OWNER'S STUDY

A project starts as a need by the owner the design andconstruction of a facility to produce a product or service. The need for afacility may be recognized by an operating division of the owner, acorporate planning group, a top executive, a board of directors, or anoutside consulting 1-m. Generally one or more persons within the owner'sorganization are assigned The owner's study must conclude with a well-defined set of project objectives and needs, the minimum requirements ofquality and performance, an approved maximum budget, and a requiredproject completion date. Failure to provide any of the above items starts aproject in the wrong direction and leads to future problems. Sometimes anowner will contract parts of the study to an outside consulting firm. If anoutside utilized, the owner must still be involved to be certain his or herneeds are represented.

OWNER'S NEEDS AND PROJECT OBJECTIVES

An owner must know his or her needs and objectives before anyproductive project work can be started. If the owner doesn't know whatthe project requires, then no one knows what to do. Defining owner needsis the first step in a broad range of preproject activities that lead to scopedefinition. A project manager cannot form the project team to execute theproject without a clear scope definition. The process of identifying ownerneeds and objectives requires the involvement of a wide range of peoplewithin the owner's organization. This includes top managers andinvestors, financial personnel, and in particular the people who will useand/or operate the project after it is constructed. The process of identifyingowner needs and objectives usually involves numerous activities anddiscussions. It is important that "what is needed be separated from "whatis wanted." Without

constraints of cost and schedule, focus easily shifts from what is needed to what is wanted. This makes a project unaffordable and non-feasible. Because there are always constraints of cost and schedule, the owner must develop a project definition based upon need. This process involves an optimization of quantity, quality, cost, and schedule.High Low Members of the owner's organization must realize that it is their responsibility to resolve all issues related to project needs and objectives before assigning the project to the project manager. It is not the duty of the project manager or the project team Lo define the owner needs. Vague owner needs lead to project changes, scope growth, cost overuns, rework, and misunderstandings among team members. The best way to determine needs, and information related to needs, is to talk to the peoplehow will use the facility after it is constructed.

A part of the owner's needs and objectives study is assessment ofthe total project budget because management generally will not approvestarting the design of a project unless the probable total cost is known. Theproject budget at this stage of development is based on parameter costs,such as cost per square foot of building or cost per acre of site development.If the anticipated project cost exceeds the amount that management iswilling to approve, then it is necessary to reduce the scope of work. Forexample, the employee's office building and maintenance shop may beretained in the project and the warehouse eliminated. This decision wouldbe made if the warehouse is the lowest priority of the three buildings.Consideration would be given to adding the warehouse at a future datewhen funds are available, after completion of the site-work, the employee'soffice building, and the maintenance shop.

PROJECT SCOPE DEFINITION

Project scope identifies those items and activities that are requiredto meet the needs of the owner. For example, a project they need threebuildings consisting of an employee's office building, a warehouse, and amaintenance shop. In addition, the project may need a crushed aggregatearea for storage of heavy equipment and bulk materials. Each of theabove items should be defined in further detail, such as number ofemployees in each building, type and amount of storage needed in thewarehouse, type of maintenance required, and size and weight ofequipment. This type of information is needed by the project manager andteam to define the work required to meet the owner's needs andobjectives. The purpose of project scope definition is to provide sufficientinrormation to identify the work to be performed, to allow the design toproceed without significant changes that may adversely affect the projectbudget and schedule. Just to state that a project consists of three buildingsand an outside storage area is not enough information to start the designphase. To assist the owner in this effort, a comprehensive check list of itemsshould be prepared.

TABLE 3-1ABBREVIATED CHECK LIST FOR PROJECT SCOPE

DEFINITION OF A PETROCHEMICAL PROJECT1. General1.1 Size of plant capacity1.2 Process units to be included1.3 Type of plant feedstock1.4 Products to be made, initial and future1.5 Should plant be designed for minimum investment1.6 Horizontal vs. stacked arrangement of equipment1.7 Layout and provisions for future expansion1.8 Any special relationships (e.g., involvements of other companies)2. Site information2.1 Access to transportation: air, waterway, highway, railway2.2 Access to utilities: water, sewer, electrical, fire protection2.3 Climate conditions: moisture, temperature, wind2.4 Soil conditions: surface, subsurface, bearing capacity2.5 Terrain: special precautions for adjacent property2.6 Acquisition of land: purchase, lease, expansion potential2.7 Space available for construction

3. Buildings3.1 Number, types, and size of each3.2 Occupancy: number of people, offices, laboratories3.3 Intended usage: offices, conferences, storage, equipment3.4 Special heating and cooling requirements3.5 Quality of finish work and furnishings3.6 Landscaping requirements3.7 Parking requirements

4. Regulatory requirements4.1 Permits: construction, operation, environmental, municipal4.2 Regulations and codes: local, state, federal4.3 Safety: detection systems, fires, emergency power4.4 Environmental: air, liquids, solids, wetlands4.5 Preservations restrictions

A realistic budget and schedule cannot be determined for a projectwithout a well-defined scope of work. Thus, the project scope should bedeveloped first, then a project budget and schedule developed that matchesthe scope. It is the responsibility of all project managers to keep all workwithin the approved scope, and all costs and schedule within approvedlimits. There are times when an owner may become excited about the meritsof a project and anxious to begin work as soon as possible. This usuallyoccurs when a new product is developed or a government official decides afacility should be built at a particular time or location. The project managermust thoroughly review the project scope and be certain that it is sufficientlywell defined before starting work on the project. If this is not done, theproject team is forced into defining scope while work is being performed,which leads to frustration and adverse relationships.

PROJECT STRATEGY

In the early stages of project development the owner must develop theproject strategy, a plan to carry out tasks in a timely manner. Projectstrategy forms the framework for handling the project. It includes thecontracting strategy, the roles and responsibilities of the project team,and the schedule for design, procurement, and construction. Contractstrategy identifies the overall organizational structure and the allocationof risk among the contracting parties. In the early stages of projectdevelopment the owner must decide the work that can be performed byin-house personnel and the work that must be contracted to outsideorganizations. The owner may have a large engineering staff that canhandle the entire project: design, procurement, and construction.in othercases the owner may only have a limited staff for projects, whichrequires the assignment of contracts to outside organizations that havethe capability to perform the necessary work.Although a large organization may have the in-house capability, it maynot be able to schedule the work when it is needed due to priorcommitments. The owner's organization must make a realistic assessmentof the work that can be accomplished in-house and an outside firm'scapability to perform the work, and then evaluate the cost and scheduletrade-offs of purchasing outside service

The type of contract chosen defines the allocation of responsibilities andrisks for each party and influences the project schedule. If a fast-track~schedules important in order to obtain an early return on the projectinvestment, then a cost-plus-fee contracting strategy may be desirable.Government projects of an emergency nature are sometimes handledin this manner. If there is ample time to complete the entire design, atraditional design/bid/build approach with a lump-sum contract may bedesirable. The owner must evaluate all possibilities, identify theadvantages and disadvantages, and consider what best meets his orher needs, objectives, budget constraints, and schedule requirements.The project strategy includes a schedule for the timing of design,procurement, and construction tasks. The purpose of the owner'sschedule is to identify and interface overall project activities: design,procurement, and construction. A workable schedule must bedeveloped that integrates the activities of all parties involved in theproject. Any change in the project schedule should be approved by allparties.

SELECTION OF DESIGN FIRMS AND CONSTRUCTIONCONTRACTORS

Selection of the designer and constuctor varies depending onmany factors including the type, size, and complexity of the project; theowner's knowledge in handling engineering and construction projects, andhow soon the owner wants the project completed. The method of selectiondepends on the owner's project strategy and the contract arrangementchosen by the owner. If the owner has no prior experience in workng withdesigners, a procedure must be established to select the designer. After theowner has studied the proposed project and its need for dcsign services, alist of prospective design organizations is identified. Often the list iscompiled based on recommendations of other owners or those acquaintedwith design firms who are known to have the expertise required to designthe project. Generally the list consists of at least three design firms thatappear to be best qualified for the particular project. Each design sent aletter that briefly describes the proposed project and inquires about itsinterest in the project.

If the design is 100% complete, the owner may issue requests for bids (RFB)to construction contractors. For most private-sector projects the contractdocuments generally state that selection of the construction contractor willbe based on the lowest and best bid. Typically for public-sector projectsthe contract documents state the selection of the construction contractorwill be based on the lowest qualified bidder. However, the lowest bid isgenerally the criteria for selection of a construction contractor when thedesign is 100% complete. Sometimes the owner may desire to startconstruction before design is completed. For example, the constructioncontractor may be chosen after 70% design completion, or the constructioncontractor may be selected at the same time the designer is selected inorder to take advantage of the contractor's knowledge of building theproject. When the owner desires to start construction before design iscomplete, selection of the construction contractor cannot be made on pricealone because the design documents are not completed. When theconstruction contractor is selected before design is completed, a procedureis established to review and evaluate prospective construction contractorssimilar to the procedures presented in preceding paragraphs for selectionof the designer.

PARTNERlNG

The competitive environment and the rigid requirements ofcontracts have, at times, caused adverse relationships in the constructionindustry. Traditionally, contractors and vendors have been selected on acompetitive-bid basis to provide construction services, under formalcontracts, to meet the requirements specified in the drawings andspecifications. A short-time commitment is made for the duration of theproject. Thus, contractors and vendors work themselves out of a job.Partnering is a business strategy that offers many advantages to the partiesinvolved; however, its success depends on the conduct of the parties andtheir ability to overcome barriers related to doing business differently thanin the past. Companies agree to share resources in a long-term commitmentof trust and shared vision, with an agreement to cooperate to an unusuallyhigh degree to achieve separate yet complementary objectives. Partneringis not to be construed as a legal "partnership with the associated jointliabilities.

A cultural change is required by all parties in a partneringrelationship. The three key elements of any successful partneringrelationship are trust, long-term commitment, and shared vision. Asthese three elements are developed, other sub elements areachieved and the benefits to all parties are maximized. Bothcustomer and supplier can profit from reduced overhead and workload stability. Competitive advantage is enhanced through improvedcost, quality, and schedule. Growth and balance ate important to thecontinual improvement of the partnering agreement. For example, indeveloping long-term commitment, a partnering agreement maygrow from single to multiple projects. Likewise, trnst may evolvefrom competitive bidding through complete disclosure of projectcosts in a cost-plus relationship. Shared vision can expand to opensharing and mutual development of business objectives.