Thursday, October 7, 2010

Some of comments on EPC projects

Some of the gains that I earned when I worked as a Project Manager are as follows:

1) In E.P.C contracts (client side):

- Approach of the client should be always help to executive factors (Consulting Engineers, Main and Sub Contractors) to reach his target. The client and his representatives should know that only someone does not take a mistake who does not work. Of course, the client should have the concern about balancing of Time and Energy (Cost) during execution his project.

- The client should obtain enough information from his project before to put out to tender for instance, to estimate time and cost of the project (Items price list or break down price list). Therefore, he needs to have basic and details engineering and details time schedule.

- It is suggested to client that details time schedule presented by main contractor is enclosed as an article of shipment documents included in Sales contract so that main contractor could not supply any machinery at the site before commencement date of civil work or erection work. Because main contractors are not usually interested in doing their obligations in Construction contract (“C” in EPC) and they will take the most their benefits by Procurement of equipment and Engineering (“P&E” in EPC) that these margins are often more than P.B.G (Performance Bank Guarantee) presented by main contractor.

-Break down price lists should be checked exactly because it is possible that shipment of a machine only absorbs 50% of L/C.

-Details time schedule should truly be designed so that it should be established a logical relation among shipments and progress of civil and erection works.

-When a new revision of the document ( contract, appendix, DWG, data sheet and so on) is issued by Contractor, we should check it out not only the cases are depended on decisions of the meeting but also other parts of the document should be controlled word to word and number to number. For instance, one of the projects, I remember that we had discussed about mechanical specifications of machinery (App 3 from Sales contract) at the meeting. But I saw that it had been deleted some civil work specifications in another part of new revision APP (3) by Contractor so that total difference cost was more than one million Euro. So I remember that the basic elevation code (BM) had been changed in new revision of DWG related to site plan so that it was caused a subject of claim.

2) In Engineering:

-The most important thing to present a new design in the field of Engineering is to collect and select the exact basic data. In fact, the calculation note and engineering software help us to increase the rate of analysis so that the feedbacks show us the confirmation or non-confirmation of basic data. Therefore, we should know that engineering tools (software and calculations) do two works for us: 1) to analyze of basic data 2) to proceed toward the limits (for saving of cost and time).

- We should have the concern about a new design because it brings us the new science production and the innovation. Therefore, we should double check our design by locally information, previous executed designs, references, returning analysis, and using of other calculator engineers and vice versa. It means, when engineers proceed to design and calculate of some details in the fields of civil, mechanic, process, electric and so on, they should guess the details of final design completely before starting of the calculation by using of locally information, other projects just like to this project, returning analysis, references etc.
An optimum design will guide us toward the exact estimation and saving of money and time. For example: I remember that I rejected basic and details engineering of Electrical Substation Building in one of the projects so that the new revision had been changed from 2500 m2( Area) to 750 m2 and total saving money was about 800000 Euro accompanied by 6 months saving time. In another project, I remember that some basic data for designing of utilities system (Cooling Towers, Steam Generators, Electrical system etc) had been changed logically and according to real consumptions and over lap (contemporary) percentages. For instance, I rejected basic engineering of sewage water (Domestic + foul water) and raw water treatment because of inlet volume (basic data) so that finally it had been changed from 6 m3/day to 1.5 m3/day. Therefore, when a project manager receives a new design from engineering department, he should spend money to obtain other designs to be produced by calculator engineers out side of his company for comparing with this new design because he is expected to find out the best way to reach the target of project. Of course, a project manager should care about locally information, previous executed designs, references, returning analysis too.

- Before final approving of details engineering included DWGs, data sheets and so on, the executive engineers and site manager should check them because a designing and calculating engineer usually works in 2Dimentioal system but an executive engineer always works in 3Dimentioal space ( the site engineers should sign all of these documents).

3) In Project Control:

- Since preparing of a details time schedule (CPM) is the most important item in EPC projects, if we increase the number of activities accompanied by relationships among them, we will be able to lead the project smoothly. In fact, a significant CPM should present us details activities. Therefore, basic data are very important just like to engineering field.
-A good project controller should be able to have a good friendship with engineers in engineering department, engineers at the site, financial department, commercial department, and coordination among them. Because he/she is someone who is supposed to establish a logical cash flow compatible with engineering activities, civil and erection activities, procurement ( shipments) by tracking of critical paths.
-I think, it will be valuable that a project manager spend money to get several details time schedule from different sources.
-A good project controller should track compatibility between primary cost estimating and cash flow in addition to other tracking every day (for presenting warning to project manager).
-Engineering department, site manager, financial department, and commercial department should sign the details time schedule (CPM).

3) In General:

- I learned that I must try to solve of the problem because I would be had to study for collecting and selecting of information and analyzing them (someone will study who needs it).

-I learned that the precision, courage, presumption, and bravery accompanied by perseverance and endeavor in accordance with logical bases are the most important factors for solving of the problems.

- It has helped me so that I think that I am able to fulfill any obligations. Of course, if I would be interested in taking the responsibility.

- When we look at to a simple contract, we should care about five points as follows:

1) Obligations 2) Total cost 3) Overall time schedule 4) Procedure of payments 5) Guarantee

-The approach of project manager should be to reach the target by the best way (the balance of time and energy). Therefore, he should bear in mind that the best way will be earned by spending money in the field of Engineering and to obtain several designs. In the result, three points have been raised concerning this mentioned:

1) The development of the world 2) Innovation and creative power 3) Increasing of job opportunity

-Every project will smoothly move and be successfully fulfilled the least Time and Energy (Cost), if all of people involved in this project as well as know and accept the target of project. In the circumstances, the attractive concepts similar to Excessive Generosity, Hardworking, Perseverance, Honest, Reliable, Love, Truthfulness and so no will be raised. Of course, it is very hard because we have two cases as follows:

1)Training: All of people involved in the project should be familiar and learn about the target of the project.
2)To define the aim of the project (What is the problem): All of people involved in the project should accept the target of the project and it is very difficult (Actually, what is the problem?).

In negotiation:

- Each time we become nervous, we have to pay the cost of it. In fact, it will be the goodwill for the correspondent.

In negotiation:

- At the meeting, when we are obliged to think, we will be at the extreme of weakness and we have to surrender and give up (in fact, this is the important principal of our life. When we are thinking to solve of the problem, we are at the extreme of weakness and the problem is at the extreme of power). Therefore, we should quickly say to the correspondent (at the meeting): “Let me check it and reply to you ASAP” or “What’s your mean, I don’t understand it” and so on.

- I think, the point “P” of the article “The executive methods for solving of the problem (part 1) and example (9) of part 2” will be useful us for negotiation. For instance, we can decrease the quotation of the contractor by it. Of course, there is always the red line of price for the contractor.

On the other hand, this point can be as well as used for monitoring of the project.

In negotiation:

The best consequence of the meeting is to reach a Win-Win result. What are the superiority conditions to this outcome?
I think, if both parties (seller and Buyer) have had enough information from project (details), the result of the meeting will be Win- Win.
Which parts of the projects have we the lacks of information?
Let us analyze “EPC” as follows:

- E = Management + Engineering
- P = Management + Engineering + tools + raw materials + labor force
- C = Management + Engineering + labor force


Technology = Engineering + tools

According to above mentioned, the lacks of information are as follows:

- What is the price of Management?
- What is the price of Technology?
- What is the price of Labor force?
- What is the price of Raw materials?

For answering to these questions, we have to refer the Economics models for instance, Capitalism, Marxism, and so on but it is possible that we cannot find our answers by these models any time. Therefore, let us abandon to reply above questions and make a new hypothesis that it is named “Outsourcing.”

The hypothesis of Outsourcing:

The definition of “outsourcing’ is to transfer technology from Company ‘A” (seller) to company “B’ (buyer) so that the new technology will be replaced by company A and where Buyer will be the same Seller.

I think, the procedure will be below cited:

We assume that company “A” (seller) and company “B” (buyer) are negotiating on price of the goods produced by company A at time of “t.”
Let us see their negotiation:

Company A: we cannot decrease the price of our goods
Company B: we cannot accept your price for these goods
Company A: It is ok. If you produce these goods by our technology, we will buy your productions the same price (our price)

If company B (buyer) confirms the new idea of company A, he will take delivery of technology and sell his production to company A with the price at time of “t.”
Of course, company “A” has to deduct the price of his goods for gaining of more benefit before negotiation with company “B.”
(Now a days, we see that price of goods are decreased that it can be the best situation for outsourcing).

At this time, Outsourcing is started.

Where Buyer (company B) will have the sense about the price of Management, Engineering and so on just like to Seller (company A).

If company ‘A” can not produce the new technology, he will be confronted with the huge risk and disaster in the future. Therefore, it is possible that company “A” uses from Third law and outsource the technology to company ‘B” little by little and systematically.
Another risk for company “A’ is to be proceeded company “B” toward new technology similar to company “A.” I think, in this case, there is not any problem because the actual price of Management and Engineering will be discovered by competition between company “A” and “B.” In fact, this type of risk will be the fault of company “A.”

If the circulation of outsourcing as well as works, we will have the result as follows in the future:

Some companies in the world will only produce the science and new technology so that workshops will be the same laboratories and labors and engineers receive the salary in lieu of learning and teaching.

Some companies in the world continue to produce the goods by previous technology.

In fact, the world will be just similar to football game where the players are the same companies, the ball is the same the technology (previous and new technologies), and companies will pass the ball each other because of the actual price of Management and Engineering.