W7_AI_Developing Operation & Maintenance Model for Offshore Regasification Facility Project

  1. Problem Definition

Besides capital expenditure, one of the cost components which is needed in financial economic model is operation and maintenance cost. Still discuss about offshore regasification facility project, this week I will develop operation and maintenance model for the project. As for the initial stages in building O&M model is determine cost structure. In making the cost structure of a project, the first thing to do is by determining work breakdown structure (WBS). In this week, I will choose WBS standardization between omni class and norsok to be applied.

 

  1. Identify the Possible Alternative

There are two commonly used WBS standardization among others:

  1. OmniClass
  2. Norsok

Both of this standard would be compared and the optimum WBS standard would be choosen.

 

  1. Development of The Outcome for Alternative

Table 1. OmniClass Table

The table above is 15 hierarchical that is designed to provide a standardized basis for classifying information. Each of it represents a different phase of project information and every entity can be combined one and another, to build more complex structure.

Moine has developed a 3D WBS model. All of three dimension project can be integrated which visualized as figure below:

Figure 1. 3D WBS Model

 

Norsok Standard describe a system for cost coding and weight estimates and as-built or experience data. The following is coding system classification of Norsok standard:

Figure 2. Norsok Standard

 

  1. Selection Criteria

Cost structure which can be applied from OmniClass standard to O&M model of Offshore Regasification Facility Project consists of:

  1. Level 1 Table 31 – Phases
  2. Level 2 Table 32 – Service
  3. Level 3 consists of several components:
  • Table 34 – Organizational Roles
  • Table 21 – elements

Figure 3. Table 31 – Phase

Figure 4. Table 32 – Service

Figure 5. Table 34 – Organizational Roles

Figure 6. Table 21 – elements

 

While the applicable cost coding of Norsok Standard to O&M model of Offshore Regasification Facility Project consists of:

Figure 7. Operational Principles Norsok Standard

Using Norsok standard some parameter must be identified at the first place:

  1. Operating Concept
  • Operation objectives
  • Operating environment
  1. Operating Philosophy
  • Criticality
  • Complexity
  • Choice of technology
  • Training and sparing
  • Manning and personnel competence
  1. Production function requirements
  • Production operations (general, start-up, shut-down, isolation for maintenance, well testing, well intervention)
  1. Maintenance function requirements
  • Maintenance strategy
  • Maintenance engineering (design, organization, programs)
  1. Inspection strategy

 

  1. Analysis & Comparison of Alternative

Both standards can be applied in operation & maintenance model of offshore regasification project. But one of the most optimum methods must be chosen to be applied in this project. Considering that the methods used is top-down and from owner perspective, as well as on business scheme operation & maintenance facilities will be contracted to a third party (ship management) using the Long Term Service Agreement, so the coverage of O&M model consists of head quarter O&M, along onshore receiving facilities and pipeline on site.

Considering it is then the most optimum standard used is OmniClass standard.

 

  1. Selection of the Preferred Alternative

Based on above description, it shows that the combination of Omniclass table with 3D WBS is better than the single standard. As we can gain deliverables that can be view from many perspectives. Then OmniClass 3D WBS is considered to be applied for Offshore Regasification Facility Project.

 

  1. Performance Monitoring and The Post Evaluation of Result

This 3D WBS is very suitable with condition of current business scheme, so it will have a positive impact on the company for developing it. But also the company need to consider another standard like Norsok as a validation against third parties, or when the business scheme changes, such as the company responsible as a facility operator & maintenance.

Reference:

  1. Planning Planet (2017). Creating Work Breakdown Structure.

Retrieved from http://www.planningplanet.com/guild/gpccar/creating-work-breakdown-structure

  1. Sullivan, G. W. (2014). Engineering Economy 16th Chapter 3 – Cost-Estimation Techniques, pp. 96-98.
  2. Nunar, A. H. (2014). 1_SJP_Forecasts Part 3.

Retrieved from https://soroakoaace2014.wordpress.com/2014/10/01/w4_anh_exploring-omniclass-and-3d-wbs-for-waste-water-treatment-plant-project/

  1. Norsok Standard. Retrieved from

http://www.standard.no/en/webshop/norsok/?gclid=CjwKCAjwuvjNBRBPEiwApYq0znFC82NEh-OnYem5gU6RHcLNKM-Gx94QdFJQCp_ljPWR14CyBKHaoRoC2r8QAvD_BwE#.Wb5XtdElHIU

  1. OmniClass Standard. Retrieved from

http://www.omniclass.org/

 

W7_A_Estimates the required duration for contractor prepare bidding document

  1. Problem Definition

On this blog posting author want to know what the reasonable duration needed on preparation bidding document by contractor, because in fact contractor always requesting more time to prepare bidding document and always found incomplete bidding document. Based on bidding stage in company regulation contractor can take bidding owner document for identify scope of work until submit the bidding is need 8 – 16 days, it divided into 3 stages :

  1. Stage-1 “Contractor Take Bidding Proposal from Owner” it take 1 – 2 days
  2. Stage-2 “Contractor get detail project explanation” it take 2 -4 days
  3. Stage-3 “Contractor submit bid proposal” it take 5-10 days

On authors works area, project divide to be 3 classification based on project value, it because of level management :

  1. Small Project with value less then US$ 37.000
  2. Medium Project with value US$ 37.000 – US$ 750.000
  3. Big Project with value less then US$ 2.251.000

 

  1. Develop the Feasible Alternative

Figure-1 provide the cost estimate classification for the Process Industries

Figure-1 Cost Estimate Classification System for Process Industries

3. Development of The Outcome for Alternative

Based on Figure-1, cost estimates can be described as follow :

  • Class 5 estimates are generally prepared based on a limited information on project.
  • Class 4 estimates are typically used for project on feasibility study or preliminary budget approval.
  • Class 3 estimates are used as the project budget until replaced by more detailed estimates.
  • Class 2 estimates are often used as the “bid” estimate to establish contract value for contractors.
  • Class 1 estimates are typically prepared to form a current control estimate to be used as the final control baseline.

4. Selection Criteria

On bidding process, contractor use Class 2 estimate in their proposal. Regarding to Figure-1 for class 2 estimates, the preparation effort ranges from 0,02% to 0,1% of project cost.

5.Analysis and Comparison of the Alternative

to obtain the ideal time required by the contractor in drafting the auction document, the supporting data is a rate engineer based on the INKINDO (Indonesian Consultant Firm) 2017 rate, assuming the working time per day is 8 hours, or US $ 17.23 per hour (for 10 years experience) and assume 75% productivity . Tabel-1 shown the calculation

Tabel-1 Bid Estimation Preparation Effort

6. Selection of the Preferred Alternative

Based on table-1, it shown for prepare bidding document contractor need 1 – 22 days depend on project scale of value, compare with company regulations, contractor only  have 8 – 16 days to prepare it. In this situation author has 2 recommendation in point of view for contractor it recommended to make strategic by learning owner’s bidding document on first stage, because it can save 1-2 days before second and third stage, because actually very less discrepancy on BoQ. For Owner point of view its recommended to consider add bidding time from 16 days to be 22 days (6 days added) for contractor prepare a complete and precise bidding document. Factually this finding same with contractor requesting, they need 5-7 days more than company regulation for bidding document submit.

7. Performance Monitoring and The Post Evaluation of Result

This analysis will greatly help estimate the costs incurred as well as the time it takes the contractor to prepare the auction document, and provide a reasonable view to the owner in providing the deadline for the contractor in preparing the documents fairly.

References:

  1. Milza, Rico. (2015). w20_rm_estimate preparation effort for a bi . Retrieved https://goldenaace2015.wordpress.com/2016/05/24/w20_rm_estimate-preparation-effort-for-a-bid/
  2. Guidelines Of Minimum Standards Indonesian In 2017 Direct Personnel and Direct Cost (2017) Retrieved. http://www.inkindo-dki.org/new/BR_2017.pdf
  3. Amos, S. J. (2012). Skills & Knowledge of Cost Engineering: A Continuing Project of the AACE International Education Board (5th ed.). Section 2, Chapter 9. Morgantown, WV: AACE International.
  4. Wibowo, Gideon. (2014). W8_GW_ Costs to Prepare a Bid for a Contractor. Retrieved from:  https://kristalaace2014.wordpress.com/2014/04/16/w8_gw_-costs-to-prepare-a-bid-for-a-contractor/
  5. Occupational Employment Handbook. (2016, May). Retrieved from: Bureau of Labor Statistics: http://www.bls.gov/ooh/business-and-financial/cost-estimators.htm

 

 

W7.2- Sulphur Product Handling Jetty – Applying a Standarised WBS Structure

Problem Definition

RAPID package 12B – Sulphur Product handling Jetty is a multi disciplined package which forms part of the RAPID development in Johor Malaysia for PETRONAS.

The facility is being constructed to allow the facility OWNER to perform 2 primary functions;

  • Sell and transfer sulphur by product created from refining process
  • Import materials and equipment stored within shipping containers received via Container ships to support RAPID operations.

It is an EPCC style project and can be characterised by the following;

  1. The Project has 3 distinct FUNCTIONS
    • Common Operation/System
    • Sulphur Handling System
    • Container handling System
  2. The project includes 4 distinct PHASES
    • Engineering
    • Procurement
    • Construction and;
    • Commissioning
  3. The Project has 2 distinct AREAS
    • Offshore
    • Onshore
  4. The project has 5 distinct WORK PACKAGES
    • Offshore / Marine
    • Onshore Civil
    • Building Architectural
    • MEP Systems
    • Material Handling Systems

Given the projects complexity and multi disciplined requirements, could a standardised WBS structure such as OMNICLASS be applied? And which tables are the most suitable for the development of a 3D WBS ensuring the schedule user (EPC Contractor) is provided with maximum potential to review and monitor multiple project facets.

FEASIBLE ALTERNATIVES

Omniclass consists of 15 tables, each of which represents a different facet of construction information. Each table can be used independently to classify a particular type of information, or entries on it can be combined with entries on other tables to classify more complex subjects

The 15 inter-related Omniclass tables are;

When using the omniclass coding structure with a 3D WBS, coding will be applied in the following way;

  • ZBS    : Table 13, Table 14, or Table 21
  • PBS    : Table 11, Table 12, Table 23, or Table 36
  • ABS    : Table 22, Table 31, or Table 32
  • OBS    : Table 33 or Table 34
  • RBS    : Table 35
  • Task    : Table 41 or Table 49

DEVELOPEMENT OF THE ALTERNATIVES

Considering the different project facets, there are a large number of combination the schedule user may want to view the project which is represented by the following matrix;

To support this ability, a 3D WBS structure must be created.

The 3D WBS is based on three main dimensions: Zones Breakdown Structure (ZBS), Products Breakdown Structure (PBS) and Activity Breakdown Structure (ABS).

There are in fact more dimensions than these 3, however for the purpose of this post we will consider only the minimum in order to create the 3D WBS- ZBS,PBS & ABS.

The ZBS,ABS,PBS can be further simplified as ZBS = where, PBS =What and ABS=How.

For SPJ – package 12B these WBS structures will be applied as following;

 

SELECTION CRITERIA

Selection of tables to develop the WBS will be based on the following criteria

– Defines high level of detail i.e. is directly relevant and hierarchical
– Provides opportunity of its future development when industry change
– Cover’s all Project deliverables up to Completion.
– Strong relationship among its element

COMPARISON OF ALTERNATIVES

To establish which Tables are more suited for creation of the 3D WBS, we will use a multi attribute decision model to check for Dominance among the alternatives and eliminate tables which cannot support the desired code structure. Refer to below

When selecting suitable Table for defining the project FUNCTION’s, it was noted that table 11 and 12 were not considered suitable. Table 11 refers mainly to the overall facility function and purpose however in our case we are attempting to split the function. Table 12 similar cannot be related to the specific project functions. Under table 23, suitable descriptions are available for conveyor and Material handling Systems such that the WBS can define and further breakdown the 2 primary functions for the facility

When selecting the most suitable table for defining the project PHASE, it was noted that table 22 is more suitable for the physical implementation aspects as opposed to the high level division of project disciplines (Engineering, Procurement, Construction). Table 31 and 32 both offer opportunity to be used however preference would be to use the Table 31 2006 version which has a clear breakdown of the co ordination  and implementation phases. It would also require the project phase structure to be modified to suit the code structure i.e. instead of EPCC, the project would need to be divided into Design/Co Ordination/Implementation/ Handover however this is not considered to be a major issue such that adoption of table 31 could not proceed.

When selecting the most suitable table for defining the project AREA, it was noted that table 14 is considered the most appropriate providing opportunity to define onshore and offshore areas clearly.

When selecting the most suitable table for defining the project WORK PACKAGE, table 22 was considered most appropriate. It covers all the required aspects, onshore, offshore, MEP and material handling aspects with sufficient detail and relevance.

SELECTION OF THE PREFERRED ALTERNATIVE 

The Following tables are considered most relevant for the creation of a 3D WBS for SPJ-Package 12B project.

  • FUNCTION – Table 23
  • PHASE – Table 31(2006)
  • AREA – Table 14
  • WORK PACKAGES – Table 22

Performance Monitoring and Post Evaluation of Results

In the next post we will implement the chosen tables to create a level 3 project WBS to assess the effectiveness to Omniclass code structure within a  multi disciplined EPCC project containing offshore and onshore work components.

We will also consider the allocation of additional tables for the allocation and tracking of resources against the programme activities.ie. materials, plant, trades. This will enable more dimensions of the WBS to be created

Whilst these tables have been selected based on most suitable compared to the alternatives, their actual use and effectiveness when creating the fully detailed WBS is still to be tested and or compared with other standardised coding systems.

Reference:

1. Sullivan, G. W., Wicks, M. E., & Koelling, C. P.(2014). Engineering economy 16th Edition. 

2. OmniClass. (2014). About OmniClass. Retrieved from OmniClass: http://www.omniclass.org/

3. Chapter 3.4 creating the WBS – Guild of project controls compendium and reference (CaR) | Project Controls – planning, scheduling, cost management and forensic analysis (Planning Planet).  Retrieved from http://www.planningplanet.com

4. Moine J-Y. 2013.3D Work Breakdown Structure Method, PM Word Journal Vol. II, Issue IV–April 2013

 

 

W6_MFO_ Cost Estimating Relationship (CER) On Pipeline Project

  1. Problem Definition

In the last coordination meeting, the Management asked the quick budget comparison of the carbon steel (CS) pipeline 4” with the Polyethylene (PE) Pipeline 125mm with length 6 km. Technically, both pipeline already fulfill the management requirement. Because of we already have data from the previous project, author want try to calculate with Cost Estimating Relationship (CER) method.

  1. Development of Feasible Alternatives

A parametric model is a useful tool for preparing early conceptual estimates when there is little technical data or engineering deliverables to provide a basis for using more detailed estimating methods. Parametric estimating is reliant on the collection and analysis of previous project cost data in order to develop the Cost Estimating Relationship (CER). A CER is a mathematical model that describes the cost of an engineering project as a function of one or more design variables. CERs are useful tools because they allow the estimator to develop a cost estimate quickly and easily.

There are four basic steps in developing a CER :

  1. Problem definition.
  2. Data collection and normalization
  3. CER equation development
  4. Model validation and documentation

Author will compare, which pipeline material has a better price to construct 6 km pipeline using Cost Estimating Relationship (CER) method, CS pipeline or PE pipeline.

From the 2015 project, we have data like table below (cost in Million USD) :

Table 1. Cost Data of CS Pipeline Project

Table 2. Cost Data of PE Pipeline Project

  1. Development of the Outcomes for Alternative

The Indexes Method is one of the way to normalize above data into year 2017. Because of the limitation of index data (the author can’t get the 2017 data), the author use indexes from Chemical Engineering Plant Cost Index (CEPCI) as per below :

Figure 1. CEPCI Data of Feb 2016, Jan 2016, & Feb 2015

The author use ‘Pipe, valves & fittings’ category of CEPCI for both the. For year 2015, the CEPCI = 863.2, and for year 2017, because of the author don’t have the 2017 indexes data, the author use the February 2016 CEPCI = 791.2.

The factor = 791.2/863.2 = 0.92

The normalization of both data are per below :

Table 3. Normalized Data of CS Pipeline

Table 4. Normalized Data of PE Pipeline

After normalization, We develop CER equation using regression function in excel.

The result of CS Pipeline are :

Figure 2. Regression Result of CS Pipeline

The result of PE Pipeline are :

Figure 3. Regression Result of PE Pipeline

  1. Selection of the Acceptable Criteria

The selection of the criteria is which pipeline material has a better price (lowest price) to construct 6 km pipeline.

  1. Analysis and Comparison of the Alternatives

From the regression result in step 3, the CER equation for pipeline are :

  • Carbon Steel 4″ Pipeline : cost = 6.01 + 104.47 x

Where x represents the length of pipe in km, and 0.18 ≤ x ≤ 7.40

  • Polyethylene 125mm Pipeline : cost = 12.39 + 102.86 x

Where x represents the length of pipe in km, and 0.50 ≤ x ≤ 9.00

Using the CER equation cost for 6 km pipeline are :

  1. Selection of the Preferred Alternative

Based on comparison table above, Author recommend the PE Pipeline for this project.

  1. Performance Monitoring and Post-Evaluation of Results

Documenting the development of CER, including the related data is important for future use. Actual data from next or another project will become very useful for CER validation.

 

Reference:

  1. US Government, Department of Energy (DOE). (2011). Cost Estimating Guide. Washington,D.C., Chapter 5, 19-21. Retrieved from : https://www.directives.doe.gov/directives/0413.3-EGuide-21/view
  2. Sullivan, W.G., Wicks, E. M., Koelling, C. P. (2014). Engineering Economy, Chapter 3, page 103 to 117. Pearson. Sixteenth Edition
  3. CEPCI Indexes. Retrieved from https://www.researchgate.net/post/Where_can_I_get_2016_chemical_engineering_plant_cost_index_CEPCI
  4. Cost Estimating and Assessment Guide: Best Practices for Developing and Managing Capital Program Cost, GAO-09-3SP. Washington, D.C.: March 2009, Chapter 11, 112-118. Retrieved from : http://www.gao.gov/new.items/d093sp.pdf