W12_MFO_Analyzing Cost-Only Alternative Using Equivalent Worth For Selecting Fire Water Pump

  1. Problem Definition.

Same case like in W11 blog posting, we have plan to install electric fire water pump for the gas plant and we have received a complete offer with the specifications of the three brands of pumps. In this blog, the author wants to analyze cost-only alternatives of the three brands of pumps using equivalent worth. Which pump should be preferred base on equivalent worth?

  1. Identify the Feasible Alternative.

The following table contains data of three brand of pumps that will be selected.

Table 1. The pumps data

This pumps will be used for 10 years and the company has a MARR of 14%

  1. Development of the Outcome for Alternative.

Using table 1 data, we will calculate the PW (Present Worth), AW (Annual Worth), and FW (Future Worth). The result as seen as table below.

Table 2. The result of Equivalent Worth Values

  1. Selection of Criteria.

The pump that will minimize the equivalent worth of total costs over the ten-year analysis period will be used as selection of criteria.

  1. Analysis and Comparison of the Alternative.

The comparison of three brand pump using the PW, AW, and FW methods to minimize total cost as seen as table 3 below.

Table 3. The comparison of the pumps

From the table 3, alternative brand C minimizes all three equivalent-worth values of total costs and is the preferred alternative. The preference ranking (Brand C > Brand B > Brand A) resulting from the analysis is the same for all three methods.

  1. Selection of the Preferred Alternative.

Base from above calculation, brand C minimizes all three equivalent-worth values of total costs and is the preferred alternative for the gas plant.

  1. Performance Monitoring and the Post Evaluation of Result.

Monitoring should be conducted during execution of the project to ensure that all requirements are met.

References:

  1. Sullivan, W.G., Wicks, E. M., Koelling, C. P. (2014). Engineering Economy. Pearson. Sixteenth Edition.
  2. Electric fire water pump specification & quotation Brand A
  3. Electric fire water pump specification & quotation Brand B
  4. Electric fire water pump specification & quotation Brand C
  5. What is the formula for calculating net present value (NPV) in excel. Retrieved from https://www.investopedia.com/ask/answers/021115/what-formula-calculating-net-present-value-npv-excel.asp
  6. How to calculate net present value (Npv) in excel. Retrieved from https://www.youtube.com/watch?v=hG68UMupJzs

 

 

 

W5.3_MFO_ OmniClass on Gas Metering System Installation

1. Problem Recognition, Definition and Evaluation

Our company will install Ultrasonic Gas Metering Station for our project. Is the use of OmniClass can be applied to this project?

This blog is made to revise the W5.2 blog post before.

2. Development of the Feasible Alternatives

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.

Fig 1. Inter-related OmniClass

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

3. Development of the Outcomes for Each 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 Metering Project, the additive weighting technique will rank the 15 tables, shows high to low applicability and relevance to the project.

4. Selection of a Criterion

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

  1. WBS location that related to Gas Metering Project (1-3, 3 being highest relationship)
  2. WBS deliverables related to Gas Metering Project (1-3, 3 being highest relationship)
  3. WBS activity related to Gas Metering Project (1-3, 3 being highest relationship)
  4. WBS organization that related to Gas Metering 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 and Comparison of the Alternatives

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

Table 1. OmniClass Tables Comparison Based on Six Selection Criteria

All attributes in table 1, be ranked in order of importance by doing paired comparison between each possible attribute combination. Result as shown on table 2:

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 Alternative

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

  1. Table 14-Spaces by Form (score 0.310)
  2. Table 23-Products (score 0.357)
  3. Table 31-Phases (score 0.270)

7. Performance Monitoring and Post Evaluation of Results

Monitoring and supervision should be conducted strictly during project to keep the project inline with the WBS.

Reference:

  1. Planning Planet (2017). Creating Work Breakdown Structure. Retrieved from http://www.planningplanet.com/guild/gpccar/creating-work-breakdown-structure
  2. Hendarto, Tommy. (2017). W6.1_TH_Standardized WBS Structures for Gas Station Project-Part 3. Retrieved from http://emeraldaace2017.com/2017/09/22/w6-1_th_-standardized-wbs-structures-for-gas-station-project-part-3/
  3. OmniClass (2017), OmniClass Table 21 – Elements (includes design elements). Retrieved from www.omniclass.org/tables/OmniClass_21_2012-05-16.zip
  4. 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/

 

 

 

W11_MFO_Present Economy Study For Selecting Fire Water Pump

  1. Problem Definition

In our project, we have plan to install electric fire water pump for the gas plant. We have received a complete offer with the specifications of the three brands of pumps. So in this blog, the author wants to try to compare the three brands of pumps using present economy study. Which pump has the most efficient cost?

  1. Identify the Possible Alternative

The following table contains data of three brand of pumps that will be selected.

Table 1. The pumps data

The pump will be operated 2,000 hours per year and 1 hp = 0.746 kW.

  1. Development Of the Outcome For Alternative

Before calculate the expense of the pumps, we must know the electric power costs per kWh. From the PLN website the electric power costs per kWh is Rp 1,467.28 as shown as table below.

Table 2. The electric power costs per kWh

The expense of electric power for the Brand A Pump is

(50 hp / 0.58)*(0.746 kW / hp)*(Rp 1,467.28/kWh)*(2,000 hours / year) = Rp 188,722,566

The expense of electric power for the Brand B Pump is

(50 hp / 0.65)*(0.746 kW / hp)*(Rp 1,467.28/kWh)*(2,000 hours / year) = Rp 168,398,597

The expense of electric power for the Brand C Pump is

(50 hp / 0.72)*(0.746 kW / hp)*(Rp 1,467.28/kWh)*(2,000 hours / year) = Rp 152,026,511

  1. Selection of criteria.

Pump selection criteria is pump that have the most efficient total cost of owning and operating

  1. Analysis and Comparison of Alternatives

The total cost of owning and operating the all pumps as shown as table below.

Table 3. The total cost of owning and operating the all pumps

From the table 3, Brand B have the most efficient total cost of owning and operating.

  1. Select of the preferred alternative

Base from above calculation, Brand B have the most efficient total cost of owning and operating. So, author will recommend the brand B for the gas plant.

  1. Performance Monitoring and Post Evaluation of Result

Monitoring should be conducted during execution of the project to ensure that all requirements are met.

References:

  1. Sullivan, W.G., Wicks, E. M., Koelling, C. P. (2014). Engineering Economy. Pearson. Sixteenth Edition.
  2. Tarif Dasar Listrik PLN Oktober 2017. Retrieved from http://listrik.org/pln/tarif-dasar-listrik-pln/
  3. Electric fire water pump specification & quotation Brand A
  4. Electric fire water pump specification & quotation Brand B
  5. Electric fire water pump specification & quotation Brand C
 

W10_MFO_Contract Type for EPC Project

  1. Problem Definition

Normally the company use lump sum or Firm Fixed Price (FFP) contract type. But, refer to some profiles of our project from my paper draft as seen as table 1 below, FFP contract type is not appropriate to use in our project because our “real” scope definition less than 85%. (70% – 84%). So, in this paper blog author try to analysis the contract type should be used for our project.

Table 1. Profiles of our project

  1. Identify the Possible Alternative

Based from Engineering tool box (www.engineeringtoolbox.com) there are 4 (four) common types of contracts which is used in the engineering and construction industry i.e:

  1. Lump Sum Contract
  2. Unit Price Contract
  3. Cost Plus Contract
  4. Incentive Contracts
  1. Development Of the Outcome For Alternative

a. The possibility outcomes if owner used Lump Sum Contract i.e.

Advantage:

  • 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.

Disadvantage :

  • 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

b. The possibility outcomes if owner used Unit Price Contract i.e.

Advantage:

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

Disadvantage:

  • 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

c. The possibility outcomes if owner used Cost Plus Fee Contract i.e.

Advantage:

  • 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

Disadvantage:

  • 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.

d. The possibility outcomes if owner used Incentive Contracts i.e.

Advantage:

  • 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

Disadvantage:

  • Opportunities are Given to Contractors to Receive Unearned Fees
  • Require complete auditing by owner’ staff
  1. Selection of 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 Alternatives

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

Table 2. Attributes of The Contract Types

Ranking attribute by using non-dimensional scaling as shown in Table 3.

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. Additive weighting for all alternatives

  1. Select of the preferred alternative

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

  1. Performance Monitoring and 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.

References:

  1. Sullivan, W.G., Wicks, E. M., Koelling, C. P. (2014). Engineering Economy, Chapter 14, page 559 to 617. Pearson. Sixteenth Edition.
  2. W2_FELIX_Contract Type. Retrieved from http://aacemahakam.blogspot.co.id/search?q=contract
  3. W3_FELIX_Contract Type II. Retrieved from http://aacemahakam.blogspot.co.id/search?q=contract
  4. 10.3 – module 10-3 – managing change – the owner’s perceptive. Retrieved from http://www.planningplanet.com/guild/gpccar/managing-change-the-owners-perspective
  5. The Engineering Tool Box. Retrieved from http://www.engineeringtoolbox.com/contract-types-d_925.html
 

W9_MFO_ Benchmark of Company Cost Estimating Template against NPS Template

  1. Problem Definition

Refer to Dr Paul comment in the 2nd Paper Submission, author want try to benchmark the Company cost estimating template against US National Park Service (NPS) estimating template using Likert Scale / Compensatory method.

  1. Identify the Possible Alternative

To make an estimate, the company already has a cost estimation template. But, using this template, our estimation results are mostly inaccurate so there needs to be an improvement on the template. The description of the template can be seen in figure 1.

Figure 1. Company Cost Estimating Template

Author want try to benchmark the company estimating template with “the best in class” that is US National Park Service (NPS) estimating template. National Park Services has 3 level of estimating, Class A, Class B and Class C. The best fit with Company estimating process regarding to National Park Services is Class A estimating, where Class A Construction Cost Estimates are referred to as actual estimates by the design. These estimates are generally prepared with a fully defined scope of work (SOW), complete with all drawings and construction details, and complete set of project specifications. The accuracy of Class A estimate is -5% to +15%. On figure 2, it shown the template use by National Park Services for estimate project with Class A estimate level.

Figure 2. National Park Services Template Class A Construction Cost Estimate

  1. Development of The Outcome for Alternative

Refer to company template and National Park Services/NPS template, there is gap between them from estimate mark-ups aspect, there is 11 aspect consider by NPS for creating an estimation, that are Published Location Factor, Remoteness Factor, Federal Wage Rate Factor, Taxes, Design Contingency, General Condition, Historic Preservation Factor, Overhead & Profit, Contracting Method Adjustment, Bond Permits, Inflation & Escalation, to identify each aspect author develop using likert to define which aspect must be consider, after that author can make purpose suggestion to company for a better estimate template, the likert score explain on table 1 below :

Table 1. Likert scale

  1. Selection Criteria

We will perform a checklist of each aspect proposed by NPS estimating template. If there are gap from the checklist and potentially to be fixed, it will be recommended to management to improve the estimation process.

  1. Analysis & Comparison of Alternative

Based on data in figure 1 and figure 2, the authors compare both template, calculate the average likert value and we will see which attributes meet the NPS template and which have not.

Table 2. Result of Company template vs NPS template

Refer to table 2, we get average of company template condition is 1.09. Refer to table 1, it means that the company template highly consider to implement NPS template because it effect on estimate value and the fact that estimation value almost always lower than actual value. Based on Table 2, it found that there are three critical aspect which still not fully consider on company template like design contingency, historic preservation factor, and contracting method adjustment. So, we can give the recommendation to the management to improve our template especially from aspect which still not fully consider.

  1. Selection of the Preferred Alternative

Based on above assessment and analysis, company must consider unimplemented aspect and improve the template for a better and reliable estimating process.

  1. Performance Monitoring and The Post Evaluation of Result

Management should consider to use of NPS estimating template to avoid over budget or under budget estimate and monitoring should be conducted during estimation process to ensure that all requirements are met.

Reference:

  1. GAO (March 2009). GAO Cost Estimating and Assessment Guide, A Reliable Process for Developing Credible Cost Estimates pages 8-11. Retrieved on 12th July 2014 from http://www.gao.gov/new.items/d093sp.pdf
  2. Sullivan, W.G., Wicks, E. M., Koelling, C. P. (2014). Engineering Economy, Chapter 14, page 559 to 617. Pearson. Sixteenth Edition.
  3. Cost Estimating Requirements Handbook National Park Service (February 2011). Retrieved on 18th July 2017 from https://www.nps.gov/dscw/upload/CostEstimatingHandbook_2-3-11.pdf
  4. Estimating Procedure Document. (2013). PT. ABCD. (Disguised).
  5. 08.0 – Managing Cost Estimating & Budgeting. Retrieved from http://www.planningplanet.com/guild/gpccar/
  6. Likert Scale (2017). Retrieved from https://www.surveygizmo.com/survey-blog/likert-scale-what-is-it-how-to-analyze-it-and-when-to-use-it/
 

W8_MFO_ Benchmark of Company Cost Estimate Process vs GAO Process

  1. Problem Definition

Refer to Dr Paul comment in the 2nd Paper Submission, author want try to benchmark the Company Estimate Process with GAO Estimate Process using Likert scale / Compensatory method.

  1. Identify the Possible Alternative

To make an estimate, company already has a procedure. We must follow the steps contained in that company’s procedures. There are at least five steps to follow. The description of the estimation process can be seen in figure 1.

Figure 1. Company Cost Estimating Process

GAO cost estimating process consist of The Twelve Steps of a High-Quality Cost Estimating Process. Each of the 12 steps is important for ensuring that high-quality cost estimates are developed and delivered in time to support important decisions. In below, we can see the GAO’s process and this is the same process which we need to apply as part of each Phase Gate, including the approved budget as part of each Phase Gate Decision Support Package.

Figure 2. GAO Estimating Process

  1. Development of The Outcome for Alternative

Base on both cost estimating process, author will compare that using the twelve steps GAO estimating process and compensatory method. For compare using compensatory method, author determine the likert scale like on table below.

Table 1. Likert scale

After determine the likert scale and refer to 12 steps GAO estimate process, we can put each task with Likert value who meet with current condition of company in estimation process like on table below.

Table 2. Company estimating process with likert value

  1. Selection Criteria

We will perform a checklist of each stage proposed by GAO approach in the estimation process. If there are gap from the checklist and potentially to be fixed, it will be recommended to management to improve the estimation process.

  1. Analysis & Comparison of Alternative

Based on the assessment of checklists in table 2, the authors calculate the average likert value and we will see which attributes meet the GAO requirements and which have not.

Table 3. Result of GAO vs Company Estimating Process

Refer to table-3, only step-1 or define estimate purpose which already meet with GAO, the other step (step 2 until step 12) still remind to consider highly and very highly implemented.  Company need to consider GAO for a better and reliable estimating process, because 12 steps purposed by GAO as one of  best practice in process estimation.

  1. Selection of the Preferred Alternative

Based on above assessment and analysis, company must consider unimplemented step for a better and reliable estimating process, because 12 steps purposed by GAO as one of best practice in process estimation.

  1. Performance Monitoring and The Post Evaluation of Result

Management should consider the use of GAO Estimating Process as part of the estimation stage process to avoid Over Budget and Behind Schedule Project and monitoring should be conducted during estimation process to ensure that all requirements are met.

Reference:

  1. GAO (March 2009). GAO Cost Estimating and Assessment Guide, A Reliable Process for Developing Credible Cost Estimates pages 8-11. Retrieved on 12th July 2014 from http://www.gao.gov/new.items/d093sp.pdf
  2. Sullivan, W.G., Wicks, E. M., Koelling, C. P. (2014). Engineering Economy, Chapter 14, page 559 to 617. Pearson. Sixteenth Edition.
  3. Estimating Procedure Document. (2013). PT. ABCD. (Disguised).
  4. 08.0 – Managing Cost Estimating & Budgeting. Retrieved from http://www.planningplanet.com/guild/gpccar/
  5. Likert Scale (2017). Retrieved from https://www.surveygizmo.com/survey-blog/likert-scale-what-is-it-how-to-analyze-it-and-when-to-use-it/
 

W7_MFO_ Price Forecasts using Best Fit Curves On Pipeline Project

  1. Problem Definition

In W6 blog posting comment, Dr Paul asked the author to take same case study for W7 blog posting using “Best Fit” curves to predict the 20 km pipeline project cost. So, the author want try to predict the cost of Polyethylene (PE) pipeline project in this W7 blog posting.

  1. Identify the Possible Alternative

Using last week indicative price, then the cost for PE Pipeline project, as follow:

Table 1. Indicative Price of PE Pipeline

From the table above, then to analyze price forecasts for 20 km pipeline 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:

Figure 1. Input Data

Using these input data and MS Excel “Best Fit” Linear Regression Analysis Curve, then trendline and trending them out to 20 Km provide in figure 2 below. While the trendline use R2 = 0.9901.

Figure 2. Linear Trendline

Then still using data in table 1, now MS Excel “Best Fit” Polynomial Regression Analysis Curve with R2 = 0.9945 will be used in the second analysis. The result of the polynominal regression analysis can be seen in the figure 3 below.

Figure 3. Polynominal Trendline

The latest, on the third data input in table 1 analysis will use MS Excel “Best Fit” Logarithmic Regression Analysis Curve with R2 = 0.9063. The result of the logarithmic regression analysis can be seen in the figure 4 below.

Figure 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.

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

  1. Selection Criteria

Further, value of all treadline for PE Pipeline 20 km length, 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 PE Pipeline Project

From the table above, we can see

  1. Best case (optimistic) = $ 1,029.13
  2. Most Likely case = $ 1,417.30
  3. Worst case (pessimistic) = $ 2,069.59

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

Step 1 – PERT weighted Mean

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

= $ ((1,029.13) + (4 x 1,417.30) + (2,069.59))/6

= $ 1,461.32

Step 2 – Standard Deviation

= (Largest Value – Smallest Value)/6

= $ (2,069.59 – 1,029.13)/6

= $ 173.41

Step 3 – Variance

= Sigma/Standard Deviation^2

= $ 173.41^2

= $ 30,070.65

The following figure 6 below shows normal distribution curve:

Figure 6. Normal Distribution Curve

The result from the step 3 reveals that the very large variance means that the number is risky, so a higher P number needs to be considered when selecting one, hence for this blog, author use P90 refer to figure 7.

Figure 7. P(90) Distribution Curve

The following above is P(90) cost estimate 20 Km PE Pipeline project with value $ 1,683.29

  1. Selection of the Preferred Alternative

This blog displays one of method in determining price forecast, on next 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 pipeline 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
  2. Sullivan, G. W. (2014). Engineering Economy 16th Chapter 3 – Cost-Estimation Techniques, pp. 113-121.
  3. (2017). W11.1_SJP_Forecasts Part 3. Retrieved from https://js-pag-cert-2017.com/w11-1_sjp_forecasts-part-3/
  4. (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
  5. (2017). W6_AI_Price Forecact for Offshore Regasification Facility Project. Retrieved from http://emeraldaace2017.com/2017/09/10/w6_ai_price-forecasts-for-offshore-regasification-facility-project/
  6. (2013). Normal curve using excel 2010. Retrieved from https://www.youtube.com/watch?v=hQHiG_cQiUE
 

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
 

W5.2_MFO_ OmniClass and 3D WBS on Gas Metering System Installation

1.      Problem Recognition, Definition and Evaluation

A company will install Ultrasonic Gas Metering Station for our project. Is the use of OmniClass or 3D WBS can be applied to this project? Which one is better?

2.      Development of the Feasible Alternatives

There are three (2) WBS alternatives to compare to answer the question above:

  1. OmniClass is a means of organizing and retrieving information specifically designed for the construction industry. It 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.

OmniClass Table 31 Phases: Table 31 – Phases, is the only OmniClass table that explains the stages (higher level of categorization than phases) of the project activity from conception until project closure.

  1. 3D WBS is based on three main dimensions: Zones Breakdown Structure (ZBS), Products Breakdown Structure (PBS) and Activity Breakdown Structure (ABS).

Fig 1. 3D WBS

3.      Development of the Outcomes for Each Alternative

a. Omniclass table 31 phases

Fig 2 – OmniClass Table 31 – Phases – WBS

b. 3D WBS Model

Fig 3. 3D WBS Model

We will compare both alternatives using Lexicography, one of non-compensatory models for multi attributes decision making technique.

4.      Selection of a Criteria

There are four (4) criteria that have been selected as parameters to analyze and compare the above alternatives:

  1. WBS level of details, this will explain how detail each alternative structures their WBS for design process.
  2. Number of design activity phase, is the number of engineering phase from the project scope development to the final design.
  3. Work flow of activities, is how the activities work together from the project scope development to the final design.
  4. Complexity of the WBS

5.      Analysis and Comparison of the Alternatives

Summary information for each alternative :

Table 1 Data Comparison

All attributes in table 1, be ranked in order of importance by doing paired comparison between each possible attribute combination. Result as shown on table 2:

Table 2 – Ordinal Ranking of Attributes

Based on table 2, the ranking is found to be WBS Level of details > Number of design activity phase  > Work flow of activities  > Complexity.

6.      Selection of the Preferred Alternative

Considering the above ranking, the 3D model was found the optimum selection as to be adapted to standardize the WBS.

7.      Performance Monitoring and Post Evaluation of Results

Monitoring and supervision should be conducted strictly during project to keep the project inline with the WBS.

Reference:

  1. Humpreys, G. C. (2011). Project Management Using Earned Value (2nd ed.). Humpreys & Associates, Inc.
  2. W16_GW_OmniClass and 3D WBS on Pipeline Installation. (2014, June 15). Retrieved from Kristal AACE 2014 : https://kristalaace2014.wordpress.com/2014/06/15/w16_gw_omniclass-and-3d-wbs-on-pipeline-installation/
  3. OmniClass. (2017). Retrieved from OmniClass: http://www.omniclass.org/
  4. Syafri, F. (2013, October 8). Managing Small Project: Omniclass 3D WBS. Retrieved from Simatupang AACE 2014: http://simatupangaace2014.wordpress.com/2013/10/08/w6_afs_-managing-small-project-omniclass-3d-wbs-2/
  1. Moine J-Y. 2013.3D Work Breakdown Structure Method, PM Word Journal Vol. II, Issue IV–April 2013
  2. Elrashid, M. (2013, January 2). W10_Mohammed_ Our Current WBS Vs OmniClass and 3D model. Retrieved from Mahakam preparation Class of AACE 2012: http://aacemahakam.blogspot.com/2013/01/w10mohammed-our-current-wbs-vs.html
 

W5.1_MFO_ OmniClass and 3D WBS on Gas Metering System Installation

1.      Problem Recognition, Definition and Evaluation

A company will install Ultrasonic Gas Metering Station for our project. Is the use of OmniClass 3D WBS can be applied to this project?

2.      Development of the Feasible Alternatives

OmniClass is a means of organizing and retrieving information specifically designed for the construction industry. It 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. (OmniClass, 2014)

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

Fig 1. 3D WBS

3.      Development of the Outcomes for Each Alternative

The 15 inter-related OmniClass tables are: (OmniClass, 2014)

  1. Table 11    : Construction Entities by Function
  2. Table 12    : Construction Entities by Form
  3. Table 13    : Spaces by Function
  4. Table 14    : Spaces by Form
  5. Table 21    : Elements (includes Designed Elements)
  6. Table 22    : Work Results
  7. Table 23    : Products
  8. Table 31    : Phases
  9. Table 32    : Services
  10. Table 33    : Disciplines
  11. Table 34    : Organizational Roles
  12. Table 35    : Tools
  13. Table 36    : Information
  14. Table 41    : Materials
  15. Table 49    : Properties

The tables above can be described in terms of the 3D WBS models as follows:

Fig 2. 3D WBS Cubes and Omniclass Table

4.      Selection of a Criterion

Characteristics of the WBS:

  1. WBS defines output
  2. WBS is hierarchical
  3. One WBS level’s output is an input to the next higher level.

5.      Analysis and Comparison of the Alternatives

By using Omniclass tables as reference, 3D WBS for the project is as follow:

    1. Zone Breakdown Structure (ZBS)
    2. Product Breakdown Structure (PBS)

3. Activity Breakdown Structure (ABS)

Based on the above, it appears that OmniClass and 3D WBS are compatible.

6.      Selection of the Preferred Alternative

OmniClass tables give a more detailed WBS and can be applied to this gas metering system installation project.

7.      Performance Monitoring and Post Evaluation of Results

Monitoring and supervision should be conducted strictly during project to keep the project inline with the WBS.

Reference:

  1. Humpreys, G. C. (2011). Project Management Using Earned Value (2nd ed.). Humpreys & Associates, Inc.
  2. W16_GW_OmniClass and 3D WBS on Pipeline Installation. (2014, June 15). Retrieved from Kristal AACE 2014 : https://kristalaace2014.wordpress.com/2014/06/15/w16_gw_omniclass-and-3d-wbs-on-pipeline-installation/
  3. OmniClass. (2017). Retrieved from OmniClass: http://www.omniclass.org/
  4. Syafri, F. (2013, October 8). Managing Small Project: Omniclass 3D WBS. Retrieved from Simatupang AACE 2014: http://simatupangaace2014.wordpress.com/2013/10/08/w6_afs_-managing-small-project-omniclass-3d-wbs-2/
  1. Moine J-Y. 2013.3D Work Breakdown Structure Method, PM Word Journal Vol. II, Issue IV–April 2013