Transcript Project Management Course

World-Class Project Performance with
Value Improving / Best Practices
Dr. Nick J. Lavingia, P.E.
Chevron
Project Management Consultant
APEGGA Annual Conference, Calgary
April 26-27, 2007
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Dr. Nick J. Lavingia, P.E.
Project Management Consultant
Chevron
Nick has over 30 years of Global Project Engineering, Management, Consulting and
Training experience in the Energy industry. As a Project Management Consultant at
Chevron, he provides Consultation and Training to Project Professionals worldwide.
Nick has a B.S. and M.S. in Chemical & Petroleum-Refining Engineering and a Ph.D. in
Engineering Economics & Management from the Colorado School of Mines. He is a
registered Professional Chemical Engineer in the State of California.
Nick is a member of Project Management subcommittee for Athabasca Oil Sands expansion
project. He has published and presented many papers at technical organizations and is a
recipient of industry award from Pathfinder for outstanding Contribution to the
advancement of Project Management Technology and Chevron Chairman’s award for
implementing Value Engineering throughout the corporation.
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Agenda
•
•
•
•
•
•
What are Value Improving / Best Practices?
What is the Impact of these Practices on the
Bottom Line?
When to Conduct these Practices?
What is Selection Criteria for Applicable
Practices?
Who should Participate in the Workshops?
What Information is Needed for the Workshops?
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Value Improving / Best Practices
Phase 1
Phase 2
Phase 3
Phase 4
Phase 5
IDENTIFY & Assess
Opportunities
SELECT from
Alternatives
DEVELOP Preferred Alternative
EXECUTE
(Detail EPC)
OPERATE &
Evaluate
• Decision & Risk Analysis
• Project Execution Planning
• Lessons Learned
(Share)
(Seek)
• Value Improving
Practices by IPA
• Post Project
Assessment
• Peer Review
• Pre-Funding Assessment
$
EST
Legend:
D
PFD
$
EST
D
P&ID
AFE = Appropriation for Expenditure
D = Decision Point
IPA = Independent Project Analysis, Inc.
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D
AFE
• Business
Evaluation
D
D
PFD = Process Flow Diagram
P&ID = Piping & Instrumentation Diagram
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Project Execution Planning--Part A
(The Strategic Project Planner by Richard Westney)
Defining the business goals that will determine project success
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Project Execution Planning--Part B
(The Strategic Project Planner by Richard Westney)
Defining major phases, milestones, risks, organization,
staffing and best practices to be used
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Project Execution Planning--Part C
(The Strategic Project Planner by Richard Westney)
How time, cost, quality and resources will be managed
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What are Value Improving Practices (VIPs)?
According to IPA: “VIPs are out-of-the-ordinary practices used to
improve cost, schedule and reliability of capital projects”.
• Used primarily during Front-End Loading
• Formal, documented practices involving a repeatable work process
with measurable results
• Almost always facilitated by specialists from outside the project
team
There are dozens of special practices used in the industry that are
possible VIPs such as team building, peer reviews, etc. Only
practices with a demonstrated, statistically reliable connection
between use and better outcomes are deemed VIPs.
VIPs are more than:
• “Just good engineering”
• A special look at some aspect of the project
• Cost reduction exercises
• Audits
• Project readiness reviews
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Impact of FEL & VIPs (from IPA)
RELATIVE CAPITAL COST AS A FUNCTION OF FEL
Relative Capital Cost
1.2
1.1
FEL Improvement Only
1.0
Industry Average Cost = 1.0
0.9
FEL Improvement plus VIPs
Best Practical
Good
Fair
Poor
FEL Rating
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Value Improving Practices by IPA*
AFE
Phase 1
Phase 2
Phase 3
Phase 4
Phase 5
IDENTIFY & Assess
Opportunities
SELECT from
Alternatives
DEVELOP Preferred Alternative
EXECUTE
(Detail EPC)
OPERATE
& Evaluate
• Classes of
Plant Quality
• Value
• Technology Selection
Engineering
• Process Simplification
• Design to Capacity
- System Levels
- Equipment Sizing
• Constructability
• Customized Standards
• Predictive Maintenance
• Waste Minimization
• Energy Optimization
• Process Reliability
Modeling
• 3-D CAD
$
EST
D
PFD
$
EST
D
P&ID
Legend: AFE = Appropriation For Expenditure (Full Funding)
CAD = Computer Aided Design
D = Decision Point
D
AFE
D
D
EPC = Engineer, Procure & Construct
PFD = Process Flow Diagram
P&ID = Piping & Instrumentation Diagram
* IPA’s Value Improving Practices are Statistically Correlated with added value.
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Classes of Plant Quality
“A structured team review focused on validating project objectives
and establishing the corresponding purpose design approach that best
correlates with business needs. Also establishes the necessary facility
to meet business goals. Characteristics such as capacity, life, product
quality, flexibility, expandability, reliability, etc. are agreed to with
decision maker”.
Selection criteria:
• Required on ALL projects to align project team with business
objectives
Documents required:
• Spreadsheet with information on all 4 categories
Who should attend:
• Project Team and Project Sponsor
When Used:
• Phase 2
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Classes of Plant Quality--Categories
CHARACTERISTICS
RANGE from CATEGORY I TO CATEGORY IV
CAPACITY
Designed for specific capacity
Over capacity expected
PLANT LIFE
2-5 years
20 + years
PRODUCT QUALITY
Meets specifications at one set
of conditions
Exceeds specifications
FLEXIBILITY
Little with limited turndown
A lot with high turndown
MARGINAL INVESTMENT
CRITERIA
Not considered even if high
payout
Could be less than project payout
EXPANDABILITY
Difficult, tight plot plan
Easier, open plot plan
RELIABILITY
Sparing for orderly shutdown
only, less than 80% operating
factor.
Sparing to keep plant up, 95% +
operating factor
Simple, labor intensive
Complex, highly automated
Little maintenance facilities,
high maintenance costs
Good accessibility, no major
maintenance costs contemplated
CONTROLS
MAINTENANCE
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Technology Selection
“A formal systematic process by which a company searches for
technology outside of the company (or, in some instances, in other
divisions within the company) that may be superior to what is
currently employed”.
Selection criteria—Use this VIP if:
• Alternate technologies are available
• There are significant benefits in new technology
• Future position in market can be enhanced
• Risks and rewards for new technology are understood
• There are various types of equipment to perform process function
Documents required:
• PFDs and cost estimate
Who should attend:
• Project Team and Technical Experts
When Used:
• Phase 2
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Technology Selection--Ranking Criteria
TECHNOLOGY SELECTION
POTENTIAL RANKING CRITERIA
(Determined by Project Objectives)
FINANCIAL
Rate of Return
Net Present Value
Life Cycle Cost
Capital Constraints
Low Cost Producer
ENVIRONMENTAL/SAFETY
Emissions
Incident Rate
Potential Future Liability
OPERABILITY
Feedstock/Rate Variability
Product Specification
Ease of Handling Upsets
MECHANICAL
Reliability
East of Maintenance
Utility Requirements
Plot Space Constraints
Ease of Retrofit
WEIGHTING
FACTOR
TECHINOLOGY
WEIGHTING
FACTOR
Degree of Commercialization
Process Risk
License Fees
Cost of Additional Development
Time to Implement
Yield Advantage
LICENSOR
Experience with the Technology
Ability to do Total Process
Scope
Experience with Retrofits
OTHER
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Process Simplification
“A disciplined analytical method for reducing investment costs--and
often operating costs as well—by combining or eliminating one or
more unnecessary process steps. This VIP uses the traditional Value
Engineering methodology (Functional Analysis) to focus on process
steps rather than individual equipment”.
Selection criteria—Use this VIP if:
• Project involves large number of process steps
• There are alternative options for performing process function
Documents required:
• PFDs and cost estimate
Who should attend:
• Project Team and Process Representatives
When Used:
• Phase 2
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Value Engineering
“A disciplined method used during design, often involving the use of an
internal or external V.E. consultant, aimed at eliminating or modifying items
that do not contribute to meeting business needs. V.E. is a creative and
organized method for optimizing the cost and performance of a facility. It is
a function-oriented, systematic approach to eliminate and prevent
unnecessary costs. The purpose of a V.E. study is to improve decision
making and obtain lowest life-cycle cost without reducing quality.”.
Selection criteria—Use this VIP if:
• Capital investment is a key driver
Documents required:
• PFDs, Plot Plan, P&IDs and cost estimate
Who should attend:
• Project Team, Experts from outside the Project Team and V.E. Facilitator
When Used:
• Phase 3
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Function of a Pencil
Component
Function(s)
Pencil
Make Marks
Eraser
Remove Marks
Band
Secure Eraser
B
x
Support Lead
COMPANY
Transmit Force
Display Info
Paint
Protect Wood
Improve Appearance
Logo
Advertise Company
Lead
Make Marks
x
Cost ($)
0.40
x
x
x
x
x
x
x
x
x
Improve Appearance
Wood
S
0.05
0.03
0.09
0.03
0.02
0.18
Alternatives--Mechanical Pencil, Marker, Chalk, etc.
B = Basic Function
S = Support Function
96-06-10
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FAST Diagram -- Definition
HOW
WHY
DESIGN
CONSTRAINTS
OUTPUT
BASIC
FUNCTION
HIGHER
FUNCTION
SCOPE
LIMIT
•
•
•
•
•
LATER
SAME
PRIOR
TIME
SEQUENTIAL
FUNCTION
CONCURRENT
OR
SUPPORTING
FUNCTION
INPUT
CRITICAL
PATH
LOWER
FUNCTION
SCOPE
LIMIT
Identify functions, not equipment.
Breaks large complex problem down into manageable pieces to facilitate evaluation.
Good basis for brainstorming.
Look for non-value adding steps; Functions that you Do and then Undo:
• Cool off, then heat.
• Solidify, then melt.
• Let down, then repressure.
• Dissolve, then dry.
• Store, then retrieve.
Use in conjunction with cost information.
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FAST Diagram--Big Oil Example
F.A.S.T. DIAGRAM
BIG OIL PROJECT
How
Why
20%
MEET
CRUDE PIPELINE
SPECIFICATIONS
REMOVE
MERCAPTANS
STABALIZE
CRUDE
SEPARATE
LIQUID/VAPOR
DESALT
CRUDE
COMPRESS
VAPOR
TREAT
PRODUCED
WATER
SWEETEN
GAS
COLLECT
WELL
PRODUCTION
6%
4%
DESIGN CRITERIA
PROJECT FACILITY
OBJECTIVES
9 ITEMS
13%
DRY
GAS
19%
K.I.S.S.
FRACTIONATE
LIQUIDS
REUSE BOUGHT
EQUIPMENT
SCOPE
LINE
MEET NEW
PIPELINE SCHEDULE
CLAUS - 22%
SCOT - 15%
SULFUR HANDLING - 1%
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TREAT
ACID GAS
38%
SCOPE
LINE
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FAST Diagram--Offplot Facilities Example
F.A.S.T. DIAGRAM
OFFPLOT FACILITIES
How
Why
TEST
PRODUCT
TRANSFER
PRODUCT
STORE
OFFSITE
TRANSFER
PRODUCT
RECYCLE
OFFTEST
PRODUCT
STORE
OFFPLOT
TRANSFER
PRODUCT
OPERATE
PIPELINES
SHIP
PRODUCT
BURN
VAPOR
OPERATE
PIPELINES
PRODUCE
PRODUCT
BURN
VAPOR
LOAD
PRODUCT
OPERATE
PIPELINES
OPERATE
LOADING
ARMS
OPERATE
PUMPS
METER
PRODUCT
OPERATE
PUMPS
OPERATE
PUMPS
BURN
VAPOR
SCOPE
LINE
SCOPE
LINE
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FAST Diagram—Office Building
HOW?
Tenants
Work
WHY?
$1,600K
$2,000K
$510K
Provide
Heat
Distibute
Air
Transport
Air
$2,600K
$85K
Cool
Air
Induce
Outside
Air
HVAC
Needed
$1,000K
Control
Temp
$1,600K
Provide
Cooling
$70K
Filter Air
$40K
Mix
Air
$35K
Exhaust
Air
$130K
$130K
Pump
Chilled
Air
Return
Air
F.A.S. T. = Functional Analysis System Technique
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Value Engineering Documentation
No.
FAST
Block
Idea
Advantages
Disadvantages
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Potential
(Cost) or
Savings
Action
Item
Who
When
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Design to Capacity
“The heart of this VIP is choosing how much allowance should be
added to each major piece of equipment or system to meet business
requirements. This practice is to set the lowest practical over-design
factors to minimize excess capacity. Different equipment types or
parts of the plant may be built to different levels of conservatism”.
Selection criteria—Use this VIP if:
• There is complex process with a number of process steps
• Equipment costs represent a major portion of total project cost
• Future expandability is critical
• Significant pre-investment options exist
• Significant cost increase of major equipment at specific capacity
points
Documents required:
• PFDs, equipment drawings and cost estimate
Who should attend:
• Project Team, Process Representatives and Equipment Experts
When Used:
• Phases 2 and 3
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Design-to-Capacity - Level Objectives
EQUIPMENT DESIGN-TO-CAPACITY LEVELS
EQUIPMENT
Level 1
Level 2
Level 3
TYPICAL PAST
PRACTICE
COLUMNS
1.0
1.10
1.25
1.25
HEAT EXCHANGERS
1.0
1.10
1.25
1.25
REACTORS
1.0
1.10
API FURNACES
1.0
LEVEL CONTROLLED
1.0
1.10
1.25
1.0
FLOW CONTROLLED
PUMPS (NOTE 3)
1.0
1.10
1.25
1.10
PIPING
1.0
N/A - NOTE 4
N/A - NOTE 4
RECYCLE CENTRIF.
1.0
1.10
NOTE 6
1.05
COMPRESSOR
RECIPROCATING
COMPRESSOR
1.0
N/A - NOTE 7
N/A - NOTE 7
1.0
NOTE 2
NOTE 1
1.0
NOTE 2
1.0
PUMPS (NOTE 3)
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1.0 - NOTE 5
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Design to Capacity--Example
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Design to Capacity Documentation
System /
Equipment
Design
Basis
Function
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List
Variables
and their
Causes
Design
Allowance
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Constructability
“Analysis of the design, usually performed by experienced
construction manager, to reduce cost or schedule and improve safety
in the construction phase”.
Selection criteria—Required on ALL projects:
• Construction safety is important
• Congested plant layout
• Require special lifting arrangements
• Complex plant for construction or constructed during a plant
turnaround
Documents required:
• Plot plans, piping layouts, equipment drawings and craft discipline
drawings
Who should attend:
• Project Team, Construction Specialist and Heavy Lift Contractors
When Used:
• Phases 2, 3 and 4
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Customized Standards
“Engineering standards and specifications can affect manufacturing
efficiency, product quality, operating costs and employee safety.
Sometimes the cost of a facility is increased by the application of
codes, standards and specifications that exceed the facility’s needs”.
Selection criteria—Use this VIP if the project:
• Life cycle cost is the key driver
• Owners standards and specs are not mandatory
• New specs and standards apply
Documents required:
• Local and industry specs and standards and cost estimate
Who should attend:
• Project Team, Specs and Standards Experts
When Used:
• Phase 2
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Waste Minimization
“A stream-by-stream analysis of how waste is generated by a process
and how those waste streams can be eliminated, reduced, recycled,
turned into saleable by-products or treated”.
Selection criteria—Use this VIP if the project:
• Is an environmentally driven project
• Generates significant waste
• Located in environmentally sensitive area
Documents required:
• Heat & Material Balances and PFDs
Who should attend:
• Project Team, Licensors and Technical Specialists
When Used:
• Phases 2
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Energy Optimization
“A simulation methodology for optimizing the life cycle costs by
examining power and heating requirements for a particular process.
The objective is to maximize total return based on selecting the most
economical methods of heat and power recovery”.
Selection criteria—Use this VIP if the project:
• Is a significant energy consumer
• Alternate designs exist that can reduce energy consumption
Documents required:
• Heat & Material Balances and PFDs
Who should attend:
• Project Team and Pinch Analysis Experts
When Used:
• Phases 2
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Process Reliability Modeling
“Reliability simulation uses sophisticated computer
simulation modeling capabilities to simulate the mechanical
reliability of a process facility. Reliability modeling is a
quantitative analysis of annual production and plant
availability aimed at improving overall production capability.
The practice is a method for evaluating the affect of different
design configurations on plant availability and can help
decide what equipment to spare and how to minimize
downtime”.
Selection criteria—Use this VIP if the project:
• Reliability and availability are key project drivers
Documents required:
• PFDs, Plot Plans, P&IDs and Equipment Failure and Repair Data
Who should attend:
• Project Team, Reliability Group and Simulation Modeling Expert
When Used:
• Phases 2 and 3
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Reliability Modeling Vs. Reliability Centered
Maintenance
Reliability Modeling
Reliability Centered Maintenance
•
•
•
•
•
•
•
•
Reviews impact on total facility
Highlights areas of opportunity
Allows unlimited “What-If” cases
Model can easily be updated
Highlights impact on revenue
stream
Determines overall plant or
facility operating factor
•
•
•
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Reviews one piece of equipment
Identifies how to improve
operating factor
Reviews how to decrease
maintenance expense
Develop contingency plans in the
event of a failure
Determine how to mitigate
failures
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Reliability Modeling--Data Needed
Operating Rate
Scheduled Outages--Frequency
Scheduled Outages--Duration
Equipment Description
Equipment Failure Rate
Equipment Repair Time
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(Units/Hour)
(#/Year)
(Hours)
(Model #)
(#/Year)
(Hours)
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Reliability Modeling--Benefits
• Quantifies Operating Factor
• Provides a Tool for “What if” Cases
• Provides data to justify Capital
Expenditures
• Identifies areas for Reliability Centered
Maintenance (RCM)
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3-D CAD
“Extensive use of 3D Computer Aided Design (CAD) during
FEL and detailed engineering. The objective is to model the
project in the computer to reduce the frequency of
dimensional errors and spatial conflicts that cause design
changes during construction. The use of 3D CAD also
improves visualization for operations input and training”.
Selection criteria—Use this VIP if the project:
• Is a greenfield project or stand alone
• Existing facility drawings are available in 3D CAD
Documents required:
• PFDs, Plot Plans, P&IDs, Detailed Equipment Arrangements and
Equipment Drawings
Who should attend:
• Process Licensors, Technology Specialists and Contractors
When Used:
• Phases 2, 3 and 4
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Predictive Maintenance
“An approach to maintaining facilities whereby equipment is
monitored and repairs effected as indicated before failure.
Predictive maintenance makes use of advances in sensor and
instrumentation technology to monitor characteristics such as
heat, lubrication, vibration, cracking, noise, and presence of
corrosion products”.
Selection criteria—Use this VIP if the project:
• Involves large rotating equipment or machinery
• Reliability and availability are key project drivers
Documents required:
• PFDs, Plot Plans, P&IDs and Equipment Drawings
Who should attend:
• Project Team and Predictive/Preventive Reliability Group
When Used:
• Phase 3
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Summary
Structured Project Development & Execution
Process and Application of Applicable
VIPs at the Right Time with the Right
Participants can help achieve World-Class
Project Performance:
• Better
• Cheaper
• Faster
• Safer
PROJECTS
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