Project Management Prior and Proper Project Planning for Profitability

Author / Editor: Ron Beck and Sunil Patil / Dominik Stephan

Conceptual development is a necessary part of all projects in the process industry. This involves working out sufficient strategic information through which risks can be addressed and decisions on resource commitment can be made in order to maximize the potential for success. However, it is a known fact that it is during this phase that most companies make blunders and go over budget. Here’s an overview on how to make project planning efficient in the initial stage itself.

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Focusing on pre-FEED and FEED ensures the success, profitability and completion of processprojects of all sizes
Focusing on pre-FEED and FEED ensures the success, profitability and completion of processprojects of all sizes
(Picture: Aspen Technology)

Traditionally, the focus on improving project management of large projects has revolved around detailed engineering and construction phases of a project. This is natural, since those phases of a project involve a large amount of labor hours, logistics, movement and fabrication of millions of components, and proper sequencing of fabrication and installation. However, owners are recognizing the criticality of focus on pre-FEED and FEED to ensure the success, profitability and completion of process projects of all sizes, and especially mega projects. This increased focus is articulately described in a recent article in Alaska Business Monthly.

The article concludes that the long-term success of a project is closely correlated with how well pre-FEED and FEED is performed. When pre-FEED gets behind schedule or is unable to reliably project ultimate project costs, the long-term economic success of a project is put at risk.

EPCs and FEED contractors are focussing on improving their ability to manage projects closely at the front end. Better management of all aspects of FEED can be a key competitive advantage for an E&C in securing and successfully performing FEED projects. These areas of focus include better collaboration and oversight during conceptual modeling, using the conceptual model to define scope that can be passed electronically to estimators, evaluating costs during conceptual modeling, just-in-time project team training, and visualization tools for project management and oversight. Some of these areas are discussed herein.

Improved Conceptual Estimating Accuracy

Keys that help project managers improve the execution of pre-FEED and FEED come from unexpected places. One crucial area is the initial conceptual estimate of a project that needs to be completed, often when only a small percentage of the engineering work has been completed. The conceptual estimate is critical for the owner and the EPC contractor to predict project capital costs, key project risk factors, and to focus on areas where significant costs can be saved.

With several high visibility mega-projects running over budget and significantly behind schedule worldwide – in particular several currently running LNG projects (for instance, the Gorgon LNG project in Australia, which is currently 40 per cent over budget) – owners are looking at better ways of anticipating factors that may create difficulties.