Chemical Engineering October 2013 - 48

Feature Report
tractor [8] and the project.
The owner team needs to continuously
monitor and rapidly address any
performance or staffing issues. Some
examples of that follow:
* EPC not properly staffed for the job.
It could be a plain quantitative issue
(that is, not enough people assigned
or not enough in certain discipline)
or qualitative (not enough people
with the right qualifications)
* EPC contractor shows a lack of experience
in certain topics (any time
after award). There are two potential
scenarios: that the EPC contractor
recognizes the weaknesses (and
does something about it, including
asking for help from the owner) or
that they do not realize or openly discuss
the weaknesses and the owner
subsequently finds out via the quality
of the deliverables or the day-today
interaction with the individuals
performing the work. Each of those
scenarios would present special
challenges to the owner team and
would need to be addressed quickly
and carefully
* Specific person on the EPC contractor
side producing poor quality work
* Entire team or sub-team on EPC
contractor side producing poor quality
work
* A person or a sub-team without the
necessary focus on safety
Project-team performance is also affected
by the so called " soft issues "
such as people issues, cultural issues
and corporate-culture issues. If not
properly understood, the soft issues
may affect the morale and the productivity
of the project teams, or could
create misunderstandings that would
lead to quality issues or re-work. Some
examples are as follows:
* Specific person on the EPC contractor
or owner side is very difficult to
deal with (creates problems)
* Misunderstandings due to cultural
differences, typical practices and
such things
* Confusions because of a language
barrier (for instance, English as a
second language)
* Confusion because of other cultural
issues (examples: date nomenclature
month/day/year versus day/
month/year; comma versus decimal
point, and so on)
* EPC not being careful enough with
confidential information when dealing
with vendors and other third
parties
* In general, cultural differences that
affect " the work environment as
communication styles, management
styles, expectations of managers and
employees, decision-making processes,
work styles and the importance of
teamwork, and attitudes toward hierarchy,
age and seniority " [9].
Intervention & risk management
A common misconception is that EPC
lump-sum (LS) contracts " transfer "
the risk to the contractor. It is true
that some of the risk is " transferred "
and that is a key reason for owners to
select LS contracts. However, it does
not mean that by having a LS contract
the owner does not need to worry. The
reality is quite different and actually
a significant portion of the owner's
role in capital projects is to identify
early and properly manage and mitigate
risks. Note that, although some
risks are common to both owner and
engineering companies, there are also
some risks that are specific to each of
these entities. Simple examples of the
latter are risks associated with quality
issues that would make the plant
unreliable after a few years.
Note also that besides the fact that
each entity has specific risks, the perception
of risk by each entity is different.
To illustrate the differences in
risks and perceptions, let's consider
a hypothetical $2-billion project that
becomes a complete " fiasco " . A $2-billion
fiasco would hurt almost any
company in today's very competitive
environment but considering that
the chemical and petrochemical industries
are very capital intensive, a
large petrochemical company would
be more able to spread the risk over
all the assets than an EPC company.
On the other hand, if a typical EPC
company (in a business which tends
to be less capital intensive) was liable
and forced to respond for such liability,
it would lead them to significant
economic challenges potentially including
bankruptcy.
A special topic on intervention and
risk management is related to the socalled
" gray " areas. Specifically, owner
48 CHEMICAL ENGINEERING WWW.CHE.COM OCTOBER 2013
teams need to be watching for items
that don't clearly fit under a single
discipline or items that are not well
defined as those could easily " fall in
the cracks " . One special subset is related
to activities that are typically
handled inside the owner organization
by a certain discipline but in the
contractor by a different one, or topics
that are handled by a certain discipline
by FEED contractor and by
a different one by the EPC contractor.
Clearly those items become more
prone to be missed or forgotten. A simple
but classic example is in the reliefvalves
area, in which typically process
engineers perform the scenario
identification and preliminary sizing
but for further development different
companies have different disciplines
to handle the work (that is, either process
engineering or instruments group
or piping group).
The owner team is responsible for intervening
when things are not going in
the right direction. Intervention needs
to occur as soon as possible to avoid too
much cost and schedule impact, therefore
early detection is critical. To detect
issues early, the best mechanisms are
continuous interactions with the contractor
(instead of passively waiting
for deliverables for review) and asking
a lot of " open ended " questions that
would help the owner to understand
how the work is progressing and what
are the real capabilities of the individuals
performing the work.
Bear in mind, however, that intervention
is typically not a pleasant
job, and therefore some owner team
members would not feel comfortable
doing so and would tend to postpone
or avoid. This is another of the many
reasons for which assertiveness and
leadership are two critical competencies
to properly perform the owner
role in capital projects.
A special item related to intervention
and risk management is scope
improvement opportunities. Due to
a number of reasons (very creative
teams, different contractor company
from previous stage, different owner
team from previous stage and so on),
it is possible that the design becomes
challenged at different stages and
that ideas for improvement are formulated,
creating the possibility of " late "
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Chemical Engineering October 2013

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