Chemical Engineering October 2013 - 44

Feature Report
The Owner Role in
Capital Projects
Avoid delays, cost overruns and more with
significant owner involvement
C. Delia Contreras
Nalco Champion, an Ecolab company
t is well known that the oil-andgas,
chemical and petrochemical
industries are capital intensive.
They require sophisticated facilities
(plants), the installation of which
are typically handled via capital projects
that, regardless of size, require
significant effort from a number of
parties for execution. The investing or
operating company is typically called
the owner and, for a number of reasons
discussed in this article, proper
involvement of the owner is critical for
capital project success. However, some
owner representatives and even some
owner companies take the approach
of letting the engineering, procurement,
construction (EPC) companies
perform work with minimum involvement
from the owner except for regular
follow-up meetings. This is typically
driven by either lack of resources
in the owner's organization or by a
misconception that money is saved via
this approach. The reality is that such
an approach is typically a very expensive
proposition.
If this approach is taken during the
front-end-loading (FEL) phase under
a reimbursable contract, this may
lead to one or several of the following
problems:
1. Over-sizing in a number of areas as
it is technically easier and reduces
responsibility
2. Missed opportunities for improvement
3.
Items postponed to later phases
If this approach is taken during the
EPC phase under a reimbursable contract,
the potential issues are similar
to those described for the FEL phase.
However, if the contract type is lump
I
Fabio Bravo
The Dow Chemical Company
sum (LS), the potential problems
would be more related to quality or additional
charges via " change orders " .
FEL and EPC phases
In this paper the acronym FEL (for
front-end-loading) refers to all work
required to prepare a project for execution
(or for the EPC phase) including
activities such as business case development,
scope development and project
definition. In some companies or
industries, this is called FEED (frontend
engineering design) while in other
companies or industries FEED only
refers to a certain portion of FEL.
In this paper the acronym EPC will
be used in two ways: a) to refer to a
project phase; in that case the E for
engineering will refer to detailed engineering,
b) to refer to the companies
that provide engineering (all phases
of engineering included), procurement
and construction services.
Although most of the items discussed
in this article apply to both
FEL and EPC phases, the emphasis
is on the EPC phase, as typically the
owner role is better understood for
early project phases (FEL). In other
words, it is more common to see poor
attention from the owner during EPC
based on improper assumptions, such
as: a) that after FEL scope, standards
and owner needs are " totally clear " and
therefore that EPC contractor should
be able to manage and deliver with
minimum interaction from the owner;
b) that by having a lump sum or LSTK
(LS-turn-key) contract, the responsibility
has been transferred to the EPC
contractor and there is no need for significant
owner involvement.
44 CHEMICAL ENGINEERING WWW.CHE.COM OCTOBER 2013
Classical symptoms and negative
results of not enough involvement or
attention by the owner team during
FEL preparation are as follows:
Improper staffing. In chemical, petrochemical
and oil-and-gas projects,
the FEL work is typically focused on
process engineering. However, some
engineering companies tend to understaff
the process-engineering function
(perhaps because of the limited supply
of qualified chemical process engineers
in the entire industry) and instead
they overstaff other functions (civil,
piping, construction, mechanical) for
FEL work. This is not only an expensive
proposition for the owner, but is
also an issue that can create a number
of problems with FEL work, as it adds
challenges for the process team.
Over-sizing. Equipment might be
over-sized because that tends to facilitate
the calculations, shorten the
schedule and minimize the risk by the
designer, and because there might be
the " it is not my money " mentality on
the engineering side. Accordingly, the
owner team needs to continuously
check FEL calculations and challenge
the design to avoid falling into this
over-sizing trap.
Incomplete data sheets. Equipment
data sheets might not be properly
completed, and entries like TBD (to
be decided) or " by vendor " or " by EPC
in detailed design " can be overused in
the preparation of FEL data sheets. In
fact, each data sheet entry that is filled
in such a way should be evaluated by
the owner for validity, the key question
being, " what is not known now that
would be known in the EPC phase? "
Passing work on. Some of the FEL
work might be passed to the detailed
engineering phase, which could create
a schedule delay or additional cost
to complete FEL work during the detailed
engineering phase.
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Chemical Engineering October 2013

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