Front End Loading: Myths & Misconceptions

ECC Conference 2003

Outline
What Front End Loading is NOT What Front End Loading IS A Basic Framework for Front End Loading Measuring Success: Metrics that Work Case Studies: What worked, what didnt work and why Questions

What Front End Loading is NOT:

A replacement for solid, experienced project management A new fad in project management A time to do all of the engineering to develop a schedule and cost estimate A time to limit input from stakeholders into the design of the project Identical for every project The only key to success for a project The end of the work to make a project successful

What Front End Loading IS:

5 equally important components: Business Needs Definition Capital Alternative Analysis Project Design Basis Definition Project Execution Planning Project Risk Analysis

Well Performed Front End Loading CAN:

Reduce project costs by 20-30% Reduce project variability, particularly for:
Cost Schedule Operating characteristics

Increase the chance of meeting the projects business, environmental and social goals

A Framework for Front End Loading: REQUIRMENTS

Business Requirements
Assess business requirements for the project Map business drivers back to key project attributes Develop project goals based upon drivers and attributes

Select Critical Technologies for the Project which can:

Improve quality Reduce cost and schedule Enhance operability

A Framework for Front End Loading: DEFINITION

Select a Site
Identify unique site characteristics Assess impacts on cost, schedule and environmental factors Investigate permit requirements and timing cycles

Define Scope of Work to be Performed

Identify drivers of project goals Develop level of definition required to define these key areas Identify deliverables required to provide this level of definition Customer sign off

A Framework for Front End Loading: THE TEAM

Assemble a Project Team with the Expertise to Achieve these Goals
People, not companies, build projects Mixed project team is OK

Provide Dynamic Orientation and Team Building

Enable team members to gain an intimate knowledge of the project development, goals and drivers Facilitate focused team building

A Framework for Front End Loading: EXECUTION

Ensure a Clear Execution Plan is in place
Defines tasks, deliverables and timelines Assigns responsibilities and team interactions Ties back to project goals and drivers

Monitor progress frequently with meaningful metrics

A Framework for Front End Loading: RISK ASSESSMENT

Evaluate key areas of project
Ensure there are not gaps in required information Ensure an appropriate level of detail has been attained Verify no additional critical areas have been identified during Front End Loading

Contingencies
Develop appropriate line item contingencies Perform a contingency assessment to ensure overall project risk is assessed Develop further definition for areas with unacceptable levels of contingency

A Framework for Front End Loading: ESTIMATING

Capital Cost Estimate
Ensure that each line item is supported by a basis of design Ensure appropriate labor and productivity factors are utilized Factor in schedule related costs (Fast Track costs money)

Schedule
Ensure that the schedule supports the estimate (prime time, etc.) Detail assumptions regarding lead times and procurement of long lead items

A Framework for Front End Loading: BUY IN

Present Intermediate and Final Recommendations in a User Friendly Manner
Address decision-makers needs and concerns Allow decision-makers to evaluate risks, mitigation of those risks and challenge approach Constantly tie project scope, estimate and schedule back to business drivers and project goals to facilitate a decision

Gain a commitment from all key stakeholders and decisionmakers on a defined path forward, including:
Scope Cost & Schedule Execution Plan

Early Indicator Estimate

Early Indicator Estimate
Quick Indication of Direction of Estimate Lifecycle Estimate

Early Budget Organized by Package / Trade

Organized for easy additional of detail

Weekly cost meeting to track drift from original budget

Monitors cost Establishes appropriate mindset with team

Add detail to estimate as it was available

No surprises Allows corrective action to be taken quickly Minimizes costly rework due to value engineering

Enables active robust management of cost.

Traditional Approach
Conceptual Design OOM Estimate

Preliminary Engineering

+/- 25% Estimate

Construction Detailed Design +/-10% Estimate Validation

Traditional Approach
Conceptual Design OOM Estimate

Preliminary Engineering

+/- 25% Estimate

Construction Detailed Design +/-10% Estimate Validation

Early Indicator Estimate Approach

Conceptual Design Preliminary Engineering Detailed Design Construction Validation

Early Indicator Estimate

+/- 25% Estimate

+/- 10% Estimate

Tracking Estimate

Staged, Gated Process

Phase 1 Business Planning Phase 2 Facility Planning Phase 3 Front End Engineering Phase 4 Project Execution Phase 5 Lessons Learned

Pass Gates

Measuring Success: Metrics that Work

What are we measuring? Budget variation Schedule adherence Schedule attainment User satisfaction Startup and Commissioning

Measuring Success: Metrics that Work

Other Measurements % TPC expended during FEL (4-6%) Duration of FEL as a % of TPS Amount of Contingency in Budget Number of Value Improving Practices used (13 possible)

Value Improving Practices

Technology Selection Process Simplification Class of Plant Quality Reliability Modeling Design to Capacity Waste Minimization Customized Standards Predictive Maintenance Energy Optimization Facility Optimization Design Tools Constructability Automation

Case Studies
Pin Mill (Puerto Rico) Eplerenone Commercial (Puerto Rico) 1500 Ton NaOH Storage Project (Mississippi) Chemical Plant (New Jersey) Consumer Products Plant (Thailand) Narcotics Plant (New Jersey)

Questions