W19_TH_Gas Dryer Feasibility Study: Replacement Analysis

1. Problem Evaluation

Beside CNG Compressor, one of the critical equipment on gas station is gas dryer.  The main function of gas dryer is to make sure that water content on gas pipeline meets the Ditjen Migas CNG specification; maximum allowable water content is 3 lb/mmscf.


Figure 1. Ditjen Migas CNG Specification

Based on the author company SOP life time gas dryer is 20 years, but in years 10th the molecular sieve of gas dryer must be replace with the new one combine with others equipment. In this unique situation trigger me to deep dive what the best alternative of gas dryer replacement: follow SOP, change new all, or leasing?

2. Development of Feasible Alternatives

In this evaluation there are three feasible options:

  • Follow SOP Policy (only change the molecular sieve at year 10th)
  • Change all with the new
  • Leasing

Author will analysis these three options which most efficient and also determine when Economic life of gas dryer.

3. Development the Outcome for Each Alternative

Two common methods in replacement analysis are present worth approach and Equivalent Uniform Annual Cost (EUAC). The reason why author chose those two methods because present worth method can calculate in present time how much the cost of two alternatives during economic life and from EUAC method I can get annual cost of each alternative with equivalent uniform/condition. Comparing the value of present worth and EUAC are the good way to know which the best alternative is.

4. Selection of Criteria

The Rule of thumb in present worth method; choose the Alternative with the highest value. The opposite of present worth method, in EUAC method we choose alternative with smallest value. The highest value of present worth method and smallest value of EUAC indicate the best alternative from economic perspective. And for the economic life is minimum total year by year marginal cost (minimum EUAC) in all period.

5. Analysis and Comparison of the Alternative

Defender and challenger data that will be used in PW and EUAC calculation are in the table below:

Table 1. Alternatives Data

After that is calculate data using PW and EUAC method. The Calculation result of PW and EUAC method are in table below:

Table 2. PW Calculation Result

Table 3. EUAC Calculation Result

Table 4. Economic Life of Alternative

6. Alternative Selection

Based on PW and EUAC calculation result, Change All Alternative is dominating over other alternative in both PW and EUAC Method. The PW of SOP Policy is greater than PW of Change All and Leasing (IDR -3,399,041,203 > IDR -3,420,207,693 > IDR -4,384,676,641). And SOP Policy has the smallest EUAC (IDR 755,806,075 < IDR 860,495,634 < IDR 1,204,210,589). Thus, the old dryer should not be replaced immediately with all new products (molecular sieve).

From the economic life evaluation we also get the optimum years of the dryer should be used. SOP Policy Alternative wills optimum in 5 years use and for change all will optimum in 4 years use. Based on PW, EUAC and economic life evaluation we get big picture of alternative sequence there is follow SOP Policy until 20 years then change the tank truck and trailer with the new one for 4 years using only.

7. Performance monitoring & Post Evaluation Result

Combination PW, EUAC and economic life evaluation will give you complete picture of alternative selection such as best alternative, sequence, and duration. It will help us to prepare all what it need, especially in alternative changing.


  1. Sullivan, G. W., Wicks, M. E., & Koelling, C. P.(2014). Engineering economy 16th Edition. Chapter 9 – Replacement Analysis., pp.427-466. Prentice Hall.
  2. Kullabs.com (2017). Note on Replacement Analysis and Economic Service Life. Retrieved from https://www.kullabs.com/classes/subjects/units/lessons/notes/note-detail/6002
  3. Dhanu, Utomo. (2017). W13_UDS_Fuel Tank Truck|Emerald AACE 2017. Retrieved from: http://emeraldaace2017.com/2017/11/21/w13_uds_fuel-tank-truck-feasibility-study-part-1-replacement-analysis/

W18_TH_Severance Cost Analysis for Regasification Plant Project

1. Problem Evaluation

Currently PLN (Indonesian electricity state owned company) now have tender to build regasification plant which BOT (Build, Operate and Transfer) scheme. Bidder will have 10 years to operate the facilities before transfer the asset to PLN. Due to this scheme, bidder should be calculate the percent of salary cost need to save yearly so by the end of years ten, severance cost will available. Severance pay is the compensation an employer provides to an employee who has been laid off, whose job has been eliminated, who has decided to leave the company through mutual agreement, or who has parted ways with the company for other reasons. In addition to pay, severance packages can include extended benefits, such as health insurance and out placement assistance, to help an employee secure a new position.

2. Development of Feasible Alternatives

This regasification project will cover more than five regasification plant on Kalimantan, NTT and NTB area. Total employee almost 100 employee. The regasification plant will COD on 2020, so the first salary cost will spent on 2020.

Table 1. Salary Cost and Assumption Data

The salary cost is paid at the end of the year, at which point some percentage is placed in a bank account. The interest calculation is based on cumulative deposits and interest in the account at the beginning of the year, but not on the deposits made at the end of the year. The salary cost is increased and the cycle repeats.

In this evaluation there are three feasible options for percentage of salary cost need to save yearly:

  • Option 1 = 12%
  • Option 2 = 13%
  • Option 3 = 14%
3. Development the Outcome for Each Alternative

Author will use Excel spreadsheet to calculate percentage of salary cost need to save yearly.

4. Selection of Criteria

Authors will analysis these three options which percentage is meet with desired amount on 2030 (smallest difference).

5. Analysis and Comparison of the Alternative
  • Option 1 = 12% salary cost save yearly

Table 2. Calculation of 12% Salary Cost Save Yearly

  • Option 2 = 13% salary cost save yearly

Table 3. Calculation of 13% Salary Cost Save Yearly

  • Option 3 = 14% salary cost save yearly

Table 4. Calculation of 14% Salary Cost Save Yearly

  1. Alternative selection

Based on calculation result, 14% salary cost save yearly has smallest difference with desired amount on 2030. So 14% salary cost save yearly will use by bidder to meet with PLN severance cost requirement.

Table 5. Comparison of Salary Cost Save Yearly

  1. Performance monitoring & Post Evaluation Result

Once the problem has been formulated in a spreadsheet, we can determine the impact of different rates, inflation rates, and so on, on the severance cost plan, with minimal changes and effort.


  1. Sullivan, G. W., Wicks, M. E., & Koelling, C. P.(2014). Engineering economy 16th Edition. Chapter 8 – Price Changes and Exchange Rates., pp.407-409. Prentice Hall.
  2. Investopedia.com (2017). Severance Pay. Retrieved from https://www.investopedia.com/terms/s/severancepay.asp
  3. Investorwords.com (2017). Severance Costs. Retrieved from http://www.investorwords.com/7710/severance_costs.html

W22 Offshore Electrical Substation – Part 2 Network Development


Further to week 21 and Part 1 of electrical substation planning, we will continue in our preparation of Electrical Substation programme development following the GPCC process / work flow commencing from step 3 (Identify / capture all activities). Week 21 blog and Part 1 has satisfied step 3 and the  identification of activities and scope definition using Omniclass table 21 as the basis.This weeks blog and Part 2 will detail methods and approaches to finalisation of Activity Sequencing and ensuring a high-quality network.

Part 3 will focus on the development and assignment of resources as well as the different methods for calculating activity durations

Part 4 will calculate the critical path and float based on target completion dates including validation checks

Part 5 will consider the development of a schedule risk analysis for the works

Part 6 will consider available options to respond to high potential for negative float within the programme

The development of the Logic Networks must consider thethe following and constraints and works sequences;

  1. Works can only commence upon approval of Design drawings
  2. Activity RC structure will be constructed using Precast Elements (Columns, beams, floors, roof) with topping screed for floor and roof areas.
  3. An external Precast manufacture will be appointed. After Appointment, it is expected that the columns and beams will be progressively delivered to site. First delivery is expected within 28 days after appointment however all precast must be complete before the commencement of erection activities for the Roof Structure inclusive of 1st floor columns.
  4. Columns and Structure for roof can only commence after 1st floor slab has been completed to avoid risk of working overhead.
  5. Permitter Scaffold erection can commence when 50% of Ground floor columns and beams are installed
  6. Columns for Transformer bay can only be installed until after 75% of Roof precast has been installed to ensure access for crane is maintained.
  7. Ground floor Block work may commence immediately after erection of 1st floor columns and beams and erection of permitter scaffold
  8. Scaffold cannot be removed until all cement rendering and painting has been completed for all external walls
  9. Assume that internal walls and external wall will commence simultaneously
  10. Internal finishing works can only commence after service rough in has been completed
  11. Internal finishing work sequence shall follow Wall, ceiling then flooring.
  12. External Handrail, access ladders and fixtures to be installed upon removal of scaffold
  13. Target Dates are as follows
    • Building to be “watertight by the 15th April 2018
    • Overall Completion by the 1st June 2018


To develop the sequence and network logic we will consider the following methods

  1. PDM (Activity on Node)
  2. ADM (Activity on Arrow)

This blog will not select the preferred option – this will be undertaken in part 4


To ensure that above constraints are accurately reflected within the network logic, suitable activity relationships must be selected. Table 1 below is a summary of the logic used within the sequence and network development (PDM).

Using the relationships and logic outlined in table 1, the following PDM network has been created – split into 3 sheets.

When considering the same constraints within a ADM network however, we cannot use the same Logical relationships between the activities as ADM method requires that all relationships be based on Finish to Start.

This means that lags and leads indicated in the PDM network to reflect the partial completion of certain activities before another activity can commence cannot be modelled in the same way.

For example, a constraint (No. 6) has been placed on the erection of Transfer columns such that this activity cannot commence until at least 75% of the roof has been installed due to crane position requirements for hoisting roof slab segments. Under a PDM network, we have conveniently used the S-S relationship on the Roof erection activity with a lag of 75% complete to reflect this constraint.

Under the ADM network, this cannot be modelled the same way as all relationships must be F-S in nature. Thus under the ADM, we have split the roof erection activities into > Erect Roof Slabs to GL 5 (75%) > Erect roof slab t GL 8 (50%) > Roof slab topping works. This will now ensure that the column erection cannot commence until 75% of the roof has been installed whilst maintaining the F-S relationships between all activities. The full ADM network is outlined below;


The following checklist (adapted from GAO best practices) will be used in assessing the quality of the proposed sequence and logic network

1. The schedule contains complete network logic between all activities so that it can correctly forecast the start and end dates of activities within the plan.
2. The majority of relationships within the detailed schedule are finish-to- start.
3. Except for the start and finish milestones, every activity within the schedule has at least one predecessor and at least one successor.
4. Any activity that is missing predecessor or successor logic—besides the start and finish milestones—is clearly justified in the schedule documentation.
5. The schedule contains no dangling logic. That is,
 – Each activity (except the start milestone) has an F–S or S–S predecessor that drives its start date.
– Each activity (except the finish milestone and deliverables that leave the project without subsequent effect on the project) has an F–S or F–F successor that it drives.
6. The schedule does not contain start-to-finish logic relationships.
7. Summary activities do not have logic relationships because the logic is specified for activities that are at the lowest level of detail in the schedule.
8. Instead of SNET constraints, conditions of supply by an outside vendor or contractor are represented as actual activities in the schedule.
9. Date constraints are thoroughly justified in the schedule documentation. Unavoidable hard constraints are used judiciously and are fully justified in reference to some controlling event outside the schedule.
10. Lags are used in the schedule only to denote the passage of time between two activities.
11. Instead of lags and leads, every effort is made to break activities into smaller tasks to identify realistic predecessors and successors so that logic interfaces are clearly available for needed dependency assignments.
12. If included in the schedule, lags and leads are used judiciously and are justified by compelling reasons outside the schedule in the schedule documentation.
13. The schedule is assessed for path convergence. That is, activities with many predecessors have been examined to see whether they are needed and whether alternative logic can be used to link some predecessors to other activities.


Using the GAO – best practices as a guideline we will compare / assess both the PDM and ADM logic networks.


After reviewing the above PDM network against the GAO best practices, the use of summary activities is not advised with SS and FF relationships / lags used to reflect column erection and precast activities could be improved or even eliminated through the use of lowest level activities making for a more reliable network and overall duration estimate.

Consider updating the PDM network for Part 4 blog and calculation of critical path and float.


  1. Chapter  7.4 – Create the Logical Realtionship ands & Sequence relationships – 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
  2. O’brien, J.J, Plotnick, F.L, (2006). CPM in Construction Management-6th Edition Chapter 4 , McGraw-Hill
  3. GAO Schedule Assessment Guide, December 2015, Appendix IV

W16_OAN_Standardized WBS for Fuel Terminal Project

  1. Problem Definition

Fuel Terminal (FT) project is a construction project of Fuel Distribution facility to Received, Storage, and distribute Fuel to Gas.

A FT area consists of several areas: Office Area, Tank Farm area, Pump equipment area, Jetty Area, Fire & Safety and utility equipment area. In this project each area is supported by some equipment or facilities.

Figure 1: Typical Layout Fuel Terminal

  1. Development of Feasible Alternatives

Using OmniClass, we have 15 Possible Alternatives:

  • Table 11- Construction Entities by Function
  • Table 12 – Construction Entities by Form
  • Table 13-Spaces by Function
  • Table 14 – Spaces by Form
  • Table 21 – Elements
  • Table 22 – Work Results
  • Table 23-Products
  • Table 31 – Phases
  • Table 32 – Services
  • Table 33 – Disciplines
  • Table 34 – Organizational Roles
  • Table 35 – Tools
  • Table 36 – Information
  • Table 41 – Materials
  • Table 49 – Properties


  1. Possible Solution

Table 13-Spaces by Function

Spaces by Function are basic units of the built environment delineated by physical or abstract boundaries and characterized by their function or primary use. Spaces have a purpose or use.  This is their function and the concern of this table.  Spaces can be occupied by people, things, and substances and serve as mediums for activities and movement.

  1. Selection Criteria

The criteria for choose OmniClass are:

  • The WBS should represent zone for FT Project
  • Deliverables should be decomposed to the level of detail needed to estimate the effort required to obtain them
  • Ensure That each WBS element has a single point of accountability
  • Support historical cost collection for future cost estimating purposes


  1. Analysis and Comparison of the Alternatives
  • Table 13-Spaces by Function – Zone Breakdown Structure (ZBS).

Detail ZBS for FT projects can be extracted by OmniClass Table 13 (Space by Function) which noted spaces for decompose ZBS components, which detail shown:

Table 1: FT OmniClass ZBS

Figure 2: FT Space by Function

  1. Selection and Preferred Alternatives

Based on Figure 2, WBS represent Zone for FT Project. All Deliverable consist detail needed to estimate the project. By doing this, we can ensure our WBS has high accountability, and we can use our historical data for future cost estimating purposes.

  1. Performance Monitoring and the Post Evaluation of Result

Standardized FT WBS can build from OmniClass Tables 13 – Spaces by Function. It is necessary to keep update the WBS periodically during project phase. Project management team also needs to evaluate the impact during phases of the project so the project can smoothly deliver with on time, on budget and on scope.


  1. Planning Planet (2017). Creating Work Breakdown Structure.
    Retrieved from http://www.planningplanet.com/guild/gpccar/creating-work-breakdown-structure
  2. W7_TH_Standardized WBS Structure for Gas Station Project – Part 4
    Retrieved from https://emeraldaace2017.com/2017/09/
  3. OmniClass (2017), OmniClass Table 13 – Spaces by Function.
    Retrieved from http://www.omniclass.org/





W15_OAN_Contract Type for EPC Project

  1. Problem Definition

Normally the company use lump sum or Firm Fixed Price (FFP) contract type. Using EPC Contract History from last 5 projects, scope accuracy less than 80%.

Table 1: Project Profile

  1. Development of Feasible Alternatives

there are 4 (four) common types of contracts which is used in the engineering and construction industry:

  1. Lump Sum Contract
  2. Unit Price Contract
  3. Cost Plus Contract
  4. Incentive Contract


  1. Possible Solution

Lump Sum Contract


  • Minimum Risk for the owner
  • Time involved for preparing the plans and specifications is considerably longer
  • Contract is based on agreed rates
  • Minimum Owner supervision related to quality and schedule


  • Time involved for preparing the plans and specifications is considerably longer.
  • Because price determines who is awarded the contract, the quality of work will be poor.
  • Difficult to make changes

Unit Price Contract


  • Owner pays for only measured work
  • Scope and quantities easily adjustable


  • Negotiation of ‘unit’ rates can be very time consuming
  • Final cost not known at outset since bills of quantities at bit time are only estimates
  • Additional site staff needed to measure, control, and report on units completed

Cost Plus Contract


  • Set a contract early with little negotiation.
  • Selection of supplier is based on rates.
  • Work definition is unimportant to contract.
  • Field work may be started before the plans and specifications are complete


  • Owner assumes all of the risk.
  • The contractor is encouraged to use inefficient (time wasting) labor and expensive materials.
  • Owner has to manage all coordination issues.
  • Owner carries cost of poor quality.
  • the contractor cannot afford delays that will keep the job going longer than expected.

Incentive Contract


  • Used to Encourage More Effective Work From Contractors.
  • When Appropriately Applied, Contractors are Paid Based on Their Handling of Cost, Schedule, and Their Performance
  • Good Business Practice
  • Owner & Contractor share financial risk and have mutual incentive for possible saving


  • Opportunities are Given to Contractors to Receive Unearned Fees
  • Require complete auditing by owner’ staff


  1. Selection Criteria

In order to determine what kind of contract should be used there are some criteria must be considered:

  • Flexibility for additional or reduction of scope
  • Quality of the services
  • Detail spec, volume and scope of work requirement
  • Owner financial risk
  • Owner supervision
  • Price negotiation


  1. Analysis and Comparison of the Alternatives

Author analyze and compare the alternatives by using compensatory models. The attributes of the contract type as shown in table 2.

Table 2: Attribute of Contract Type

Ranking attribute by using non-dimensional scaling as shown in

Table 3: Non Dimensional Scaling

After set relative rank for each attribute, further is to conduct additive weighting for all alternatives as shown in table 4

Table 4: Weighting for Alternatives

  1. Selection and Preferred Alternatives

Base from above calculation Incentive Contracts become the best alternatives to replace FFP contract type for our project.

  1. Performance Monitoring and the Post Evaluation of Result

Management should consider to use incentive contract type as the best alternatives to replace FFP contract type to avoid over budget project and monitoring should be conducted during the project contract to ensure that all requirements are met


  1. Sullivan, W.G., Wicks, E. M., Koelling, C. P. (2014). Engineering Economy, Chapter 14, page 559 to 617. Pearson. Sixteenth Edition.Benefits & Disadvantages of Functional Organizational Structure.
  2. The Engineering Tool Box.
    Retrieved from: http://www.engineeringtoolbox.com/contract-types-d_925.html#
  3. Giammalvo, Paul D. AACE Certification Preparation Course Day 5. Page 75 to 95.
  4. Module 05-1: Introduction to Managing Contract.
    Retrieved from : http://www.planningplanet.com/guild/gpccar/introduction-to-managing-contracts
  5. W40_MFO_Contract Type for EPC Project
    Retrieved from https://emeraldaace2017.com/2017/10/13/w10_mfo_contract-type-for-epc-project/