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Benchmarking your construction management approach « Beroe inc

Date post: 21-Jul-2016
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Benchmarking your Construction Management (CM) approach Currently, a majority of the project owners are aware of how Construction Management (CM) services are procured within their respective organizations. However, most, if not all, of them do not have much clarity on how their peer groups procure the same services. - See more at: http://www.beroeinc.com
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Rita Williams Lead Analyst Beroe-Inc Dialing in from: India

Host

Domain Lead – Palani Darshan Beroe-Inc Dialing in from: India

Moderator

Discussion Segments

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How are CM services procured currently?

01

Is geographic and contractor consolidation possible?

02

Where is the CM market heading? 03

Construction management – Most adopted Delivery methods (1/2)

6

Complexity

Nature of Geography

Type of construction

Criticality Project Spend

Time frame

In house Expertise

No of projects

Contractors

Construction management – Most adopted Delivery methods (2/2)

7

Bundling CM Services- Contractor CM

CM as an Exclusive service

CM under Engineering

Procurement & Construction Management

Construction Management as a part of PM services

Construction management – Most adopted Delivery methods

8

What are the most widely adopted CM delivery methods by peer industries?

Capability

50 – 250 mn USD

Prior Relation

Time Scale

Single Project

Bundling CM Services-Contractor CM

Multiple Parties

Not worked in the region

Local Contractor

Higher Risk

CM as a part of PM services

Construction management – Most adopted Delivery methods

9

What are the most widely adopted CM delivery methods by peer industries?

High spend

Multiple projects

> 2 years

CM as an exclusive service

Complex

Multiple specialist

High Spend

Fast track

CM under EPCM

10

CM – Contracting preference by Geography

• In developed regions: Contractor CM Or Bundling of other services with CM

Why Contractor CM?

1. Contractor capability

2. Experience of in house teams in the region

3. Engineering and Design Quality

4. Well versed in HSE policy

5. Lower Risk

Why PMC??

1. Complex Contracting laws

2. Immature supply chains

3. Lack of Safety Awareness & Unsafe work

4. Diverse Engineering Standards

PM managing CM

Design + CM Globally EPCM

CM : construction management PMC: project management consultant

EPCM: engineering procurement and construction management HSE: health safety and environment

• High spend • Complex • Multiple contractors

• In developing regions: Adoption of a PMC – Managing CM

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Distinctive CM approaches - Bundling of CM with Contractors

In developed regions, CM is invariably contracted as a bundled service.

GSK:

Project Type: vaccine

manufacturing facility - Belgium

Contractors: PM Group

Delivery Type: EPCM

Eli Lilly:

Project Type: Industrial

Contractors: Fluor Daniel, Cockram,

Hochtief Turner

Delivery Type: Multiple EPCM

projects in North America/Europe

Nestle U.S :

Project Type: Industrial: Bottling

plants and distribution facilities

Contractor: Gary Engineering – 11 projects in the U.S.

Delivery Type: Design + CM

Nestle Europe:

Project Type: Industrial: Manufacturing facilities – Multiple

Contractor: PM group and M+W –

in Eastern Europe

Delivery Type: Design + CM

Kraft foods - Europe

Project Type: Industrial:

Coffee Production facility

Contractor: PM group in UK, Switzerland, Germany

Delivery Type: Design + CM

Coca Cola - UK

Project Type: Manufacturing and Distribution Centers

Contractor: Faithful +Gould –

Nationwide project execution

Delivery Type: Design + CM

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Distinctive CM approaches - Bundling of CM with Contractors

In developed regions, CM is invariably contracted as a bundled service.

GSK:

Project Type: vaccine

manufacturing facility - Belgium

Contractors: PM Group

Delivery Type: EPCM

Eli Lilly:

Project Type: Industrial

Contractors: Fluor Daniel, Cockram,

Hochtief Turner

Delivery Type: Multiple EPCM

projects in North America/Europe

Nestle U.S :

Project Type: Industrial: Bottling

plants and distribution facilities

Contractor: Gary Engineering – 11 projects in the U.S.

Delivery Type: Design + CM

Nestle Europe:

Project Type: Industrial: Manufacturing facilities – Multiple

Contractor: PM group and M+W –

in Eastern Europe

Delivery Type: Design + CM

Kraft foods - Europe

Project Type: Industrial:

Coffee Production facility

Contractor: PM group in UK, Switzerland, Germany

Delivery Type: Design + CM

Coca Cola - UK

Project Type: Manufacturing and Distribution Centers

Contractor: Faithful +Gould –

Nationwide project execution

Delivery Type: Design + CM

Distinctive CM approaches - Employing PM firms

An overall agreement with an international PMC for CM in a consulting and supervision role – In developing regions

Singapore

Client: Unicharm

PM Firm: Hill international

Ukraine

Client: Coca - Cola

PM Firm: Aecom

Egypt

Client: Unicharm

PM Firm: Hill international

China

Client: Kimberly Clark

PM Firm: Jacobs Engineering

Client: Sanofi Pasteur

PM Firm: Technip

Indonesia

Client: Bayer

PM Firm: Royal Haskoning DHV

South Africa

Client: Colgate Palmolive

PM Firm: Arup Engineers

Russia

Client: Kimberly Clark

PM Firm: Jacobs Engineering

India

Client: Roche

PM Firm: Tata consulting

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The next step – a Single CM for multiple geographies?

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Is it possible to have a single CM firm for multiple projects in multiple geographies?

Avoid multiple tenders

Single point of reference/accountability

Easier to implement project construction – on fast track basis

Better visibility for capital projects – across portfolios

Easier to implement/monitor standards and specifications

To save time and money

To increase project quality

Why

The next step – a Single CM for multiple geographies?

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Case: Unilever

Background: Unilever was expanding its facilities in the APAC region – multiple factories in 3 countries

Priority: Fast track project execution, design compliance, supply chain risk, construction laws

Approach: Entered into a partnership arrangement with Royal Haskoning

Betterschedule adherence, easier implementation of standards,

Vietnam

Thailand

Indonesia

Geographies covered

Service Scope

• Consultancy services of design,

• Project Management

• Construction Management

The next step – a Single CM for multiple geographies?

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Case: Nestle

Background: Nestle had multiple capex projects in developing regions

Priority: Compliance to standards, HSE, Design Supervision

Approach: Bundle construction management at a regional level, and contract CM as a master service agreement across multiple projects with geographic proximity.

Benefit: Design compliance, better safety record, better portfolio visibility

The next step – a Single CM for multiple geographies?

17

Case: Nestle

Regional level:

• PM Group and M+W group

• Multiple industrial projects

• Design and CM

• Eastern Europe

Multiple Countries:

• Tebodin International

• Engineering, PM, CM

• The Netherlands, Hungary, Dubai, Romania, South Africa, Nigeria, and Vietnam.

Country Level:

• 12 Month engagement

• Jacobs engineering

• PM – CM arrangement

• For all Dairy, coffee and food processing facilities in Mexico.

Consolidation of CM services - Alliances

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If our CM requirements are very frequent is a partnership approach with a supplier feasible?

Case: BHP Billiton

Multiple Projects

By 2015, BHP has to execute more than 12

projects; each project worth over USD 2 billion in Australia alone.

Strategic Alliance

For categories having multiple projects - extended timeframe - same geographic location

Lack of in house expertise

Potash is a new venture - Construction support was required

EPCM Contractor Category Location

FAST Iron ore projects Australia

Bechtel Metallurgical coal Australia

SNC Lavalin Potash Canada

• Engineering and construction support is highly complex and critical • High value • Multiple projects – Simultaneous • Multiple specialty contractors • Low in house management expertise

Consolidation of CM services - Alliances

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Case: Merck

Merck, Various Manufacturing Facilities

Location: Various Locations, USA

Construction Management

USD 1,000,000,000

Hill is assisting Merck to manage its multi billion dollar campaign in the united states by partnering as the construction management service provider .

Very High spend

Separation of design Function

Strict compliance standards / validation

Large Scale of construction

Quick turnaround - 2 years

WHEN??

How should you base your CM contracting ?

In the past the decision to outsource CM services was driven by a per requirement basis, very specific to the nature and scope of the project. – but that’s changing.

Evaluate you in house team

Evaluate your contractor pool

Identifying new areas

Multiple projects

Similar nature projects

By asset type

Complex – engineering and

design

Common geographies

By contractor

Multiple locations

Past project execution

By geography

Service portfolio

Decide Delivery Type

Type of Engagement

with contractor

Identify new Synergies

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The Road Ahead,,,,

Build up in-house expertise

Companies are using CM firms to obtain Industry economic analysis before construction

Decrease in Contractor managed Construction management

1 Companies are likely to consolidate geographic scope of construction management

2

3 4

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