Is There a Business Case for

Project Data in the Process Industries?

Gregory Ray and Luke Wallace
 First a Few Definitions…

Refers to cost, schedule, engineering, and

“Project Data” team data, as well as project documentation

Conversion of information into digital

“Digitization” form (photos, music, paper, old CAD
drawings, etc.)

Process of getting separate collections of

digitized information to communicate;
“Digitalization” can also be referred to as “data
integration”

CONFIDENTIAL – IBC 2019 2 INDEPENDENT PROJECT ANALYSIS

 What Amazing Things Are Being Marketed to Us Today?

• Available technology:
‒ Forms/audits done via phone (QA/QC, safety audits, quantity surveys) and uploaded to
database to instantaneously access issues and progress
 At the same time, it can be plugged directly into contractor databases for immediate data
transfer
 Project managers can view project progress, program managers can view program progress,
and EVPs can view global portfolio progress/performance from mobile phones

‒ Augmented and virtual reality to conduct remote safety walk-throughs and

Constructability Reviews
‒ Drones to monitor safety, track progress, and perform inspections (e.g., equipment for
preventive maintenance)
‒ Continuous scanning drones to maintain live facility 3D models

CONFIDENTIAL – IBC 2019 3 INDEPENDENT PROJECT ANALYSIS

 Objectives of This Study

The buzz around Digitalization, Artificial Intelligence

(AI), Machine Learning (ML), and Blockchain has made
its way to projects

• The objective of this study is to help management understand the value of project
data and digitalization by asking:
‒ What are companies currently doing?
‒ What are the challenges to digitalization?
‒ What does a data value proposition look like?

CONFIDENTIAL – IBC 2019 4 INDEPENDENT PROJECT ANALYSIS

 What Value Do We Get From Project Data?

• The value from data is that it has the potential to enable better decision
making

• In projects, there is a vast amount of data that could be valuable to owner

project organizations

• But that value depends on three key elements:

‒ Owner’s organizational structure
‒ Project system and execution strategies
‒ How they can actually leverage the information

• Therefore, we asked the question, “What does data value look like for you
for your capital projects?”

CONFIDENTIAL – IBC 2019 5 INDEPENDENT PROJECT ANALYSIS

 We Talked With Owner Representatives to Understand
Their Current Situations

Project Controls and Data Detailed Telephone

Integration Experts Interviews

Multiple participants from 12 IBC Structured interviews focused on

members the following concepts:
‒ Perceived value
Typically with 10+ years of
experience ‒ Current organization practices
‒ Tools and software
Most in senior roles in company-
wide digitalization initiatives ‒ Lessons learned
‒ Ongoing initiatives
‒ Insights for adoption

CONFIDENTIAL – IBC 2019 6 INDEPENDENT PROJECT ANALYSIS

 Participating Companies

CONFIDENTIAL – IBC 2019 7 INDEPENDENT PROJECT ANALYSIS

 Is There a Business Case for Data in the Process Industries?
The Answer Is: It Depends!

Are you frustrated with current data • Organizations must have the capability to
extract value from information
capabilities?
• The challenge these companies face is
No difficulty in demonstrating value of
20% investing in data systems
Yes
• Perception that these are expensive
80%
• Business needs to see return on
investment
‒ E.g., “We can save X percent if we have this
Most of the companies information, and it will only cost Y dollars”
we interviewed feel frustrated!

The first step is knowing what data you actually want and why you want it
CONFIDENTIAL – IBC 2019 8 INDEPENDENT PROJECT ANALYSIS
 Outline

Ongoing Initiatives and Challenges

Generating the Value Proposition for Data

Conclusions and Recommendations

CONFIDENTIAL – IBC 2019 9 INDEPENDENT PROJECT ANALYSIS

 The Bigger Initiatives

• A few of the participants we interviewed are working on implementing

systems that will unify the project cost, schedule, and engineering data into
one database:
‒ Will provide a robust record of the development of the cost estimate, planned schedule,
and conceptual to basic engineering
‒ Then, combined with planned continuous digital updates from the contractors, it is used
through execution to control the project
‒ Concludes with a perfect data record for the project from concept to completion,
including all modifications/change orders for the project

• This is one of the dreams of digitalization for the project world

CONFIDENTIAL – IBC 2019 10 INDEPENDENT PROJECT ANALYSIS

 Organizations Are Pursuing Multiple Data Integration Initiatives
Everyone Is Focusing on Cost

100%
Percentage Pursuing Initiatives

n = 12

80%

60%

40%

Big Organizations:
20% “Where are you?”

0%
Cost Schedule Engineering Teams

Project Data Initiative Category

CONFIDENTIAL – IBC 2019 11 INDEPENDENT PROJECT ANALYSIS
 Perceived Roadblocks to Digitalization

“We have tried IT solutions in the

“Legacy systems are perceived
66% past that work, but not very well. 50% as very expensive to change.”
Management is disappointed.”

“We can’t get the kind of data

33% we want from EPC 50% “We don’t have data people.”
contractors.”

“No standard breakdown

25% structure for cost and schedule.” 8% “What would we do with the data?”

CONFIDENTIAL – IBC 2019 12 INDEPENDENT PROJECT ANALYSIS

 What Is the Reality?

• For project data digitalization to work, owners need a better way of

receiving and managing data
‒ Contractors resist providing detailed information
‒ Most project systems do not have data infrastructure (e.g., databases or data
management)
‒ Data collection is manual (spreadsheets) and inconsistent

• The effort to remedy these issues is perceived as significant

‒ You can get more detail from contractors, but it takes discipline
‒ Automation tools are not comprehensive and can be expensive
‒ Data functions add to your already scrutinized head count

CONFIDENTIAL – IBC 2019 13 INDEPENDENT PROJECT ANALYSIS

 The Power of Data Is NOT From the Sheer Volume
The Power Is From the Insights You Get

“Data is like garbage.

You’d better know what you are going to do
with it before you collect it.”
– Mark Twain
(1835-1910)

• Tangible business benefits must be laid out clearly so that buy-in can
happen from both upper management and the employees

• Digitalization projects, like all other capital projects, cannot be about the
technology, but rather need to be about clear business objectives and
targeted performance metrics

CONFIDENTIAL – IBC 2019 14 INDEPENDENT PROJECT ANALYSIS

 Outline

Ongoing Initiatives and Challenges

Generating the Value Proposition for Data

Conclusions and Recommendations

CONFIDENTIAL – IBC 2019 15 INDEPENDENT PROJECT ANALYSIS

 Basics for Establishing the Value of Investing in Data

What data bring the Who needs to be How and when will the
most value? involved? data be captured?
Step 1 Step 2 Step 3

The first step in the process is to The next step is to identify who Finally, a method and infrastructure
determine what data bring the within the organization needs to are needed to ensure the data are
most value to the business and be involved in data management captured consistently and at the right
why and what expertise they will need frequency
to have

All of these considerations vary by company

CONFIDENTIAL – IBC 2019 16 INDEPENDENT PROJECT ANALYSIS

 Data That Reduce Project Cost Should Be the First Priority

• The most valuable project data for business are data that reduce the project
costs

• What do cost saving data look like?

Cost Data Control Data Design Data Team Data

Drive competitive Cost & schedule data Promote
For team optimization
targets for execution control standardization

CONFIDENTIAL – IBC 2019 17 INDEPENDENT PROJECT ANALYSIS

 What Would You Do With All Cost Information in the World?

• Business wants projects that are cost competitive and that come in close to
the target
‒ Between the two of these, cost competitiveness has the greatest value to the business

• For cost competitiveness, knowing what a project should cost lets project
teams manage the outcome

• IPA research has consistently shown that competitive targets, coupled with
Best Practice use, lead to competitive outcomes

• Despite this, soft targets have been prevalent

Cost Data Control Data Design Data Team Data

CONFIDENTIAL – IBC 2019 18 INDEPENDENT PROJECT ANALYSIS
 Competitive Targets Drive Competitive Outcomes
Worse

1.4
Actual Cost Competitiveness

1.3

1.2

1.1 Competitive estimates lead

to competitive results
1.0 Fat estimates:
Teams tend to
spend some of the
0.9 excess money

0.8
Industry average
0.7
Better

0.6
0.6 0.7 0.8 0.9 1.0 1.1 1.2 1.3 1.4

Estimate Cost Competitiveness

Better Worse

Cost Data Control Data Design Data Team Data

CONFIDENTIAL – IBC 2019 19 INDEPENDENT PROJECT ANALYSIS
 How Much Data Do You Need to Drive Competitive Cost
Targets?

Cost Estimating Cost Validation

• Bottoms-up estimating methods are reliant • Analogues
on:
• Capacity curves
‒ Detailed quantities
• Discipline-level quantities and rates (e.g.,
‒ Detailed material pricing “piping labor hours/foot of pipe”)
‒ Detailed labor rates • Location factors
‒ Detailed rate of placement
• Project-level escalation
‒ Detailed indirects

Companies preparing their own detailed cost Companies using cost data for validation—
estimates need detailed data to drive competitive surprisingly need almost as much data!
estimates

Cost Data Control Data Design Data Team Data

CONFIDENTIAL – IBC 2019 20 INDEPENDENT PROJECT ANALYSIS
 Estimate Validation Improves Cost Competitiveness
Irrespective of How Detailed the Cost Estimate Is

1.10
Cost Index at Authorization

1.09

1.08

1.07 Low Granularity

Summary only

1.06 Moderate Granularity

Detail for some categories

1.05
High Granularity
Detail for all categories

1.04
No Validation Validation Done

Cost Data Control Data Design Data Team Data

CONFIDENTIAL – IBC 2019 21 INDEPENDENT PROJECT ANALYSIS
 Earned Value Improves Project Outcomes

• Industry projects generally accept that earned value analysis (now

commonly called EVM) is a value-added project controls approach
‒ IPA research has quantified improved cost and schedule outcomes
‒ AACE, PMI, and many other recognize EVM as a Best Practice

• Most contractors say they do EVM, but IPA has long established that
verified progress is a prerequisite to determining actual progress

• To get the best value from EVM, specific contractor data are required to be
integrated with owner information

Cost Data Control Data Design Data Team Data

CONFIDENTIAL – IBC 2019 22 INDEPENDENT PROJECT ANALYSIS
 Earned Value Has Minimum Data Requirements

• Earned value requires detailed data to be established on the front-end and

maintained throughout execution

• Minimum data requirements to perform EVM include:

‒ Planned Values
 Scope broken down by Work Breakdown Structure (WBS)
 Schedule assigned to scope
 Budget assigned to scope
 Measurement of performance

‒ Actual Values
 Incurred cost by scope
 Performance by scope

Cost Data Control Data Design Data Team Data

CONFIDENTIAL – IBC 2019 23 INDEPENDENT PROJECT ANALYSIS
 Digital Twin: Likely a Benefit, Mostly to Operators
The Key to Digital Transformation of Projects…

• A digital twin is a programmed/software replica of a project

‒ The representation is synched in real time to the physical asset using sensors

‒ Sensors continuously feed data back to the twin to keep it connected with the physical asset

• The benefits of a digital twin are numerous:

‒ Live progress updates

‒ Always have as-built model

‒ Resource planning

‒ Safety monitoring
But how many owners can really make
use of this technology today?
Source: Intellectsoft

Cost Data Control Data Design Data Team Data

CONFIDENTIAL – IBC 2019 24 INDEPENDENT PROJECT ANALYSIS
 Some Owner Organizations Are Building Central Databases
for Their Engineering

• What owners can actually do with the data

Does your organization archive and use detailed depends on their owner capabilities
engineering documentation (e.g., 3D models)? • IPA has shown across industries that
standardization saves 20 to 30 percent of total
Trying installed cost (TIC)
17%
• If your company prepares detailed design
information, then capturing the 3D models
could help with the following:

No ‒ Design optimization
83% ‒ Standardization
‒ Design efficiency (as-builts maintained for
About half responded with: brownfield projects)
“What would we do with it?” • However, if your organization does not do
detailed design, what would can you do about
engineering data?

Cost Data Control Data Design Data Team Data

CONFIDENTIAL – IBC 2019 25 INDEPENDENT PROJECT ANALYSIS
 If Nothing Else, Get the Quantities

• If your organization is not in the business of Quantities Validated?

design, quantities still have enormous value
1.15
• Quantities are the backbone of a quality
detailed cost estimate—if the quantities are
wrong, so is everything else 1.10

Cost Index
• Companies who have the ability to validate 1.05
material quantities outperform those who
cannot in terms of cost competitiveness
1.00

0.95

0.90
No Yes

Cost Data Control Data Design Data Team Data

CONFIDENTIAL – IBC 2019 26 INDEPENDENT PROJECT ANALYSIS
 Project Teams Are Under Considerable Pressure to
Lower Owner’s Costs

• IPA research has demonstrated that

1.50
there is no question that key owner
involvement improves project 1.40
outcomes
1.30

Owner Cost Index

• Due to concerns with rising owner 1.20
costs, some companies have imposed 1.10
caps on owner’s cost (e.g., not to
exceed a certain percentage of total 1.00
cost) 0.90

0.80
• The challenge with this framework is
that there is no magic number for 0.70
owner’s costs—they depend on what
0.60
the project needs
0.50
1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

Authorization Year

Cost Data Control Data Design Data Team Data

CONFIDENTIAL – IBC 2019 27 INDEPENDENT PROJECT ANALYSIS
 Understanding the Owner’s Costs Requires Data

• A good question to ask is: “How much owner involvement is needed?”

• You need data to understand the owner team optimization:

‒ Full-time equivalents (FTEs) and skillsets

‒ Cost cannot be the key differentiating variable—complexity and other variables need to
be included

‒ Owner-versus-contractor-versus-Integrated project team (IPT) track records on roles on

similar projects

• The objective is to find the optimal combination to structure the most

inexpensive team with the highest likelihood of success

Cost Data Control Data Design Data Team Data

CONFIDENTIAL – IBC 2019 28 INDEPENDENT PROJECT ANALYSIS
 Summary: Project Data

What data brings the Who needs to be How and when will the
most value? involved? data be captured?
Step 1 Step 2 Step 3

• At a minimum, you should be trying to do detailed cost estimate validation and performing
EVM on projects—and you need the data to accomplish both of these

• Engineering can lead to standardization, but if not, at a minimum, the quantities are
necessary for cost estimating, validating and project controls

• Team data are used for owner team optimization, reducing both risk and owner’s costs

CONFIDENTIAL – IBC 2019 29 INDEPENDENT PROJECT ANALYSIS

 Basics for Establishing the Value of Investing in Data

What data brings the Who needs to be How and when will the
most value? involved? data be captured?
Step 1 Step 2 Step 3

The next step is identify who

within the organization needs to
be involved in data management
and what expertise they will need
to have

CONFIDENTIAL – IBC 2019 30 INDEPENDENT PROJECT ANALYSIS

 Data Management Is a Unique Skill
Many Project Systems Are Over-Reliant on Project Controls to Manage Data

“Management is very excited to ‘go digital’ and pushed this initiative

onto our project controls team—without any budget increase”

“To succeed at this, a whole new skillset of people need to be hired:

data scientists, database people, apps developers—these are not
skillsets traditionally hired into our industry(-ies)”

Data Analytics
Department
Data 25%
Analytics No Data
People Analytics At All
50% Data Analytics on
Controls Team
25%

CONFIDENTIAL – IBC 2019 31 INDEPENDENT PROJECT ANALYSIS

 Like Engineering, Data Analytics Requires Specialization

Do you just need help Are you overwhelmed with the data, Do you want to study cause and
organizing the data? and looking to make predictions? effect in a structured experiment?

Database Data
Statistician
Administrator (DBA) Scientist

• Knowledge of database design and • Typically masters or PhD in • Masters or PhD in statistics
theory computer science, math, or statistics
• Skilled in the theory and application
• Knowledge of database software, • Skilled with statistical computer of statistics
SQL Server, MySQL, PostgreSQL, languages
etc. • Designs research plans and
• Experience creating data structures experiments
• Capable of database server
installation • Knowledge of statistics and machine • Skilled in statistical computer
learning languages
• Capable of ensuring security and
generating backups • Experience with data visualization
techniques

CONFIDENTIAL – IBC 2019 32 INDEPENDENT PROJECT ANALYSIS

 Summary: Who Needs to Be Involved

What data bring the Who needs to be How and when will the
most value? involved? data be captured?
Step 1 Step 2 Step 3

• Define what you want

• Figure out how to scale the organization to get you what you need

• Make the business case for adding these people (e.g., “we can cut X hours”)

CONFIDENTIAL – IBC 2019 33 INDEPENDENT PROJECT ANALYSIS

 Basics for Establishing the Value of Investing in Data

What data bring the Who needs to be How and when will the
most value? involved? data be captured?
Step 1 Step 2 Step 3

Finally, a method and infrastructure

are needed to ensure the data are
captured consistently and at the right
frequency

CONFIDENTIAL – IBC 2019 34 INDEPENDENT PROJECT ANALYSIS

 Infrastructure Needs to Be Set Up for Information to Flow
Fluidly to Gain Insights

Data Sources
Cost Collection Insights
Database Analysis
Management Instruments
Schedule

Team
Data collection Relational Efficiency of
requires a databases needed analysis is
Contractor
process to fully capture greatly improved
General Project useful data from organized
Data Intake from data
data sources
must be as
automated as
possible
Data requirements and
format need to be
predefined

CONFIDENTIAL – IBC 2019 35 INDEPENDENT PROJECT ANALYSIS

 Extracting Value From Data Is Dependent on How Easy it Is
to Obtain and Store

• After the data are identified and resources assigned to gather the
information, the last step is to identify how you will get and organize the
data
‒ The data’s value must outweigh the effort to get and store it

• The biggest challenge facing the projects industry is getting detailed

information from the contractors
‒ Contractors have no incentive to give the owners detailed information, particularly
detailed cost information
‒ This does not mean it is a lost cause, but it is a formidable challenge that takes
significant discipline by the owners

CONFIDENTIAL – IBC 2019 36 INDEPENDENT PROJECT ANALYSIS

 Owners Control the Parameters and the Enforcement
of Data Rights

Almost all participating organizations said that having sufficient reporting

requirements in the contract and enforcing them was a challenge

Minimum Steps to Obtain Data From Contractors:

Senior Contractor Contractor Contractor

Data ITB/RFQ
Management Proposal Reporting Compliance &
Requirements Support
Support Review Capability Capability

Establish minimum Get senior Ensure project Involve project Audit contractor Audit compliance
data requirements management controls controls in reporting and capability
by contract form support for support the contractor capability after through contract
(expect less from obtaining data ITB/RFQ proposal review award execution
lump sum):
‒Detail
‒Frequency
‒Format

Much of these data do not immediately benefit the project

Project teams are often reluctant to pay for it

CONFIDENTIAL – IBC 2019 37 INDEPENDENT PROJECT ANALYSIS

 The Data Collection Requires a Process

• Controls function is responsible for capturing project data in most

organizations
‒ This makes sense given that the most valuable information is managed by the
controllers (e.g., cost, schedule, quantities, changes, etc.)

• However, 83 percent of those interviewed said they continue to have

compliance issues with submitting final cost data—even when it is required

• For the data collection step to be effective, it must be part of the project
delivery process; there needs to be progressive data capture and project
teams must be required to support this effort
‒ One client tracks project team compliance regarding data submission

• Once the process is in place, the next step is to develop collection

instruments
CONFIDENTIAL – IBC 2019 38 INDEPENDENT PROJECT ANALYSIS
 Excel®* Is Not a Database and Should Not Be Used for Data
Collection

17% 33% 33% 17%

Have no system to Require PMs and teams Have a dedicated Have mapping tools to
collect cost information to submit spreadsheets resource who manually translate contractor
or do so sporadically with final data collects data with data
with Excel spreadsheets

Spreadsheets are limited in capacity, flat files, time consuming to

update, and prone to error

* Excel is a registered trademark of Microsoft

CONFIDENTIAL – IBC 2019 39 INDEPENDENT PROJECT ANALYSIS
 Relational Databases Are Structured Based on the
Relationships in the Data

• Relational database can help to maximize the data’s value

• Relational structures enable an unlimited depth of detail that all relates back to a
common entity (e.g., a project)
Equipment Cost

Project ID
Heat Exchangers

General Project Data Project Cost Pumps

Project ID Project ID …

Name Equipment
Location Piping Material Cost
Product Steel Project ID
4” CS Pipe
4” SS Pipe
…
CONFIDENTIAL – IBC 2019 40 INDEPENDENT PROJECT ANALYSIS
 Information Needs to Flow Into the Database With
Structured Forms

• Estimating, scheduling, cost management, and even design can be a

significant help in capturing data

• Most off-the-shelf solutions can be linked to one another

‒ E.g., SAP can be automatically linked with Ecosys

• In the worst case scenario, these systems can export structured

spreadsheets (CSV files), which can then be loaded into a central database

• Expectations around the data format must be clearly articulated in the

contract with the contractor, so that contractor data loading requires only
an import
‒ Reporting must be consistent from project to project and the data need to be in a
machine-readable format (no PDFs)

CONFIDENTIAL – IBC 2019 41 INDEPENDENT PROJECT ANALYSIS

 Savings From Adding People and Infrastructure

• There will be additional owner costs with new people

• However, there is a significant reduction in the manpower required once the

system is up and running:
‒ “We were able to cut down on our transferring of detailed cost data from our SAP
system into our cost database from two people and a month to one person, one button
and about three minutes”
‒ “Progress reporting was always a month late and involved a team of people re-entering
data into our system; now it is instantaneous”
‒ “Capturing project cost and schedule data has been reduced from six people per project
down to one”

CONFIDENTIAL – IBC 2019 42 INDEPENDENT PROJECT ANALYSIS

 Summary: What Needs to Be Involved

What data bring the Who needs to be How and when will the
most value? involved? data be captured?
Step 1 Step 2 Step 3

• There must be a work process to collect, clean, and store the data

• The digital information needs to be structured for automation between systems and the
database

• Ensure compliance from both the contractors and project team

• A relational database is necessary to fully capture the project data’s value

CONFIDENTIAL – IBC 2019 43 INDEPENDENT PROJECT ANALYSIS
 Outline

On-Going Initiatives and Challenges

Generating the Value Proposition for Data

Conclusions and Recommendations

CONFIDENTIAL – IBC 2019 44 INDEPENDENT PROJECT ANALYSIS

 Conclusion

• It is possible to prove digitization’s value to the business, but it is difficult

or everybody would have already done it
‒ But the value does not come from simply purchasing and installing a nice software
solution
‒ It comes from the data and database and how you are able to leverage these two to
reduce costs
 There may also be some schedule and design optimization benefits, but the reality is that it is
all about cost reduction

• That being said, capturing data is difficult, but can be done

‒ There are very specific requirements for the data in the ITBs/RFQs (e.g., format, timing,
content)
‒ Ensuring the data are delivered throughout the project life cycle is mandatory
‒ Frequent auditing of the data is required to ensure its integrity
CONFIDENTIAL – IBC 2019 45 INDEPENDENT PROJECT ANALYSIS
 Recommendations

What data bring the most Who needs to be involved in What method and
value to the business and data management? infrastructure are needed to
why? capture the data consistently
What expertise will they need and at the right frequency?
to have?
Step 1 Step 2 Step 3

• Get buy-in from management and the employees by describing the project in
terms of cost savings and clear, measureable business and project objectives

• Always remember: it is about the value you can generate for the business

CONFIDENTIAL – IBC 2019 46 INDEPENDENT PROJECT ANALYSIS

Thank You!