Chemical Engineering January 2017 - 53

proach, modifications typically take
more time and have a larger cost impact
than in a hybrid approach. By
segmenting work packages such as
site work, process piping, and others
in a hybrid approach, owners can
maintain flexibility and address scope
changes related to new equipment
selections or fluctuations in labor and
material pricing. Owners can also take
advantage of lower-priced options for
select elements of the project.
Historically, global chemical firms
and other operating companies in
the CPI have traditionally aligned
themselves with top EPC firms to
manage their large, capital-intensive
construction and expansion projects.
This traditional approach can
alleviate many concerns and reduce
risk to a degree, but it can also be
costly. By contrast, the hybrid approach
discussed here allows CPI
operating companies to shape the
project team and take advantage of
lower pricing by the following:
* Utilizing local engineering and construction
resources. This allows the
owner to engage contractors and
consultants who are familiar with the
regional construction requirements,
workforce and customs
* Purchasing major equipment directly
without incurring EPC contactor
markups. This allows the
owner to leverage the firm's internal
procurement resources to negotiate
favorable pricing and terms on
many large mechanical components
(such as turbines, pumps and
compressors)
* Supplementing the EPC contractor's
project-management team
with internal staff or lower-priced,
third-party resources. When the
project owner is able to assemble
an appropriate project team comprised
of both internal and thirdparty
contracted resources, they are
often able to maximize efficiencies,
reduce costs and ensure independent
oversight
Managing risks
While the hybrid delivery model discussed
here offers distinct advantages,
increased owner involvement also invariably
leads to greater exposure to
many aspects of project performance.
Without experienced project-management
resources and strong project-delivery
leadership, the owner's potential
risk exposure can grow. For instance,
the hybrid approach will likely result
in the owner holding multiple supplier
contracts, including some with
cost-reimbursable compensation
terms for labor, overhead, materials,
expenses and more. For these types
of contacts, the owner must specifically
review and validate costs, track
progress and reconcile mark-ups and
allowances. By necessity, this will require
engagement with more internal
and external resources to prevent unexpected
cost overruns.
New tools and strategies
While technology is transforming
(and has in some cases completely
transformed) industries from retail
and media to auto manufacturing,
the CPI-related construction industry
is in many ways still very similar
to the way it was 20 years ago. Operating
companies that are successfully
able to rethink the entire projectmanagement
lifecycle and better
understand how data are utilized on
a project can achieve competitive
advantage by improving the integrity
of design, increasing the efficiency of
construction processes and reducing
operational lifecycle costs for the
assets they build and operate.
Optimizing the use of staff and
resources. Determining the level
and type of owner or contractor
resources required at each phase
of a traditional major project is typically
based on project manager estimates,
project staffing projections or
availability of project personnel. This
is not only inefficient, but it often fails
to leverage valuable resource and
project staffing data from current
and historical projects. This often
occurs because current and historical
data may not be readily available,
or because the effort may require extensive
data normalization, and there
may not be internal personnel with
data-analytic capabilities who can
help develop staffing models and
projections based on regression and
other types of data analyses.
However, if structured properly and
integrated into the project-resourceplanning
process, such data can help
organizations to better plan, manage
and forecast resources to align with
project and organizational goals and
targets. For instance, CPI project
owners are often able to help make
more-informed decisions regarding
staffing levels and estimated projectCHEMICAL
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Chemical Engineering January 2017

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