August 31, 2004
Save Time, Money and Headaches
What if you could save up to 20 percent on your project costs by committing to better pre-project planning? You say, "No way!” How about schedule savings up to 39 percent? "Impossible!" you reply. How about increasing the likelihood of meeting all your project goals? You demand, "Show us how!”
The Capital Project Trap
Starting a capital project is somewhat like a Chinese finger trap. Once you get into it, and the harder you try to succeed, the tighter the trap grips you.
As we so desperately try to jump-start capital projects and new plants that have been delayed for so many reasons, the last thing that our bosses, shareholders or even project staff members want to do is plan.
The proverbial question "When can we start construction?” becomes all too familiar. Before we know it, we are caught up in the hustle and bustle of everything that’s going on and there's no going back.
Luckily we are not destined to spend the rest of our lives with a finger from both hands locked in a 25-cent toy. We figure it out and escape. Unfortunately, we don't get the opportunity to build 10 or 20 plants before figuring out how to do it (like weight experience in 60 seconds with the trap) so we must learn from others in our quest to escape capital project "traps.”
The fundamental principle behind all pre-project planning is that early decisions—both good and bad—have a cascading effect throughout the project. A poor decision early will haunt you with increased costs and problems down the road. The figure below shows this concept graphically.
Once construction starts, the impact of our decisions is drastically reduced. This doesn't mean that fast-tracking and other methods aren't valuable and can’t impact your project—they can. What this does mean is that effective pre-project planning may be even more important to get right in these delivery methods and it must be taken seriously in order to make all project delivery methods successful.
Tools & Resources
Several resources have been established by organizations in the industry to help us. We must take advantage of these tools if we want to improve at capital project delivery. Let's take a look at a few of them and see what they can do for us. The Construction Industry Institute (CII) (www.construction-institute.org) has been committed to improving capital project delivery for some time. A consortium of large owners (many industrial) and contractors collaborate to fund and implement research with the goal of better leveraging capital project dollars.
Through these efforts, CII has produced some great research and implementation guides that are available to the industry. The numbers mentioned at the beginning of this article are indicative of the type of "prove it" research the CII members insist on before a "Best Practice" is anointed and published. Some of the highest impact Best Practices opportunities are early in projects. They get discussed a lot in the capital project business but to really make it happen, project owners need to know what to do early.
Unfortunately, it has been difficult to get these tools out to those who need them. CII's Best Practice category most related to our topic is "Pre-Project Planning." CII indicates pre-project planning should be 1.5 percent to 8 percent off the expected Total Installed Cost (TIC) depending on project complexity. The effort is owner-driven and tied closely to business goals. The function of pre-project planning is to: 1) develop and evaluate project alternatives: 2) develop a project definition package for the selected alternative: and 3) decide if the project should proceed. CII lists 12 key outputs that may help us better understand what happens during this Best Practice phase.
Now this may look a little daunting to some of us, but as some of you know, too many projects are executed with many of these things unknown until well into the execution phase. Unfortunately, we may remember them only because they have already bitten us (sometimes hard). The great thing about this is that CII (and its research institutions) has proven from a database of 350 substantial projects that when these things are done well, the results are tremendous.
CII and its partners have developed a manual to help us get all this done. It’s called the Project Definition Rating Index (PDRI). Although CII is clear that the owner/sponsor needs to drive the preplanning process, that individual is seldom equipped to answer all the questions required without the help of some trusted business partners. These may come in the form of consultants, engineers, contractors, construction managers or the like.
Pre-planning is a team effort. The PDRI tool allows team members to score themselves on how all these elements are coming along and provides a threshold score to determine if it is time to proceed with detailed design work or if the team should spend some more quality time defining the project. Again, CII has empirically shown that without a certain score, you’re asking for trouble. If you have a score over the recommended threshold, you have a much better chance at success.
These are only guidelines, but by performing the evaluation a few times during the development stage, you can pinpoint and know your shortfalls and risks—a key element of success for any project. Other Best Practice tools are also available from CII that can benefit your project.
Pay Special Attention
You may want to pay particular attention to the “Alignment" and "Design" Best Practices. Another tool that can provide ethanol-specific planning advice is BBI International's Ethanol Plant Development Handbook, Fourth Edition. It provides a front-to backset of information useful for planning and understanding ethanol plants. Various chapters lead you through thought-provoking checklists and supporting information for an ethanol plant project. This is a great tool to help you cover all the bases.
Tools are also included to help estimate rough costs and other key parameters important for ethanol facilities. Whatever you elect to do for planning on your project, do it. It's a time-proven principal that the capital projects industry has struggled to overcome. A common phrase states that, "failing to plan is planning to fail." Have the discipline. Throw out a few of these impact numbers as the project is considered.
Hold your ground for everyone’s benefit. When we are faced with a capital project, with all the dollars and risk involved, it is not the time to wing it. You may end up with your fingers in a trap far too long.
More Information Dave Crumrine, PE, PMP, is President of Interstates Construction Services, headquartered in Sioux Center, Iowa. Reach him by email at firstname.lastname@example.org.