
considered Core by Owners?

Core Competencies
• The following competencies are usually considered core
by owner companies:
– Convert research to project
– Formulation of business case
– Conceptual cost estimating (60/40)
– Conceptual Design
– Environmental/Permitting
– Safety
– Procurement and Contracts Admin.
– Project Management
– Commissioning and Startup
– Continuous Improvement
Non-Core Competencies
• The following competencies are usually considered non-
core by owner companies:
– Detailed Engineering
– Construction

The Project Management Competencies
• All owners with successful capital project systems

consider project management a core competency
• Most consider the supporting competencies core too:
– estimating
– scheduling
– procurement
– controls

Some Conclusions
• Competitive advantage for the project execution phase
is significantly more likely to reside with owners that:
– Build at least a core in-house detailed engineering
capability for large projects
– Maintain a strong control function
– Use in-house construction managers when

> Portfolio of projects includes substantial revamp work
> Risk of changes during startup is high

How Do I Make
The Right Sourcing Decision?
• I have to own the competency if I can’t buy it reliably
from the market.
• If I decide to get rid of the competency, I must be a

savvy buyer.
– If I don’t do this in-house, can I be a savvy buyer?
• If I believe that I can perform this competency more

effectively in-house than buying from the market, I
may decide to keep it.
– After factoring in the “valley” periods when some of
those jobs might not be needed.
> Need data!

FEL Team Project Technology

VIPs
Practices Controls
Parametric
Statistical
Techniques
Operational
Performance

Good Project Control Practices
Reduce Execution Schedule Slip
20%
15%
Percentage Schedule Deviation
10%
5%
0%
-5%
-10%
-15%
-20%
0 1 2 3 4 5 6 7 8
Weighted Control Practice Score
Worse Better

Best Practices
• IPA has identified a set of Project Inputs that
when applied correctly constitute Best Practices
• Best Practices should be implemented primarily
during project definition and maintained during
execution
• The primary Project Inputs are:
– FEL or Project Definition
– Use of VIPs
– Team Development
– Project Controls
– Use of New Technology
• “Class A” project systems implement these
practices in a concerted manner
Outline
• IPA Background

• The Challenge

Keys to Better Productivity
• Detailed execution planning is the single most

important driver of better field productivity
– Execution planning has been progressively outsourced
to contractors
• But the data are clear: owner execution planning and

control are central to securing good labor productivity
• The principal role of the engineering contractor is to

provide timely, high-quality engineering documents to
construction; it is not to take the place of the owner in
the execution planning process

Components of Improved Labor Productivity
More
More
Front-End
Front-End Execution
Execution Other
OtherDrivers
Drivers Construction
Construction
Loading
Loading Factors
Factors for
forthe
theMoney
Money
• Project Execution • Use of Integrated 3D

• Quantitative
planning • Working weather windows weather effects
–detailed schedules • Effects of overtime
• Role of supervision
• Soils
• Union/open shop effects
• Health and Safety
requirements • Importance of schedule
maintenance
• Engineering status • Control planning
• Equipment specs
• Key VIPs

Outline
• IPA Background
• The Challenge

What Really Matters?
BEST Strategy
PRACTICES
Process People

The Challenge in Capital Project Execution
• In the last 15 years, the process industry has made

significant progress understanding the value of Best
Practices in capital project execution
• However, the key challenge remains on the integration

of processes and organization (within which Best
Practices reside)
• The truly successful project systems have managed

to master a process that is supported by a strong
project organization (resources, core competencies,
integrated teams); Best Practices are then inserted
into both the process and the organization at the right
time and level
INDEPENDENT PROJECT ANALYSIS, INCORPORATED
www.ipaglobal.com
Research and Metrics

Measuring
Capital Project
Best Practices
Presented by: Carlos Tapia

[email protected]
THE AMERICAS EUROPE AUSTRALIA CHINA

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INDEPENDENT PROJECT ANALYSIS, INCORPORATED

Research and Metrics

Presented by: Carlos Tapia

THE AMERICAS  EUROPE  AUSTRALIA  CHINA

• In this presentation we will focus on capital

• These Best Practices have been quantified and

• IPA clients routinely apply this knowledge in the

• What are the keys to successful project

CONFIDENTIAL 2 INDEPENDENT PROJECT ANALYSIS

Cost & Schedule

Cost & Sched. Pred.

0% 20% 40% 60% 80% 100%

CONFIDENTIAL 3 INDEPENDENT PROJECT ANALYSIS

• Special Study: Labor Productivity

CONFIDENTIAL 4 INDEPENDENT PROJECT ANALYSIS

• Founded in 1987 to provide a unique project research

• Staff includes engineers, economists, scientists,

• Offices in the United States, The Netherlands, China, and

• Mission is to improve competitiveness of our customers by

• Devoted exclusively to the analysis of capital projects as a

CONFIDENTIAL 5 INDEPENDENT PROJECT ANALYSIS

• Pulp & Paper Industry

• Specialty chemicals and consumer products

• Mining, Minerals Processing and Metals

CONFIDENTIAL 6 INDEPENDENT PROJECT ANALYSIS

Abbott Laboratories Chiyoda ICI PEMEX

• Best Practices: Research and Metrics

CONFIDENTIAL 8 INDEPENDENT PROJECT ANALYSIS

Key Leading Indicators Key Performance Indicators

Project Project System

CONFIDENTIAL 10 INDEPENDENT PROJECT ANALYSIS

KEY PROJECT PRACTICES

KEY PROJECT RESULTS

Project Performance Outputs

Project Performance Inputs

Project Performance Outputs

• Best Practices: Research and Metrics

– Teams and Core Competencies

• Special Study: Labor Productivity

• IPA research has identified a set of primary

– Strong, interactive new-hire safety orientation

– Craft worker review of the safety program

– Pre-task planning after changes

– Individual recognition awards for safety

CONFIDENTIAL 14 INDEPENDENT PROJECT ANALYSIS

Project Performance Inputs

Project Performance Outputs

CONFIDENTIAL 17 INDEPENDENT PROJECT ANALYSIS

CONFIDENTIAL 18 INDEPENDENT PROJECT ANALYSIS

0.8 Best Practical Good Fair Poor Screening

CONFIDENTIAL 19 INDEPENDENT PROJECT ANALYSIS

CONFIDENTIAL 20 INDEPENDENT PROJECT ANALYSIS

Project Performance Inputs

Project Performance Outputs

VIPs are out-of-the-ordinary practices used to improve

1.1 practices that use a

0.9 • VIPs are almost always

CONFIDENTIAL 22 INDEPENDENT PROJECT ANALYSIS

Process Reliability Modeling

THE AMERICAS EUROPE AUSTRALIA CHINA

THE AMERICAS EUROPE AUSTRALIA CHINA