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Managing Mega projects
Content
Mega projects Definition
Mega projects Challenges Driving and executing mega projects to success
Mega projects execution - Risks & Opportunities
Fluor tools and processes
Mega projects Opportunities
Information from: FLUOR guidelines, procedures and database.
2012 AACE INTERNATIONAL TRANSACTIONS RISK.823.4
Industrial Megaprojects: Concepts, Strategies and Practices for Success. (Edward W Merrow. 2011)
MegaProjects and Risk, An Anatomy of Ambition, (Bent Flyvbjerg, Nils Bruzelius, Werner Rothengatter. 2003)
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Mega project definition
A mega project is an extremely large-scale investment project,typically defined as costing more than US$1 billion
Mega projects attract a lot of public attention because of substantialimpacts on communities, environment, and budgets
Mega projects include oil and gas, petrochemical, mining,aerospace, airports, canals, environmental, information technology,stadium and sporting venues, rail and rapid transportation, bridgeand highway, science, space flight, planned cities, dam andhydroelectric and water infrastructure projects
Governments invest in mega projects to stimulate the general
economy (i.e. Chinese economic stimulus program (2008-2009);the European Union stimulus plan (2008) and the AmericanRecovery and Reinvestment Act (2009)
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Mega project elements
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PROCESS
ENGIN.COMPLEXITY MAYOR STIR.
LABOR
MARKETS
COMPLEX
EXECUTIONINTERFACE
COST ANDSCHEDULES
OWNERORGANIZATION
COMPLEX
ENVIRON.REGULATION
PART OFA PROGRAM
FINANCIALPROFILE
MEGAPROJECTS
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Political, security and financial instability
Economic uncertainty (i.e. recession / devaluation)
Government licensing and permitting constraints
Transportation and logistical difficulties
Extreme climatic conditions / Communications
Manpower staffing, retention and labor unrest
Camp and catering facilities
Emergency preparedness and evacuation
Healthcare services / medevac capabilities
Environmental protection and preservation
Mega project Challenges
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Mega project Challenges
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Driving and executing Mega projects to success
Business priorities (finance, investment, economic model, time tomarket, commercial opportunities, business objectives)
Design Definition (Licensing process, engineering, contractingstrategy, procurement, construction, key engineering deliverablescompleteness)
Organization Capability (Owner organization, dedicated owner´s
team for core engineering and construction disciplines andmanaging interfaces)
Project Controls (Level of controls needed, change management,risk management, physical progress attained before moving into
next phase) Mega project / Program Execution
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Mega project Execution (cont.)
Program Execution - Risks and Opportunities
– Integrated Stage-Gate Process (approval of internal and
external stakeholders, partners)
– Engineering/Construction Interface (engineering maturebefore construction starts – evaluate overlap in phases, effectiveinterface management)
• Execution approach (concurrent or phased execution)• Greenfield and Brownfield units/projects
– Construction Costs
• Productivity (scope, construction management, contract and
material management, logistic, weather, site congested, shutdownenvironment, geographical, local regulations)
• Incentives (safety, schedule)
– Cash Flow Constraints (reworking the execution plan, resourcingrequirements, schedule logic, priorities, completion date)
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Mega project Execution (cont.)
Program Execution - Risks and Opportunities (cont.)
– Procurement
• Start ahead of sanction for long lead items
• Cancellation terms
• Bulk quantities (buy down /discounts)
– Contracting Strategy (LNTP, LS, LSTK, reimbursable, unit
price, OBE convertible to LS)• Level of project definition
• Schedule constraints
• Market conditions
• Resources – Division of Responsibility
• Break down the scope between engineering, construction, suppliers,licensor and owner’s team
• In alignment with estimate and schedule basis8
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Mega project Execution (cont.)
Gatekeeping is a process, not a single person. It encompassesvarious steps. Key steps include:
– Assurance —checking that project deliverables are accurate andof high quality
– Endorsement —a recommendation that the project meets thebusiness need and is ready for execution
– Financial sign-off —agreement that the project is aligned with thecompany’s financial goals and can be authorized for execution
Financial entities requirements ECAs (Export Credit Agencies)
IPA – Independent Project Analysis – VIP (Value Improving practices)
PDRI – Project development rate index
Surveillance Analysis
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Fluor’s Tools and Processes
Project Phase
FEL-1 FEL-2 FEL-3
MarketAssessment
and
BusinessCase
BusinessPlanning
FacilityPlanning
ProjectPlanning
Engineering,Procurement
and
Construction
Turn-overand Start-up
Operations &Maintenance
• Define project objectives
• Identify and defineprocess options
• Test options forconsistency with projectobjectives
• Select project processscheme
• Define scope for market,product, capacity, sitelocation
• Class 5 estimate(Capacity factored)
To provide "what hasto be done"
Gate AReview
To provide correctand completeBaseline Data
To provide correct andcomplete
Basis for ProjectExecution
• Further developselected processoption
• ConceptualEngineering, Definebasis of design (BOD)
• Preparedocumentation forauthority approval (e.g.
EIA)
• Licensor selection
• Class 4 estimate(Equipment factored)
• Finalize scope of theproject
• PreliminaryEngineering, DefineBasic Design Package
• Class 3 estimate(during FEL 3) (Semidetailed)
• Class 2 estimate and(at the End of FEL 3)(Forced Detailed)
• Identify resourcesrequired
• Tendering of long leaditems
• Set up of executionplan
• Detailed Design andEngineering
• Material & EquipmentPOs
• VendorDocumentation
• Installation DesignDrawings (IFC)
• Final ConstructionSchedule
• I,O&M Manuals
• Turn-over, Testingand Start-UpProcedures
To provide correct andcomplete Design for
Construction
Objectives andDeliverables
Gate BReview
Gate CReview
Gates D,EReview
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Fluor’s Tools and Processes
Agreed Baseline
Project Manager
Lead
Engineering / Design
Baseline:Project Level
Baseline:Discipline Level
Baseline:Activity Level
Analysis andReport
Status andExceptions
Analysis andReport
Status andExceptions
Analysis andReportStatus andExceptions
Progress Report and ReviewFluor (PSR) - Client
Facilitationby ProjectControls
• Contract• Scope• Schedule
• Cost• Risk• Execution Plan
• Changes• Updates• Preventative Actions
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Fluor’s Tools and Processes
Baseline:Project Level
Baseline:Activity Level
Progress Report and ReviewFluor (PSR) - Client
Facilitationby ProjectControls
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6 Basic Elements
– Scope of Work (Facilities and Services)
– Cost Estimate – Schedule
– Execution Plan and Change Management
– Risk Management
– Prime Contract
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Fluor’s Tools and Processes
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Fluor’s Tools and Processes
CONCEPTUAL ENGINEERING
ProjectControls
Baseline CentricExecution
RiskManagement Document
ControlMaterials Control
SiteManagement
ContractManagement
ProjectManagement
ENGINEERING
PROCUREMENT
CONSTRUCTION
START UP
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Fluor’s Tools and Processes
OperationalSupport
Maintenance
Training
Start-up
Construction
Procurement
Design/ Engineering
Basic / Design
Feasibility
ConceptDevelopment
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Phase 5Operate &
Evaluate
Phase 4Execute
EPC
Phase 3Define Project(FEL 2 and 3)
Phase 2
Generate andSelect Alternatives
(FEL 1)
Phase 1Identify & Assess
Opportunity
BusinessPlanning
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Fluor’s Tools and Processes
PMC/Owner
Project 1
Project 2
Project 3
Project 4
Program Management in MegaProjects must extend across severalEPCs in addition to integrating allsuch EPC into a single Project
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Mega project Opportunities
Uplift employees in developing markets
Develop skilled local workforces Support community outreach programs
Build and sustain ‘world class’ HSE practices
Establish strong business relationships
Leave a positive impression on the societies in which we work Improve Owner competitive advantage
Leave a legacy
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Success or Failure?
There are underlying causes of over budgeted, delayed, andunsafe megaprojects.
We need to ensure a safe and profitable future formegaprojects
There are project best concepts, strategies and practices
that, when delivered in a disciplined manner deliverpredictably good results
“Good” results: – World class safety results
– Completion in accordance with the contract schedule
– Costs in accordance with the budget – Flawless Project startup
– High project quality reflected in plant operation
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Energy & Chemicals in Latin America
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Thanks