Hydrocarbon Processing - May 2022 - 80

Plant Turnarounds and Project Management
is not enough to drive away the two-figure
deviations found in many EPC projects.
The authors' thesis is that the main
cause of cost and schedule overruns is
the intrinsic complexity of EPC projects;
therefore, the problem will only be solved
when the industry finds a way to effectively
manage that complexity.
The roots of the problem. The causes
of EPC deviations most frequently mentioned
in literature include the following:
* Client design changes
* Low construction productivity
* Aggressive bidding
* Poor project planning and
scheduling
* Financing problems
* Slow decision-making
* Acts of God.
If these deviations are analyzed, the underlying
cause is the complexity of EPC
projects. In theory, client design changes
should not be harmful because the contractor
will be compensated, and the client
only makes them if the benefit/cost ratio
is positive. If changes end up being a problem,
it is because their impact turns out to
be worse than expected. The reason this
happens so often is that project complexity
makes it difficult to foresee the real impact
of the changes. It also makes it very difficult
to reach an equitable agreement between
the parties on the costs of the change.
The second deviation-low construction
productivity-is not due to lack of
experience of construction personnel, but
to problems caused by delays in the delivery
of drawings and installation materials.
The complexity of the project should be
the only reason for highly experienced engineering
and procurement teams to end
up doing a bad job.
The third cause is aggressive bidding.
Market pressures can often force contractors
to provide low prices, but the complexity
of EPC projects means that, even
unintentionally, bids can easily be unrealistically
high or dangerously low.
Complexity plays an important role in
all the deviations, including Acts of God,
because risk analysis and mitigation measures
are always carried out before starting
a project. If they prove to be insufficient,
it is because the complexity of the project
makes it very difficult to gauge the consequences
of the acts.
While there are other factors that can
also lead to project failure, complexity is
80 MAY 2022 | HydrocarbonProcessing.com
by far the most common and most difficult
to manage. In addition, complexity
is aggravated by the urgency of capital
projects. Project lead times are excessively
long for an increasingly dynamic economy,
and this makes urgency present at
every step of the project. This urgency exacerbates
the consequences of complexity
because, in addition to limiting the time
available to try to untangle the complexities
of a project, urgency often forces the
design to move forward based on assumptions
rather than on firm data.
Academic research supports the conclusions
drawn in this article. After a
systematic analysis of 86 research papers
on the causes of project failures, Denicol
et al.2
found that the dimensions that
make megaprojects so difficult to manage
include size, uncertainty, complexity, urgency
and institutional structure.
There are numerous research papers
on the origin of project complexity, but, in
the case of EPC projects, one only needs
to see the detailed critical path method
(CPM) and program evaluation and review
technique (PERT) network to understand
where this complexity comes
from. A medium-sized EPC project can
easily have more than 20,000 tasks, with
a much higher number of interactions or
dependencies among them. Like trees that
obscure the forest, complexities blur and
hide problems, and, without a clear vision,
it is very difficult to manage them.
Prieto3
said that, in addition to obscuring
the problems, complexity amplifies
even the smallest and seemingly improbable
risks. In his book, The Improbability
Principle-Why Coincidences, Miracles and
Rare Events Happen Every Day, David J.
Hand mathematically describes the amplification
mechanisms, such as Lorenz's
butterfly effect. The following will show
that the size and complexity of this maze
of multidisciplinary tasks and interactions
are further aggravated by the limitations of
the tools used to visualize this maze.
The schedule problem. Scheduling is a
key tool for efficiently planning and controlling
the project's execution. One might
think that the schedule's function is limited
to controlling execution times, but scheduling
also has a strong impact on many
other factors-such as spent worker hours,
the amount of rework required, construction
efficiency, the necessary volume of
surplus materials, and many other cost elements
that are affected by the schedule design.
The following are several examples:
* If the design of cable routings is
started with immature information,
designers will have difficulties
obtaining the data they need and
spent worker hours will increase.
Furthermore, they may have to
work on assumptions, which may,
in turn, lead to a wave of redesigns
in downstream disciplines-
including construction reworks-
when the correct data arrives.
* If construction subcontractors
are mobilized too early, they will
suffer from drawing shortages,
leading to a drop in efficiency.
* If time frames assigned to
procurement and subcontracting
tasks are too short, chances are
that there will not be enough time to
get the most competitive prices.
* If the initial schedule is too
optimistic, the project will
accumulate delays, often leading
to staff demotivation.
The schedule is, therefore, the most
powerful tool available to project management.
The budget is an essential reference
for cost control, but it is only a reference
and not a mechanism that can act
directly on costs.
There are very powerful schedule management
tools on the market. While they
are designed to display a myriad of activities,
with the ability to drill down into the
details, they do not provide an all-encompassing
vision of project structure. These
tools cannot produce clear summaries capable
of communicating the complex task
networks and the roles of the interactions
between them.
Managing a project without a clear
overall vision of its structure is like driving
a car in the fog. There must be a clear
overall picture to enable the EPC contractor
to detect risks and opportunities,
measure the consequences of decisions
on downstream activities, and choose the
best implementation strategies.
Mapping of project interactions. There
are few solutions available to obtain a clear
overview needed to manage large, complex
projects. If these solutions are simple tools
and are not complicated systems that add
more complexity to the already overloaded
project management environment, then
advanced analytics can help.
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