Chemical Engineering October 2013 - 45

Have strong owner involvement
It is understood that most owner organizations
are very lean and focused on
running their plants, so it is very difficult
for them to properly staff projects,
especially considering the tendency
in recent years to have multiple simultaneous
projects as well as very
large projects (also known as mega
projects). However, for project success,
it is a must to have proper owner representation
[1].
The following is a list of reasons
for having strong owner involvement
in all stages of capital projects. Each
item will be explained in detail in the
following sections.
* Fundamental issues
* Quality
* Schedule and cost considerations
* Performance and staffing issues
* Intervention and risk management
* Contractual issues
Fundamental issues
A fundamental issue is that for an operating
company " too much is at stake
to have a project handled almost entirely
by an engineering staff that does
not have to live with the day-to-day
operating plant headaches " [2]. For the
owner, process safety and environmental
issues are typically at the top of the
list because significant issues in those
areas during the life of the plant could
have devastating consequences.
On the other hand, it is likely that
contractor engineers will not have
much operating experience, and although
typically quite interested in
process safety and the environment,
their perspective might be a little different
since they would not have to
manage the environmental or process
safety issues after the plant is turned
over to the operating company. A key
consideration and something that
every project person (regardless of
company alignment) should always
keep in mind: bad decisions and poor
designs typically result in safety or
environmental incidents,
or other
problems over the next 20 to 30 years
of plant operation.
In other words, the contractor and
owner companies typically have different
perspectives from the timing
viewpoint: the contractor
typically
focuses on two to three years (maybe
the life of the project if PMC), while
the owner needs to also think of the
next 20 to 30 years because the owner
would need to " live with the assets " (or
live with the consequences) through
the lifecycle of the plant. By the way,
unless issues are very significant or
are discovered while the EPC is still
involved, the EPC contractor rarely
gets enough feedback on how the design
really worked.
It is important to recognize the completely
different roles and perspectives
of the owner and the contractor. There
are common goals (for instance, having
a successful project) that apply to
both parties, but the perspectives are
still different. A simple example would
be that for one of the parties to maximize
profit, the other party might be
negatively affected. For that reason in
LSTK contracts, it is not always easy
to find " win-win " solutions, as in many
occasions in terms of cost, quality and
schedule, a " win " for the EPC company
may mean a " loss " for the owner company,
and vice versa. However, this
does not mean that owner and EPC
companies are " natural enemies " . Actually
owner and EPC companies are
sort of " natural partners " ; in spite of
the different perspectives and goals
there are also common goals and tremendous
opportunities for synergies
that can be achieved through proper
understanding of the other party's
role. In fact, proper collaboration between
both parties and proper understanding
from owner and EPC companies
of the other party's role, and
respect for those roles, are critical for
project success.
For both owner and contractors,
cost and schedule are very important
for obvious reasons. From the owner
viewpoint, long-term considerations
regarding safety, quality and reliability
are key issues. Those, however, are
not necessarily top considerations for
all the contractors (especially in LSTK
contracts, which tend to be very schedule
and cost driven). Problems like
safety incidents (at any time in project
execution or down the road during
plant operation); production losses;
poor reliability; product quality issues;
excessive maintenance; problems with
regulators, authorities and local community
are - or will become - owner
problems, regardless of contract type.
It is impractical to try to delegate
those issues to EPC companies.
Note also that safety incidents,
low reliability, poor quality, excessive
maintenance, damage of company
reputation, liabilities and so on would
have a much higher economical impact
than any claims or liquidated
damages that the owner could make
to an EPC company.
Some people have described the
owner's team role as being the " catalyst " ,
the analogy being that a small
amount of involvement facilitates a
reaction. As in chemical reactions, if
a catalyst is needed and not present,
things will either happen very slowly
or will go in the " wrong " direction.
Of course, as in chemicals reactions,
having too much catalyst (that is, too
large an owner team that wants to
micromanage everything) could also
bring another set of problems.
Sometimes there is a misconception
that the owner role in EPC is relatively
easy; sometimes people erroneously
describe the job as " approve the
bills " or " watch the contractor " . This
could be the case in the perfect world
that includes a perfect contract, a perfect
FEL package and perfect teams in
both owner and contractor sides. But
in the real world, there are imperfections,
and the owner role, if performed
properly, is typically extremely demanding.
As a result, the owner representatives
may become overloaded
and forced to move out of their area of
expertise and become generalists.
Some people argue that EPC companies
tend to perform better when
the owner is absent or does not get involved;
those arguments are typically
based on misconceptions or bad experiences.
It is true that EPC companies
perform better when allowed to follow
their own work processes and procedures
(instead of learning new ones).
It is also true that owner teams can
fall into the trap of trying to micromanage,
enforcing owner work processes
that do not properly fit or that
negatively affect overall productivity
or somehow interfere and delay the
contractor's work. Needless to say, the
owner needs to pay attention and not
fall into such traps.
However, it is probably well known
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Chemical Engineering October 2013

Table of Contents for the Digital Edition of Chemical Engineering October 2013
