Introduction: Industrial Engineering Projects

 

Engineering construction is a loose expression covering the design and construction of capital projects for a broad spread of manufacturing and energy related industries including:

 

• gas and oil exploration and production;
• chemical and process;
• refining;
• nuclear;
•  power generation;
• steel production;
• pharmaceuticals;
• oxygen and other gases;
• food and drink;
• water and sewage treatment.

 

Some of these industries are indigenous and have developed their practices alongside the construction sectors of other local industries, by adopting and adapting the same basic philosophies of administration and control, while others originated in other parts of the world. Current practice has therefore been influenced by the nature of the projects typically undertaken and the traditional practices in the area of the world where the industry has its roots. In addition, owners and contractors in the above sectors are often among the world's largest companies, many of which have made major investments both in terms of experience and development costs in their particular method of doing business.

 

 

OWNER INVOLVEMENT

 

Various factors affect the manner in which a prospective owner of a plant interacts with his design/construction team. The typical owner of an engineering project will therefore be more involved in the day-to - day decisions and take a far greater degree of responsibility for the project than will most owners in the building and civil engineering industries. This involvement has a major effect throughout the whole organization of the work and on the contractual relationships between the various parties. Generally, schemes take several years to implement and initially an owner must consider plant capacity, construction costs, production slots, feedstock, energy, transport and above all the available market and the price the product will command in the future. This will of course call for research as to what other organizations are constructing facilities, or planning to construct facilities, which would affect the product's market or price.

 

 

COMPLEXITY

 

Many engineering projects are by their very nature complex and include unique designs or processes. Owners demand the most modern technologies either to produce a new product or to ensure cost -effective production, etc. and frequently require the finished product in a short development period. This necessitates parallel working between the design and construction phases and the need for multi -contractor construction sites, with a consequent potential for delay, disruption and associated extra costs. The design of a plant as a whole may incorporate designs provided by various specialist suppliers, who cannot design their component in isolation from the main design, but whose design is required by that main design. The resulting iterative procedure requires close control and expediting of information that flows between the various parties, in order that all the various designers, specialist suppliers and construction contractors work from the most up -to- date information at all times. The time required to manufacture some items of sophisticated equipment may require that they are ordered ahead of any contract being tendered for their installation. Furthermore, bulk materials, e.g. pipe, valves, electrical and instrumentation cables, etc., may be purchased by the owner or the owner's managing contractor for reasons of compatibility or buying power. 

This gives rise to construction contracts where some or most of the materials are provided as 'free issue' to the contractor, which requires controls to be introduced into the manner in which those materials are purchased, issued and used. On large projects, it is unlikely that any one main contractor will have all the necessary skills and resources needed to fabricate and construct the entire project. The result is the need to coordinate site access, availability of design and the free issue of materials and equipment, with the parallel or sequential working of a number of major construction contractors, subcontractors and equipment manufacturers. Following construction, the plant will be pre- commissioned and finally commissioned and test run to verify the plant's performance. Some of this work may be undertaken by the owner, some by the management contractor and some by the construction contractors, subcontractors or equipment suppliers. The impact of design complexity, the coordination of the design, procurement and construction activities and parallel working, is a major management function which highlights the need for tight control in terms of cost, time and information.

 

 

MANAGEMENT

When approval is given for a major project to proceed, many people are employed for months or years and many millions of pounds (or dollars, dinars, etc.) are expended. The success of such a project rarely depends on a single individual. 

However, one single inadequate person at a sufficient level of influence can bring failure, overspend or delay (often all three). The very term 'project manager' leads to a misunderstanding of the role of managers, and indeed it encourages the belief that projects can be 'managed' by an individual, whereas they can only be run by a team. The project manager is the leader of the team and as such must have adequate knowledge of the engineering issues, safety regulations and the law as it relates to the project, together with lots of common sense, the skills of a diplomat, an ability to face unpleasant issues quickly and enough respect from the team to get maximum effort and cooperation from them at all times.

 

 

INFORMATION CONTROL AND REPORTING

 

Understanding the importance of appropriate reporting is essential if a project team is not to be buried by the mountain of information generated by a typical major project. Large projects are too complex to allow project managers to regularly do any of the detailed work themselves, but a project manager does require relevant information to be provided in a condensed form in order to maintain an overview of the project and its key activities. 

The project will therefore need to have a bespoke service to give intelligible information in report form, supported by further detailed levels of information available to be examined, adapted and acted upon as required. Unless the distribution of the large amount of information and reports generated by a project is controlled by a system which ensures that each member receives only what is required, the project management team can be overwhelmed by sheer volume of paperwork containing information which is constantly changing and developing. Moreover, unless such information is coded and correctly archived, the possibility of its successful recovery is remote. Information control is therefore a significant activity on engineering projects, not only to ensure that all the various project members are working from the most up-to -date documentation and data but also to ensure that drawings and other documents are available to the owner which accurately reflect the as - built condition, since once completed the plant is an ongoing operation requiring maintenance and possible future development.

 

 

TIME

Time on a project is frequently all important, given the need to meet market expectation and customer demand; and in some cases the earlier earning capacity will outweigh any increased cost of accelerating the design and construction process. Time on all projects becomes increasingly critical as more of it passes. When the project is in the feasibility stage, a project completion and commissioning date perhaps five years in the future may seem a long way ahead; but when approval to proceed is finally received a year can have elapsed, but the completion date rarely moves. If the project becomes the subject of environmental objections further delays can accrue. Notwithstanding environmental issues, the development of the design is the first stage of the project to feel the increasing pressure exerted on it by the passage of time; but the proposed completion date may still appear a long way off. Further pressure is exerted on the design team as the procurement activity starts to demand design criteria and performance requirements in order that tenders can be sought for the purchase of long lead items. There is now an increasing awareness that time is indeed passing and that the time left to completion and commissioning is a little tight.

 

 

When at last fabrication and construction commence, time may have the whole project team by the throat. The time required for the logical sequential progression through the work may no longer be available. Design may have overrun and procurement be delayed as a consequence, but the end date remains cast in stone. The consequences of this are not difficult to predict. When the programme slips, the reasons are often various or not specific. The need to accelerate the programme usually requires further expenditure by the owner over and above the original contract which, not surprisingly, he may not be too keen to incur. There will be a temptation to delay unpalatable decisions in the hope that subsequent events will make up any previous delays to the programme. The overall effect of a delay to an owner may be loss of earnings and possible loss of markets and the owner will have to balance his options in deciding whether to accept the delay or bear the cost of accelerating the work. The importance of the planning engineer's function in ensuring that the project is completed on time cannot be overemphasized. The many activities needed to design the work, procure equipment and materials, award contracts, coordinate contractors and suppliers, construct and commission the plant and set it to work needs to be carefully sequenced and progress monitored, and remedial actions need to be taken immediately to overcome problems. The planning engineer will be faced with the difficult task of producing an overall project programmed showing what is required, of whom and when, and then ensuring that all other parties involved in the project work to schedules which are compatible with this master programmed.

 

 

SAFETY, QUALITY AND ENVIRONMENTAL ISSUES

 

Safe construction and safe operation is the subject of numerous Acts of Parliament and quality assurance is now generally used throughout the whole of the engineering industry. Similarly, the growing environmental lobby has also made owners and contractors alike more aware of the need to operate in an environmentally acceptable manner. While health and safety is particularly important to the engineering industries in view of the danger inherent in any major industrial plant, if the desired quality is not achieved maintenance costs, guarantee of production and environmental protection can all be adversely affected. It is now often the case that an operating or manufacturing company will demand that any contractor or subcontractor employed on a project must have quality assurance and quality control (QA/QC) procedures consistent with the requirements of IS0 9000, and that they also have an environmental policy. If a company does not have such controls internally, then it is unlikely to be considered when tender lists are prepared. Environmental considerations are crucial to the programmed. If the project is the subject of environmental objections during its development and goes to public inquiry, this may take 18 months, and a judicial review will take a similar period, while planning consents or emission license’s will take about six weeks each time the project goes to committee. If, at the end of this period, another site has to be selected and purchased, this process will start again, with calamitous effects on the programmed.

 

 

ESTIMATING AND RISK

 

Many engineering projects are of high capital value, and are possibly carried out in remote locations; many use processes at the limits of current technology, and many are unique or sufficiently dissimilar to each other to make it difficult to use a standard, high - level, cost database. As a result, estimates are required to be produced to a far greater degree of detail than in other construction industries in order for them to be sufficiently flexible to meet the demands of each unique environment and to enable the project manager to identify, analyse and closely manage the significant risks involved through the project period. Large projects have special features which make them different and, when things go wrong, more expensive. Reasons can vary but include the following –

 

• The management of major projects is often undertaken by bespoke teams of specialists brought together for that one project and disbanded, after completion, with subsequent loss of team relationships and experience of working together.

 

• Unique items of plant may be ordered months, sometimes years before installation. Any mistakes or delays in the provision of this plant cannot be resolved by a trip to the local builders' merchant to purchase additional quantities or a replacement.

 

• The requirement to employ large numbers of specialist fitters, welders, etc. can deplete the resources of the locality, necessitating the investigation of the various options for off- site fabrication, importation of labour, etc. Separate disciplines and specialist suppliers may be designing their contributions in isolation, hence the possibility of error or change increases unless good coordination is practiced.

 

This list may have the effect of putting most of the contractors and team members, however experienced, on a 'learning curve' at all stages of the project.

 

The risks mainly arise from the complexity of the plant, the remote nature of the typical site, the urgency with which the plant is required to be completed and the areas of new and untried technology, all of which will test the most experienced estimator. Although the aim should always be to improve performance and use 'fit for the purpose' designs and specifications, the decision to reduce cost by reducing specification has to be taken against the background of a realistic estimate which includes a proper consideration and evaluation of the project risks. To realize late in a project that features that were part of the original brief but omitted to reduce cost, could have been accommodated within the original budget will not endear the estimator to colleagues or employer.

 

COST CONTROL AND REDUCTION

 

The reality of a project will mean that unless effective cost control is exercised costs will escalate and the efforts of the most experienced of estimators using the very best of information will be wasted. Control is not the passive role of merely monitoring and accounting for cost, nor is it limited to the cost of material and construction. Cost control is an active role, which commences on day one of the project, with the control of management and design, and it continues through procurement of materials and construction of the plant, to completion and settlement of all accounts. Cost control is undertaken by cost engineers whose function is to ensure that the work is undertaken in the most cost - effective manner, by seeking economic solutions, monitoring expenditure, analysing performance, identifying problem areas and recommending preventive or remedial action. The position of cost engineer may be filled by one who is by profession a cost engineer or quantity surveyor; however the term quantity surveyor is not widely used in the engineering industries. Company costs can be reduced by various means including elimination of waste, removal of unnecessary requirements or by increased efficiency. Costs can also be reduced by reducing capability or specification, but whether this constitutes a 'saving' may be a matter of opinion since the owner is receiving less for his money. Waste to be eliminated includes poor performance, lack of coordination and change for its own sake, all of which causes disrupted working and delay. The use of non-standard items, be they items of equipment, contract documentation, procedures or certification requirements, rather than an 'off the shelf' fit for the purpose, again incurs unnecessary additional cost or risk. The CRINE (Cost Reduction Initiative for the New Era) report highlights many of these features in connection with the offshore oil and gas industries and emphasizes the savings that it considers could be enjoyed if the traditional confrontational forms of contract were replaced by a cooperative relationship between contracting parties. Time will tell whether the objectives of the report and the Latham Report into the UK construction industry can be translated into the savings.

 

demanded and whether similar initiatives are equally valid in other construction environments. It is sometimes necessary to challenge whether something perceived as essential to a project is in fact necessary. The removal of unnecessary content, or overspecification, from a project is a genuine saving and the use of the techniques of value engineering described in Chapter 4 challenges every aspect of a project and the components within that project. Value engineering is a technique which requires a systematic review of each element of the project and of every item of equipment within the project, questioning purpose and cost in order to identify savings.

 

This clearly demonstrates that to obtain best effect any cost saving reviews must be started sufficiently early. It also demonstrates that, during this same early period, management structures, controls and procedures must be established to improve and maintain performance and avoid the cumulative effects of change, delay, rework and disruption.

 

 

TERMINOLOGY

 

The lack of standardization within the industry is evident when looking at a list of apparently interchangeable terms which at best cause misunderstanding and at worst contractual error, dispute or other difficulty. The need to fully understand the terminology used is obvious. A term apparently in common use may be given different definitions on different projects. For example, in this book the person for whom the project is being undertaken is referred to as 'the owner' while elsewhere the terms 'employer', 'client', or 'operator' are commonly in use. Similarly the generic term 'change' is used to describe the following terms which are in general use to describe a change to the design, specification, means of construction, or timing of the work:

 

• Engineer's instruction
• Variation order; trend notice.

 

Even greater difficulties relate to the term 'project manager', which is used in this book to describe the person in overall charge of the project. Some owners use the term project manager, while others refer to 'the engineer', as do some published standard conditions of contract. To add to the confusion, some conditions of contract require both the owner and contractor to appoint project managers, while others may appoint a project manager to be in charge of the overall project, but use forms of contract which refer to the person ultimately responsible for a contract as being 'the engineer' or the 'owner representative'. Contractors and subcontractors may in turn appoint a project manager for their parts of the whole. In considering alternatives in general use it is therefore important to consider not only the project as a whole but also the various contracts placed within that project. The function of a particular person or document should not be assumed without reference to a more precise definition peculiar to that project.

 

NON-STANDARD DOCUMENTATION

 

A major element having a significant effect on administration within the industry is the lack of standardization of contract documents, administrative practices, methods of measurement, etc. This lack of standardization affects the efficiency of the industry in various ways:

 

• It reduces the possibility of amassing and exchanging data between projects and companies. It causes error in the understanding of requirements and requires tenderer to search through documentation to find potential contractual hazards and contractors to fall foul of clauses which they had misunderstood.

 

• It requires personnel to acquaint themselves with the systems and procedures for each project.

 

 

CONCLUSION

 

As in all endeavours teamwork and cooperation are vital ingredients to the success of engineering projects. An owner will rely on his project management team; they in turn will be reliant on contractors, subcontractors and suppliers who have been chosen for their experience and suitability. However, each member of this greater team is dependent on others and the procedures, systems, contracts and controls must allow the benefits of cooperation to come through.

 

Such a balance is best achieved through an appreciation of the requirements of other members of the project and it is hoped that this article will help each project member understand how the other disciplines do their work and thereby assist them in achieving the cooperation and efficiency we all strive to obtain. Owners and contractors involved in industrial engineering projects are constantly seeking new ways of undertaking capital projects in order to increase the efficiency of the industry, to improve the economics of working and to adapt to the changing safety and environment requirements around the world.