W8_UDS_ Evaluation in Choosing Best Supply Pattern Part 1

  1. Problem Evaluation

Kediri is a city in east java; My Company has a Fuel Terminal in this city but was closed on 2009. Kediri consumes fuel almost 4% around east java region. And from the fuel consume forecast it will be growing up 3% each year.

Phenomena appear in Indonesia and Kediri also, which non subsidiary fuel consumption rise significantly and lead in the market. It is very different condition than few years ago. In this unpredictable situation, we need to prepare the facility of non-subsidiary fuel to catch the opportunity.

  1. Development of feasible alternatives

There are three alternative Fuel Terminals as supply point to supply Kediri area to catch the opportunity:

  • Existing pattern; Surabaya, Malang, and Madiun Fuel Terminal as supply point to supply Kediri area
  • Shortcut pattern; Tuban Fuel Terminal as supply point to supply Kediri area. Tuban regularly also supply to Fuel Terminal in Surabaya, Malang, and Madiun
  • New pattern; Kediri Fuel Terminal as supply point to supply Kediri area. In this alternative we will reopen the Kediri Fuel Terminal.

Multi Attribute Decision Making Method will use in choosing the best alternative pattern to supply Kediri area not only at economic aspect but also other aspect that influence customer satisfaction such as delivery time, transport loss,  operational flexibility, and etc.

  1. Development the outcome for each alternative

In this part (1st part) I will use method that different from my Company usually used (NPV, IRR, Payback Period and PI) but tension only on economic criteria that are B-C Ratio and ERR.

B-C Ratio This method is very useful to select alternative in economical approach with a simple way, because it compare positive (cash in) and negative (cash out) cash flow of each alternatives. This is the process of quantifying cost and benefit of project over a period time.

External Rate of Return (ERR) is also known as the “Modified Internal Rate of Return”. This method measured not only depends on the cash flow from an investment and also on any assumptions about reinvestment rate.

  1. Selection of criteria

The Rule of thumb in Benefit – Cost ratio method is Alternative will be feasible if B-C ratio greater than one. So in this evaluation we will eliminate alternative with B-C Ratio less than one, because it not economically feasible (their cash out higher than their cash in).

ERR decision rule: If ERR ≥ MARR, the project is economically justified. So in this evaluation I will eliminate alternative with ERR value less than 10.5% (My Company Hurdle Rate), because it not economically feasible.

  1. Analysis and comparison of the alternative

Data of three alternatives that use in B-C ratio calculation are show below:

Table 1. Alternatives data

Figure 1. Profit per year shortcut pattern and new pattern alternatives

Shortcut Pattern and New Pattern have incremental benefit each year because in this alternatives have investment to improve facility to catch increasing demand opportunity. Present Worth of this profit PW (B) is  1,347,925,669,473 IDR.

Calculation result of Conventional and Modified B-C Ratio are in table below:

Table 2. B-C ratio calculation result

There is no B-C Ratio of each alternative that less than 1, so no one will be eliminated. Existing Pattern doesn’t have Modified B-C Ratio (N/A) because this alternative doesn’t have investment cost.

This three alternatives data such as interest, period, investment, benefit and cost to calculate ERR:

Table 3. Alternatives data

Using data in table 3, we get the result of ERR calculation of each alternative:

Table 4. ERR formula and calculation result

Based on ERR calculation table above there is no value less than MARR 10.5% so all alternative economically justified. In existing pattern there is no ERR value because it does not have investment cost so we cannot calculate it.

  1. Alternative selection

All method show shortcut pattern alternative dominating over other alternative in both B-C Ratio and ERR Method. This alternative is recommended to be used.

  1. Performance monitoring & Post Evaluation Result

Even I already have the chosen alternative base on economic aspect, I will evaluate this project base on other aspect such as operational and customer satisfaction. In next evaluation (2nd part) I will use AHP method to capture more aspect not only economic.

References

  1. Sullivan, G. W., Wicks, M. E., & Koelling, C. P.(2014). Engineering economy 16th Edition. Chapter 10 – Evaluating Project with the Benefit – Cost Ratio Method., pp.467-491. Prentice Hall.
  1. Sullivan, G. W., Wicks, M. E., & Koelling, C. P. (2014). Engineering economy 16th Edition. Chapter 5 – Evaluating a Single Project., pp.210-263.
  2. Planning Planet. (2017). Benefit Cost Analysis. Retrieved from http://www.planningplanet.com/guild/gpccar/managing-change-the-owners-perspective
  3. Mind Tools. (2017). Cost-Benefit Analysis. Retrieved from https://www.mindtools.com/pages/article/newTED_08.htm
 

W6.1_TH_ Standardized WBS Structures for Gas Station Project-Part 3

1. Problem Definition

After compare two best practice of standardized WBS on Blog W2 and W5, this week the Blog will determine and analyze which of the 15 elements Omniclass tables would be applicable to use in creating a WBS structure for a Gas Station Project.

2. Develop the Feasible Alternative

OmniClass consists of 15 hierarchical tables, each of which represents a different facet of construction information or entries on it can be combined with entries on other tables to classify more complex subjects[2].

Fig 1. Inter-related OmniClass[2]

Author will be chosen what kind of tables on OmniClass that applicable for GS Project WBS.

3. Develop of the Outcome for Alternative

To choose top four most applicable tables from the 15 tables, the most appropriate technique will be the multi attributes approach. Compensatory models, the additive weighting technique has been chosen to help performing the comparison and selection. In all compensatory models, which involve a single dimension, the values of all attributes must be converted to a common measureable scale. By using determined criteria related to the Gas Station Project, the additive weighting technique will rank the 15 tables, shows high to low applicability and relevance to the project.

 4. Selection Criteria

There are six criteria related to gas station project that have been determined for the OmniClass tables selection:

  1. WBS zone that related to Gas Station Project (1-3, 3 being highest relationship)
  2. WBS deliverables related to Gas Station Project (1-3, 3 being highest relationship)
  3. WBS activity related to Gas Station Project (1-3, 3 being highest relationship)
  4. WBS organization that related to Gas Station Project (1-3, 3 being highest relationship)
  5. WBS level detail completeness (1-4, 4 being preferable)
  6. Tables applicability/uses for oil & gas project (low to high)
5. Analysis & Comparison of Alternative

The comparison result of OmniClass Tables is shown in the following table:

Table 1. OmniClass Tables Comparison Based on Six Selection Criteria

Attributes in table 1 were ranked in order of importance by applying paired comparison between each attribute combination. Results are shown as follows:

Table 2. Ordinal Ranking of OmniClass Tables attributes

Based on Table 2, relative rank = ordinal rank + 1. A rank of 5 is best, the relative ranking will become as follows:

Table 3 OmniClass Tables Selection – Attribute Weight

The attributes values on Table 1 have to be converted in to non-dimensional form. The procedure for converting the original data on table 1 for a particular attribute to its dimensionless rating is:

The non-dimensional (dimensionless) values of the attributes are shown on Table 4:

Table 4 OmniClass Tables Selection – Dimensionless Value

Finally, for each OmniClass table, the normalized weight of the attribute (Table 3) is multiplied the non-dimensional attribute value (Table 4) to obtain a weighted score for the attribute. These weighted score are then summed to arrive at an overall score for each OmniClass table. The result is shown on Table 5.

Table 5 OmniClass Tables Selection – Weighted Score

6. Selection of the Preferred Alternatives

Based on calculation and Table 5 comparison, the top four most applicable and relevant WBS from OmniClass for the GS Project is:

  1. Table 13-Spaces by Function (score 0.397)
  2. Table 23-Products (score 0.357)
  3. Table 31-Phases (score 0.270)
  4. Table 33-Disciplines (score 0.254)
7. Performance Monitoring and The Post Evaluation Result

A standardized WBS structure is one success key for project team to the deliver project with OTOBOS. Next week, author will try to build up Gas Station WBS from top four OmniClass Tables, to prove whether the conclusion above is correct, and start evaluating the impact during phases of the project.

References:

  1. Planning Planet (2017). Creating Work Breakdown Structure. Retrieved from http://www.planningplanet.com/guild/gpccar/creating-work-breakdown-structure
  2. Ardi, Satria. (2014). W14_SAS_Developing|Soroako AACE 2014. Retrieved from https://soroakoaace2014.wordpress.com/2014/12/12/w14_sas_developing-standardize-omniclass-3d-wbs-for-electric-furnace-rebuild-project/
  3. OmniClass (2017), OmniClass Table 21 – Elements (includes design elements). Retrieved from www.omniclass.org/tables/OmniClass_21_2012-05-16.zip
  4. Norsok Standard Z-014 (2017), Norsok Standard Z-014. Retrieved from http://www.standard.no/pagefiles/951/z-014.pdf
  5. Ardi, Satria. (2014). W12_SAS_Developing|Soroako AACE 2014. Retrieved from https://soroakoaace2014.wordpress.com/2014/11/28/w12_sas_developing-3d-wbs-for-electric-furnace-rebuild-project/
  6. El Rashid, M. (2016). The Influence of Non-Standard Work Breakdown Structure on Change Orders and Cost Estimation for Sudan Oil and Gas Projects, PM Word Journal Vol. V. Retrieved from http://pmworldlibrary.net/wp-content/uploads/2016/12/pmwj53-Dec2016-ElRashid-non-standard-work-breakdown-structure-sudan-featured-paper.pdf
  7. Gannasonggo, Gustaf. (2012). W3_GGS_OmniClass WBS|Casablanca AACE 2012. Retrieved from https://aacecasablanca.wordpress.com/2012/02/06/w3_ggs_omniclass-wbs-table-selection-using-additive-weighting-technique/
 

W7_OAN_Cost Estimation by Ratio and Proportion

  1. Problem Definition

We are evaluating to build new storage tank. One of the critical aspects is development cost of the new storage tank. Since the decision shall be taken early, there is no sufficient time to conduct good and fully complete engineering study. In this stage the research is going to select qualitatively what is the most suitable cost estimation method using historical data.

  1. Development of feasible alternatives

Based on AACE RP No. 17R-97, Author should create class 5 estimate to meet Management requirement.

Table 1: Class Estimate

  1. Possible Solution / Alternative

Based on Table 1, the methodology suggested to produce class 5 estimate are:

  • Capacity Factored
  • Parametric Models
  • Judgement
  • Analogy

In this case, we will use Capacity Factored Estimates (CFE) and Parametric Models, which The cost of a new plant is derived from the cost of a similar plant of a known capacity with a similar production route (such as both are batch processes), but not necessarily the same end products. It relies on the nonlinear relationship between capacity and cost.

Table 2: Process Equipment Size Exponent (N) – N= 0.6 for Tank Vessels, Carbon Steel

We use historical data from our previous contract. Therefore, we use Cost Indices, which are useful when basing the approximated cost on other than current prices.

  1. Selection of Criteria

The Estimation result should meet the Management requirement, at expected accuracy at the end of the project actual cost generated .

  1. Analysis and Comparison of the Alternatives

Table 3: Data

Table 4: Calculation Result using Process Equipment Size Exponent (N)

Since we are using 2015 data, and we want to calculate for 2017 project, we use Cost Indices. For the ratio, we use The Big Mac Ratio.

Tabel 4: The Big Mac Index

Table 5: Current Cost Using The Big Mac Index

  1. Selection and Preferred Alternatives

As shown at table 1, Class 5 estimation range is from -50% to + 100%.

Based on the estimation result in Table 7, the Author proposed a class 5 estimate with the total investment cost is using P70 for preferred capacity of tank.

  1. Performance Monitoring and the Post Evaluation of Result

The class 5 estimates purpose is only for the concept screening. If the management approve the concept screening, we can continue to Feasibility Studies until, with class 4 estimates. Then, the Estimators complete the required project scope so that the level 2 or 3 estimate can be produced for bidding process.

 

References

  1. Module 08-4 Creating the Owners Cost Estimate (Top Down) (2015).
    Retrieved from http://www.planningplanet.com/guild/gpccar/creating-the-owners-cost-estimate
  2. AACE International Recommended Practice No. 17R-97
    Retrieved from http://www.anvari.net/Risk%20Analysis/17r-97.pdf
  3. AACE International Recommended Practice No. 59R-10
    Retrieved from https://fenix.tecnico.ulisboa.pt/downloadFile/1126518382175702/DEVELOPMENT%20OF%20FACTORED%20COST%20ESTIMATES_AACE%2059R-10.pdf
  4. W24_HI_Cost Estimating Method
    Retrieved from https://garudaaace2015.wordpress.com/2015/08/22/w24_hi_cost-estimating-method/
  5. Process Equipment Cost Estimating by Ratio and Proportion (2012)
    Retrived from https://www.pdhonline.com/courses/g127/g127content.pdf
  6. Sullivan, G. W., Wicks, M. E., & Koelling, C. P. (2014). Engineering economy 16th Edition. Chapter 3 – Cost-Estimation Techniques., page.91-122.
  7. W6_OAN_Equipment Factored Cost Estimates
    Retrieved from http://emeraldaace2017.com/2017/09/10/w6_oan_equipment-factored-cost-estimates/
  8. The Big Mac Index (2017)
    Retrieved from http://www.economist.com/content/big-mac-index

 

 

 

 

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
 

W7 – ABM- Assessment of Productivity and Learning Curve for Trestle Barrier Wall Construction at SPJ – 12B (PART 2)

  1. PROBLEM DEFINITION

Further to Week 5 blog  on the construction of trench RC barrier for SPJ – 12B project and the effects of Learning curve on production, it was determined that the Contractors expected productions gains due to increased familiarities and repetition cannot be solely relied on to achieve required weekly production output and meet target schedule dates.

Subcontractor must now look at other alternatives to increase production. Based on current projections, we can expect a 30 day delay in works if we solely reply on productivity gains from learning curve effect.

Works scope / details areoutlined are as follows

We will now assess alternatives to increase production

2. FEASIBLE ALTERNATIVES

The following alternatives were considered under Week 5 blog. alternative 1 was determined to be unacceptable. we will now consider items 2 & 3 i.e. changes to manpower quantity and working times;

  1. Do nothing. Barrier can be completed by the specified dates
  2. Increasing manpower in current crews (current planned – 10 men)
  3. Increasing overtime / hours worked each day

3. DEVELOPMENT OF OUTCOMES

 Do Nothing. Production of crews will achieved necessary production and dates

This was determined to be unacceptable with a likely delay of 30 days to result due to average manhours / unit unlikely to drop sufficiently enough to be covered by the Subcontractors current manpower planning.

Extending Manpower in current crews

Subcontractor plans to use a 10 man crew to erect formwork, install cast in items, cast concrete and then strip.

Firstly we will assess current productivities for the crews;

Using data obtained from site from the 4th to the 9th September, crews were able to construct a 35m length of wall plus a further 35m of 75m high kicker (base for wall).

By measuring manpower and output we have determined basic productivities for the main elements of the wall construction. this is outlined in Figure 1 below. Total manhours for the week based on the 6 man crew have also bee determined to assist in calculating a utilisation factor. Refet to Figure 2.

Using this information, and assuming that the actual productivities determined with the smaller crew reflect the unit rate work requirements, an estimate of the total manhours required to construct 100Lm of barrier wall each week is outlined under figure 3.

Based on the required weekly work quantities and current productivities, a total of 17 men is now required to meet the target production of 90Lm per wee

Increasing Overtime / hours worked each day

As can be seen in the figures above, a total man hour requirement of some 1020 hrs must be invested into the work each week to satisfy the quantities demanded by the production schedule, this cannot be satisfied with working overtime alone using a 6 or even 10 man crew

Whilst the productivities above were computed using a 70 hour working week for the crews, these figures have been taken from a single week where the previous working week included extended public holidays and crew working hours were considered low.i.e. productivities are not impacted by fatigue.

In a scenario where by effort is sustained over consecutive weeks, production losses due to fatigue are likely to affect, particularly given the use of heavy steel formwork and minimal plant to assist in shifting formwork.

To reflect this effect we will assume a 10% loss going from a 58 hour work week to 70 hour  i.e. each man is only 90% effective then the required man hour input is as follows;

Under this scenario, a minimum of 16 men would be required to satisfy schedule and production requirements.

4. SELECTION CRITERIA

Satisfy man hour requirements based on observed production levels and weekly quantity targets (90Lm) using least number of men.

 5. ANALYSIS OF THE ALTERNATIVES  

Based on the above, an increase in the above manpower to 16 men is considered most appropriate given this will result in the least amount of men however having “a few extra” is never a bad idea for critical works.

In the next blog, an analysis of programme impact potential will be considered to determine if target production figures are excessive / unnecessary.

6. Performance Monitoring

During last week, the crews managed to cast 2no. 16.5m sections of wall using a 6 man crew. These were effectively the 5 and 6th Cycle of casting.

The total hours expended to achieve the 33Lm of wall was 420 hours.

This equates to a total of 250mhrs / 20m section of wall.

Based on the learning curve analysis conducted under week 5, by the sixth cycle, the expected man hours required to construct every 20Lm of wall using a predicted gain of 20% i.e. 80% learning curve with an initial effort of 447 mnhrs was 334 hrs.

However the above results indicate crews are operating closer to a 70% learning curve. This may result in the further reduction in average manhour / unit from 177 hrs/unit to only 100 hrs/unit. refer to attached graph below

Further monitoring to be conducted on both overall production as well as individual productivities to assess both learning curve gains and fatigue impact where working hours include excessive overtime.

References

  1. Sullivan, G. W., Wicks, M. E., & Koelling, C. P.(2014). Engineering economy 16th Edition. Chapter 3 – Learning and Improvement., pp.110-112.
  2. Chapter 11.5 Managing Project Data Basis  – 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
  3. Chapter 9.5 Project Performance Forecasting – 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

 

 

 

 

W6_AI_Price Forecasts for Offshore Regasification Facility Project

  1. Problem Definition

After last week blog discussed about cost estimate calculation for offshore regasification facility project using historical data, and then this week according to Dr. Paul Giammalvo suggestion, price forecast method will be used to predict project cost within the next 5 years.

Still using the same indicative price last week, this week the indicative price for offshore regasification facility project with capacity 100 MMSCFD will be forecasting using MS Excel “Best Fit” Regression Analysis Curve.

This calculation can be using as an input value in financial economic model. With this method, we can calculate cash flow prediction project value within a certain period in the future.

  1. Identify the Possible Alternative

Using last week indicative price, then capex value for offshore regasification facility project, as follow:

Table 1. Indicative Price

From the table above, then to analyze price forecasts for next 5 years will use:

  1. MS Excel “Best Fit” Linear Regression Analysis Curve
  2. MS Excel “Best Fit” Polynomial Regression Analysis Curve
  3. MS Excel “Best Fit” Logarithmic Regression Analysis Curve

 

  1. Development of The Outcome for Alternative

These are the following an initial data plotting in determining price forecast:

Picture 1. Input Data

Using these input data (indicative price 2015-2017) and MS Excel “Best Fit” Linear Regression Analysis Curve, then trendline and trending them out to 5 years provide in picture (2) below. While the trendline use R2 = 0.9948.

Picture 2. Linear Trendline

Then still using data input in 2015-2017, now MS Excel “Best Fit” Polynomial Regression Analysis Curve with R2 = 1 will be used in the second analysis. The result of the polynominal regression analysis can be seen in the picture (3) below.

Picture 3. Polynominal Trendline

The latest, on the third data input in 2015-2017 analysis will use MS Excel “Best Fit” Logarithmic Regression Analysis Curve with R2 = 0.9941. The result of the logarithmic regression analysis can be seen in the picture (4) below.

Picture 4. Logarithmic Trendline

With the purpose to make it simple to see the results of the analysis, then bellow will be displayed plotting all three trendline in one chart.

Picture 5. All Trendline (Linear, Polynominal, Logarithmic)

 

  1. Selection Criteria

Further, value of all treadline for the fifth year, which is 2021, will be used, ranked and analyzed using PERT calculation. As for the smallest value represents “best case”, middle value represents “most likely” and the highest value represents “worst case”.

 

  1. Analysis & Comparison of Alternative

The following is data to be used for PERT calculation

Table 2. Trendline Forecasts of Offshore Regasification Facility Project

From the table above, we can see

a. Best case (optimistic) = $ 114.2

b. Most Likely case = $ 123.5

c. Worst case (pessimistic) = $ 124.2

Using PERT calculation, then the Mean, Sd, and variance:

Step 1 – PERT weighted Mean

= ((Optimistic)+(4 x Most Likely)+(pessimistic))/6

= $ ((114.2) + (4 x 123.5) + (124.2))/6

= $ 732.4/6

= $ 122.1

Step 2 – Standard Deviation

= (Largest Value – Smallest Value)/6

= $ (124.2 – 114.2)/6

= $ 10/6

= $ 1.67

Step 3 – Variance

= Sigma/Standard Deviation^2

= $ 1.67^2

= $ 2.8

The following picture (6) below shows normal distribution curve:

Picture 6. Normal Distribution Curve

From the step 3, there is small variance means that the risk was small, so there is no need high contingency to cover the risk. Hence, P(75) will be considered to being calculate for the indicative price .

Picture7. P(75) Distribution Curve

The following above is P(75) cost estimate offshore regasification facility project in 2021 with value $ 123.36.

 

  1. Selection of the Preferred Alternative

This blog displays one of method in determining price forecast, on next week blog another price forecast method will be applied. So in the last price forecast series, the best and optimum forecast method will be chosen to be applied in part of financial economic model for offshore regasification facility project.

 

  1. Performance Monitoring and The Post Evaluation of Result

Forecasting method very dependent on the amount of data used, so it will be better and optimal if forecasting calculations using updated and valid data. Therefore project character are dynamic and unique, preferably input data for price forecast is updated periodically as a continual process of checking, reviewing and monitoring.

Reference:

  1. Planning Planet (2017). Creating The Owners Cost Estimate (Top Down).

Retrieved from http://www.planningplanet.com/guild/gpccar/creating-the-owners-cost-estimate

  1. Sullivan, G. W. (2014). Engineering Economy 16th Chapter 3 – Cost-Estimation Techniques, pp. 113-121.
  2. (2017). W11.1_SJP_Forecasts Part 3.

Retrieved from https://js-pag-cert-2017.com/w11-1_sjp_forecasts-part-3/

  1. (2009). Excel Dynamic Chart #11: Dynamic Area Chart with IF Functioin – Normal Distribution Chart Statistics

Retrieved from https://www.youtube.com/watch?v=Fp1JV-ZVDZw

 

 

 

 

 

 

 

 

W6_OAN_Equipment Factored Cost Estimates

  1. Problem Definition

This week, Author went to South Borneo, to conduct survey for New Fuel Terminal. After survey, Management asked Author to estimate cost of this facilities based on the limited time and data availability. This estimation will be used to conduct feasibility study

  1. Development of Feasible Alternatives

Based on AACE RP No. 17R-97, Author should create class 4 estimate to meet Management requirement.

Table 1: Class Estimate

The requirement for class 4 estimate are:

Table 2: Maturity Level of Project Deliverables

  1. Possible Solution

Based on Table 1, the methodology suggested to produce class 4 estimate are:

  • Equipment Factored
  • Parametric Models

In this case, we will use Happel’s Method, which estimated purchase for all pieces of equipment (material), labor needed for installation using factors for each class of equipment, extra material and labor for piping, insulation etc. from ratios relative to sum of material and added installed cost of special equipment, overhead, engineering fees, and contingency.

Table 3: Happel’s Method 1

Table 4: Happel’s Method 2

Table 5: Happel’s Method 3

  1. Selection Criteria

The Estimation result should meet the Management requirement, at expected accuracy at the end of the project actual cost generated .

  1. Analysis and Comparison of the Alternatives

Table 6: Data

From Table 6, we can calculate using Happel’s Method as shown in table 7.

  1. Selection and Preferred Alternatives

As shown at table 1, Class 4 estimation range is from -30% to + 50%.

Table 7: Proposed Solution

Based on the estimation result in Table 7, the Author proposed a class 4 estimate with the total investment cost is $ 59.400.000. The total investment cost includes all of the construction cost plus overhead, engineering fees, and contingency.

  1. Performance Monitoring and the Post Evaluation of Result

The class 4 estimates purpose is only for the study or feasibility. If the management approve the FID (Final Investment Decision), the Estimators then should complete the required project scope so that the level 2 or 3 estimate can be produced for bidding process.

 

Refrences

  1. Module 08-4 Creating The Owners Cost Estimate Top Down.
    Retrieved from http://www.planningplanet.com/guild/gpccar/creating-the-owners-cost-estimate
  2. AACE International Recommended Practice No. 17R-97
    Retrieved from http://www.anvari.net/Risk%20Analysis/17r-97.pdf
  3. AACE International Recommended Practice No. 59R-10
    Retrieved from https://fenix.tecnico.ulisboa.pt/downloadFile/1126518382175702/DEVELOPMENT%20OF%20FACTORED%20COST%20ESTIMATES_AACE%2059R-10.pdf
  4. W22_RM_Equipment Factored Cost Estimates (2016)
    Retrieved from https://goldenaace2015.wordpress.com/2016/05/26/w22_rm_equipment-factored-cost-estimates/