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Comment PDF Business & Economics

The Owner Role in Capital Projects

By C. Delia Contreras Nalco Champion, an Ecolab company Fabio Bravo The Dow Chemical Company |

Avoid delays, cost overruns and more with significant owner involvement
 

It is well known that the oil-and-gas, 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 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 (front-end 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.

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 under-staff 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.

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 micro-manage, 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 that there are areas in which most EPC companies appreciate owner involvement as they may not have all the necessary expertise or depth knowledge for a given process technology. A typical example is operational issues, because most EPC companies have limited operating experience. The owner can also definitely add value by providing guidance to the EPC companies in areas, such as compliance with and interpretation of the owner standards, owner-specific needs and preferences, and so on.

Another fundamental issue is related to “human nature” as there is a tendency for people to perform better when they know that their work is meaningful (that is, important enough for others to spend time checking it) or when they get feedback on their work. So, as humans, engineers tend to do their best in an environment in which there are professional challenges, timely feedback and intelligent technical discussions. Proper involvement by the owner with the right attitude (including a collaborative approach) is a key to create an environment in which the entire project team can excel and deliver great results.

To summarize this section, due to a number of reasons, the owner needs to manage projects to make sure they are successful; and to properly manage projects the owner team needs to have the capabilities and resources to get properly involved. The owner should not expect good results by using a hands-off approach [3].

 

Quality

One good definition of quality for any product says that “quality is what the customer wants.” Such a definition seems to fit well for capital projects (although sometimes “wants” becomes what the customer can afford).

Once the above definition is accepted, then it becomes clear how critical the owner role is in capital projects, as the owner would need to decide and explain “what is wanted” regarding a large number of issues on a day-to-day basis during plant design and project execution. If, for whatever reason, the owner team cannot provide “just-in-time” input, this would typically result in schedule issues, re-work or quality issues (in terms of operability, reliability and durability of the plant). In reimbursable contracts, this would typically lead to over-design.

Ref. 4 provides some interesting examples of “costly mistakes” related to process design and the author explains that “Experienced, multi-talented [petroleum-] refinery engineers would need to reside and work together with younger staff members and engineering contractors in a truly joint-team fashion, and thus successfully meet the project’s goals for quality, cost and timelines and ultimately capture a savings of 15–30% on engineering costs by eliminating reworks” [4].

A typical root-cause of quality issues is a lack of adequate communication between the disciplines. There is an old saying in the engineering business that “very few design errors result from technical incompetence. Rather, most result from poor project communications …” [3, 5]. The owner needs to constantly watch for this sort of issue and intervene as necessary. The owner team can also be a catalyst as far as making sure that the information flows from one discipline to another; however, the owner should be vigilant in avoiding the trap of becoming a key mechanism for communications among disciplines. Significant issues regarding information flow between disciplines on the contractor side need to be quickly and properly addressed by the contractor; trying to get the limited owner resources to mitigate significant deficiencies in such critical aspects would not be sufficient.

The owner team has responsibilities for watching the quality of the design and deliverables, and therefore has a key role to review and provide input to a large number of documents, such as piping and instrumentation diagrams (P&IDs), data sheets, vendor data, 3D models and so on. But the owner team needs to be careful not to fall into the trap of becoming “the main reviewer” of the designer deliverables or becoming the entity that is in charge of quality (also known as the “quality police”). The key is to get the engineering company fully engaged and committed to produce high quality work for which the engineering company must have enough qualified engineers as well as adequate quality controls. The owner team should not be exposed to serious or multiple mistakes.

In general, the main responsibility for quality should stay with the designer so the checker (from the engineering company) would not need “to scrutinize every aspect of the document” [6] and as a general rule of thumb “the checker should only spend one tenth of the time spent creating the document” [6]. If the owner team receives documents with serious or multiple mistakes (or both) it typically means that the system is not working properly on the contractor side and needs to be addressed immediately. The owner team must help with quality checks, but needs to be assertive and have the necessary leadership skills to make sure that any significant issues in quality control are quickly and properly resolved by the contractor. Having the owner team cover for significant deficiencies in quality (due to poor quality work or poor quality control at contractor side) would be just “bandaids” and would not be sufficient.

Naturally, it is not necessarily easy to address performance issues, such as the quality or communication issues described above, but nevertheless it is imperative that such issues are quickly addressed and solved. That is one of the many reasons for which leadership skills, including assertiveness, are some of the most important qualifications for owner representatives in the project environment.

Most project work and deliverables are prone to quality issues. Some are relatively easy to detect (for instance, deficiencies in P&IDs, missing information in data sheets and so on) via limited owner reviews. However, some quality issues are more difficult to notice (or to notice on time, when something can be done about it) and therefore the owner needs to be more proactive and ask “open ended” questions. Examples of situations where action may be needed include the following:

• EPC is using its own software (or even special commercial software) and the owner does not know how good the software is or how proficient the EPC team is with the software (at a minimum a sample of the software results should be carefully checked)

• Not enough technical work is being done in equipment-bid evaluations because the focus is on cost or schedule, or both

• Vendor package documentation is not adequate in a number of issues (examples: P&IDs not drawn to standards; relief valve calculations or documents not adequate; incomplete line list; and so on)

 

Schedule & cost considerations

Quality was discussed in the previous section without acknowledging the fact that quality, cost and schedule are not independent from each other but are in fact heavily interconnected. If the owner is not properly involved in the project work, the consequence could be poor decisions that result in quality and reliability issues, delays or re-work (or both) either of which could result in serious schedule and cost impact.

The owner team needs to continuously monitor cost and schedule for a number of reasons, including verification that the EPC company progress estimates are accurate and correct. This is critical for milestone payments, to avoid late surprises, manage related contracts and so on. For a number of reasons (probably including human nature) there is a tendency to over-estimate progress and accordingly a clear need for a close involvement by owner on progress assessment (which requires the right experience and amount of involvement by the owner to be able to validate progress statements).

From a schedule viewpoint, another reason that the owner needs to be heavily involved is related to schedule delays and specifically the corresponding mitigation. The owner needs to make sure that the root-causes are properly identified so that the proposed mitigations are appropriate. The classic example is a project delay resulting in the typical “first reaction” of increasing staffing, sometimes without properly studying if that approach would work. In fact, there is an old saying in the engineering and construction business that “a woman can give birth to a baby in nine months but nine women cannot have a baby in a month” [3]. In reality, sometimes adding people to speed up things backfires, as it can add confusion, decrease productivity, affect morale and so on, and therefore results in even further delays.

Regarding cost, “money talks,” so typically the need for the owner’s active participation in cost monitoring and control is better understood. However, it is probably important to point out a common mistake in which owner teams assume that once a lump-sum or LSTK contract is signed, the cost is “fixed” and the owner does not need to worry about cost anymore. In reality, lump sum contracts do not give you a ceiling price but only a floor price [ 1] or “starting” price.

 

Performance & staffing issues

It is understood that the only way to achieve quality in a project is to put together a team of highly capable and motivated individuals that work as a team [3]. Neither the best company procedures nor the most sophisticated quality-management plans can, by themselves, ensure a good design [5]. “Only the commitment and pride of the individual project team members will provide a quality product” [5].

Sometimes owners fool themselves by thinking that once they engage a prestigious engineering company with “top notch” work processes, they are set and can take a “hands-off” or relaxed approach. Perhaps they do not realize that “It’s the people — not the procedures and techniques — that are critical to accomplishing the project objectives. Procedures and techniques are merely tools to help people do their jobs” [7]. Experienced owner representatives know that engineering companies have high-quality individuals as core team members (the so-called A-teams), but when demand for their services peak, they need to recruit additional staff that are typically not fully familiar with the work-processes and that might not have the same level of experience and capabilities of the A-team members.

The owner team needs to watch for this and maintain high standards by making sure that non-performing individuals are removed from the project as soon as possible — again, not a comfortable task but something critical for project success.

Turnover of contractor resources is another important issue. It is typical for the owner to include some contractual requirements for the contractor to not remove certain key individuals from the project without the owner’s permission [8], for example project directors, project managers, process and discipline leads, schedule leaders, maybe some key process or project engineers, and so on. However, more generic contractual requirements (that is, establish a maximum percentage of rotation per year for all project personnel) would be a good policy also, since excessive rotation at any level or in any discipline could be very traumatic for the project.

Staffing issues go both ways: for the project to be successful, sufficient and qualified owner representatives are required so that delays and re-work are avoided by getting owner’s input on time at every step of the project. Qualified in this context means individuals with the technical knowledge and the capability to make decisions. It is not uncommon for owner organizations (whose main goal is to run the plants safely) to rotate owner representatives too often due to unexpected more urgent needs or other reasons (talent development plans, company policies, and so on). This can easily create serious problems for the contractor [ 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-to-day 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 so-called “gray” areas. Specifically, owner 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 relief-valves 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” changes and re-work. Late changes, even when they mean improved design, tend to create serious issues in projects. In fact, if not properly managed they could lead to chaos. However, the “no-more-changes mentality” although common and typically very appropriate, could also backfire if design problems are not addressed, or valid and valuable improvement opportunities are missed.

The right approach is to encourage critical revision of the design, making open channels available to discuss potential problems and to formulate ideas for improvement. At the same time, only changes that clearly meet project criteria should be allowed, such as “won’t work” or “unsafe” or “extremely profitable opportunity.” Needless to say that for a project to be successful, it needs to have a strong “management of change” procedure.

 

Contractual issues

Although the importance of clearly defining of scope and each party’s responsibilities seems obvious, in real life it is not uncommon for projects to have significant challenges due to deficiencies in the contracts. Besides, even when the importance of these issues are well understood by all parties, there can still be disputes and issues because of the inherent difficulties in fully describing the entire scope of large and complicated projects in contractual documents. Also, experienced owner teams know that having clear requirements in a contract does not necessarily mean that such requirements will be incorporated in the design, so the best approach is to “trust but verify.”

The following are examples, from the process-engineering arena that help to illustrate this topic. These are items that typically need to be performed in detailed design, but that may be disputed if not properly described and clarified in the “invitation to bid” (ITB) and contractual documents: 1) evaluation of thermal expansion and addition of any thermal relief valves; 2) additional restriction orifices resulting from detailed-design hydraulic calculations; 3) additional steam traps needed in the design, but not shown in FEL P&IDs; and 4) evaluation and proper resolution of surge issues (that is, hydraulic hammer).

There are a number of other contractual issues that could surface during the EPC phase that need active participation by the owner to achieve positive and quick resolution. Examples are given in the box above.

Hiring a PMC?

With so many important owner responsibilities and contributions and with limited resources, sometimes the solution appears to be obvious (especially for large projects): hire a project management consultant (PMC) company. This approach is quite common for large projects and definitely a step in the right direction compared to a hands-off approach due to lack of owner resources. However, by no means can this be considered a panacea that will solve all problems.

The need to hire a PMC company is almost a given for mega projects and other very large projects, as it is almost impossible for the typical owner company to properly staff such projects, not only in terms of simple headcount but also in terms of expertise and project execution capabilities. However, note that several of the fundamental issues discussed in the previous sections also apply to a PMC. For example, the timing considerations for a PMC are different from the owner company. Similarly to the EPC, the PMC would not have to “live with the consequences” through the plant’s lifecycle.

Note that although a PMC could add a lot of value, it also adds complexity (at the end is another party with another set of goals), so hiring a PMC does not mean that the owner team is relieved of the responsibilities and can relax. The owner team will need to integrate well with the PMC team, and also properly manage the PMC to achieve project success.

If the above does not happen, it could result in additional confusion. For example, the EPCs could receive different or conflicting instructions from the owner and from the PMC, which could easily result in chaos if not rapidly addressed. There are a number of scenarios that could lead to different instructions from the owner and the PMC. The typical ones are poor integration and poor communication between owner and PMC, and lack of adequate training to the PMC team (so it would tend to do things the way the PMC company typically does them, instead of the preferred way for the specific project).

In summary, hiring a PMC could be quite helpful and is almost a must in very large projects, but it is not a perfect solution. It does not relieve the owner team of its responsibilities and actually requires good planning, management, leadership and assertiveness skills by the owner so that the PMC approach is effective and leads to project success.

 

A word of caution

Although the key message of this article is the need for very active involvement by the owner in project work to achieve project success, there are also some potential pitfalls that the owner team needs to be aware of, as follows:

• Owner representatives need to be careful not to express their opinion in something that they are not familiar with (that is, outside their area of expertise) since opinions might be “misrepresented” as owner instructions. The reader might think that only people who are arrogant or over-confident would fall into this trap, but in reality it is easy to get in trouble in this area, as EPC companies tend to ask questions on all kinds of topics, but it is almost impossible for an owner representative or even the entire owner team to have expertise in all areas

• EPC is no time for “wild guesses” as those guesses might be translated into procuring or building something, which would typically be very expensive to update. Instead of wild guesses, designers need good and reliable data to move forward

• One common issue is that the EPC contractor may have questions about the FEL package, but the owner team does not remember all the FEL details. The best approach to prevent this is to be proactive by keeping good documentation from the FEL phase, including clear and well-organized calculation records.

• Sometimes, the owner team receives too many documents to review, so it becomes a bottleneck. There are two types of scenarios, depending on the frequency of occurrence. Getting behind once in a while (due to workload peaks) is quite normal but still needs to be properly managed so that it does not create unnecessary problems, delays, claims or arguments. However, when the owner gets behind often, the issue needs to be addressed and corrected properly (by prioritizing work, getting additional manpower, working even longer hours and so on). Otherwise it could have a very serious negative impact on the project. An extreme example is when, due to the many things that occur simultaneously, the owner team does not seem to find enough time for critical reviews — needless to say, this could easily lead to disaster, so it needs to be properly corrected as soon as possible. Although it may sound impossible or even counterproductive, experienced owner representatives know that a good mitigation for the heavy workload is to collaborate and interact with the contractor on a day-to-day basis and discuss the deliverables while they are being prepared, instead of waiting to be literally “flooded” with unfamiliar documents to be reviewed

• The owner team may be pushed by circumstances (that is, unexpected studies, quality issues, confidential issues and so on) to be a doer versus reviewer during the EPC phase. This reduces the time that the owner team can dedicate to review and interact with the EPC, so it typically results in the issues described in the bullet above

• An owner representative doesn’t have enough knowledge about a certain issue that he/she is asked to approve, review or discuss. A typical example is when owner representative is asked to visit a shop but the person does not have much experience with equipment fabrication, welding and so on

However, the biggest trap of all is not acting like the owner and letting the contractor work on his /her own. This could be called the “easy life” approach and becomes natural to owner representatives whose assertiveness and leadership skills are not the best. A rule of thumb is that if an owner representative thinks the job is “easy”, he or she is likely not doing it right. Due to human nature, people who are not self-motivated tend to exert a minimum amount of effort; such an approach is a risky and expensive proposition for projects. Owner representatives need to be watching for those situations, they need to motivate their teams and make sure that the EPC team members are not only qualified, but fully engaged and committed to the project. However, if that is not achieved and things are not going well, the owner representatives also need to have the necessary assertiveness and courage to intervene when necessary. That intervention starts with proper day-to-day interaction, but may require more difficult actions such as removing certain individuals from the project or making drastic decisions, such as using to another engineering company.

Edited by Gerald Ondrey

Authors

C. Delia Contreras is global director of engineering
for Nalco Champion, an Ecolab company
(Phone: 281-263-7872; Email: delia.contreras@
nalco.com). She has significant experience in the
chemical, petrochemical, oil-and-gas and polymer
industries, including a number of leadership
positions in project execution and plant management.
The coauthor of several published papers,
she holds a B.S.Ch.E. from the Universidad Industrial
de Santander (Colombia).

Fabio Bravo is associate director with The Dow
Chemical Company (Phone: 979-238-3253; Email:
fbravo@dow.com). He has extensive experience in
the chemical, petrochemical, petroleum-refining
and polymers industries in diverse functions
mainly in plant design and project execution, including
significant experience in the owner role
in projects in different parts of the world. He is
the coauthor of several published articles and
holds a B.S.Ch.E. from the Universidad Pontificia
Bolivariana (Colombia) and M.S.Ch.E. from
Rice University.

References

1. Merrow, Edward W., “Industrial Megaprojects”, John Wiley and Sons, 2011.

2. Ludwig, E.E., “Applied Project Engineering and Management”, 2nd ed, Gulf Publishing Co, 1988.

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