The project phases mentioned earlier in first part of this serious are essentially significant projects by themselves, and each phase warrants distinctive and specific expertise and attention. The forthcoming article will describe each phase in more detail.
PHASE I: Technology/Contractor Selection
The first step in any new industrial plant is the transfer of technology of the new plant from one of the technology providers herein called contractors. It is obvious that the client will try to select the best technology from the contractor. However there are some activities and work involved to help the client to select the best contractor technology.
Prior to selecting one of the industrial plant technology licensors (called here contractors), certain formalities are performed and completed as a general common practice. These include:
1. an invitation to contractors, 2. the submission of proposals or bids, 3. an evaluation of proposals, and 4. the selection of the successful contractor.
The above steps are mainly followed during the evaluation of the proposals or bids received from the contractors in terms of technical as well as execution and commercial issues. These steps are essential in identifying a licensor technically and commercially competent enough as per the client’s requirement.
The following sections briefly describe and explain these steps for the technology selection.
1) Invitation to Contractors
The invitation to contractors requires a technical documentation that should give a clear picture of the project. This is the first step to be evolved to ignite the engine of this project.
The invitation includes project specifications, technical requirements, site conditions, execution instructions, and other relevant documents of the new industrial project.
It should be noted that standards and specifications of clients are the most essential and basic documents for a new project. All requirements, terms, and standards of a client are defined and specified in these documents. They set the scope for the contractor to bid. These documents form the basis by which the client will evaluate various bids of the contractors, so that the best bid satisfying the client’s requirements can be selected.
2) Submission of Proposals
The project proposal provides a detailed description of the design basics and scope of the proposed facilities. It also provides a ground for establishing a clear understanding and basis for building a firm agreement between the client and the contractor.
Contractors interested in responding to the invitation of the bid, should prepare their bids or proposals, both in terms of technical specification and execution details, in compliance with client’s requirements as defined in the invitation of the bids. They should also present, within a stipulated time, the execution proposal which should reflect the project execution strategy proposed by the client—also defined in the project execution plan mentioned earlier. However, contractors can also be encouraged to propose alternatives, if any, for client’s evaluation and consideration.
The time for submission is usually defined and stated by the client for all contractors bidding on the project. In addition, the proposals submitted by contractors should be in line with the contract approach selected by the client for the industrial project.
3) Evaluation of Proposals
After receipt of the detailed bids from all the contractors by the closing date, the client has to compare the various bids obtained and evaluate them. This is the most essential step in the technology selection phase in which the client and PMC (if applicable) make thorough and detailed evaluation of the proposals from technical, execution, and commercial point of view.
Each contractor who responds to the invitation should include in the bid detailed technical and engineering capabilities, and the contractor’s business and financial standings. The bid should also describe the features and benefits of the contractor’s process design and latest developments in achieving an optimum design.
At times, not all contractors can fully understand and comply with all project scope and specifications given by the client, so contractors, as well as the client, usually seek for clarifications throughout the bidding phase until the closing date. Sometimes both arrange for clarification meetings in technical and execution related matters to resolve and reach alignment between the two parties.
PROJECT EXECUTION
As a convention, the contractor, as per the mutually agreed terms and conditions with the client, should comply with client’s requirements and the project scope. The contractor’s execution proposal should include detailed description of the common project management elements including, but not limited to, project execution plan for engineering, procurement and construction related activities, manpower assigned to the project, project controls, project schedule, communications plan, quality control and quality assurance, etc. In addition, the contractor should have safely and successfully executed major previous projects in the field and have a thorough knowledge of the local market and conditions.
In view of the primary objectives of efficient and reliable technology, schedule, quality and safety being stressed by the client, a contractor’s approach to a new industrial project should always ensure that construction and commissioning considerations are incorporated in the execution proposal. Various stages in the execution of large industrial projects require extensive planning, organization, and control. Essential elements of an industrial project such as relevant experience, project execution plan, engineering, procurement, construction, turnover, Health Safety and Environment (HSE), risk management, etc., should be well-addressed in the contactor’s execution proposal. To facilitate better understanding by the reader, these essential elements are discussed in the following paragraphs.
Relevant experience The contractor’s or licensor’s experience is reflected by providing a list of their client references for the client to contact and obtain feedback, if necessary, from operating companies who are utilizing the proposed technology for production of the required products. The contractor’s experience is required in all facets of the project phases, to ensure a safe, reliable, and profitable plant, capable of achieving the lowest life cycle costs.
Project Execution Plan The project execution plan defines the objectives, requirements, actions, and related information necessary for optimum project execution. It also defines the methods and project management elements to manage project execution. It establishes the execution philosophy and defines the organization, work processes, and systems necessary for management of the project. It is used to help ensure that the project will be completed in a timely and efficient manner, and that the project deliverables—the facilities designed and constructed—will satisfy client requirements per the prime contract. A project progresses step–by-step through several phases of planning and execution. This systematic execution approach requires the project to move from one phase to another with a steady pace, indexed to well-defined documentation. Projects with a high degree of methodical development and systematic execution processes, in short adherence to disciplines and attention to details, can always lead to a successful project.
Engineering, Procurement and Construction (EPC) Engineering work performed by the contractor on the industrial project should make full use of the contractor team's engineering knowledge and experience to reduce costs and improve quality, safety, and the project schedule.
Normally, an engineering stage is combined with the procurement and construction stages. The first part of an engineering stage is the process design, which involves verification of the front-end engineering (FEED) and basic design work, followed by the detailed design. The detailed design overlaps with the procurement work, which continues through coordination with vendor’s work and throughout the stage of construction.
Therefore, the engineering stage starts from the initial design work and vendor follow-up, through starting of the field activities and mechanical completion. In practice, contractor’s designing also includes bulk material procurement including engineering design for the construction, besides the itemized equipment.
The engineering work can be broadly defined as: process design, basic engineering, and detailed engineering.
A process flow diagrams (PFDs) and associated heat and material balances are essentially fixed during the process design and basic engineering phase. This forms the foundation of detailed engineering. In the process design/basic engineering phase, preliminary piping and instrumentation diagrams (P&IDs) are developed for all plant units. In the detailed engineering design phase, all the engineering deliverables, such as as-built design drawings, mechanical designs involving equipment, and layout and stress analysis of all piping systems, are finalized.
Generally, in detailed engineering, the design documents are prepared by combining the process and mechanical design data, and they are reviewed for approval by client or the PMC, per project specifications. These design documents form the basis for issuance of purchase enquiries for plant equipment issued to the qualified vendors.
A procurement group is normally responsible for purchase and delivery of material to the location of the industrial project. Sometimes subcontracts are awarded for the supply of bulk material—for example, materials for pipe support, concrete, etc.—and for various construction subcontracts and field work packages.
Turnover The contractor should comply, per the project specifications, with the turnover sequence of the individual systems and units of the industrial plant. This will help assure a safe and smooth turnover of the industrial plant.
Commissioning The step of commissioning can be ensured only if each phase in the sequence is executed as per the plan. Since each phase overlaps with others, any distortion could disturb the whole sequence.
Therefore, the contractor will have to ensure a smooth shift from the initial engineering design phase to construction followed by commissioning and startup of the project until the final plant performance test is carried out. An essential prerequisite is the assurance of offsite systems and utilities supply, which enables pressure-testing, system flushing, etc.
Risk Management A risk management tool is an essential component to be provided to the client. It enhances the confidence levels for both the client and contractor regarding the execution and implementation of the industrial project.
The contractor should therefore carry out a risk assessment study specifically dealing with health, safety, and environment (impact and/or damage) issues; schedule; quality; engineering (design, technical, and technology); procurement and supply (equipment, materials, and contractual); construction and installation (labor, equipment, and erection); commissioning and testing; start-up; performance; and reliability testing. The study should then be documented and accompanied by a risk management tool, following the project requirements.
Safety, Health, and Environment
The client will have to comply with all applicable laws and relevant industry standards of practice concerning protection of health and safety of its employees in the work place and other persons affected by its business activities as well as and the prevention of environmental pollution. Protection of health and safety, and the prevention of pollution to the environment shall be a primary goal of the client.
Therefore the contractor should define and implement proven standards and processes that define responsibilities, activities, and methods for assuring and controlling safety during planning, start-up, and execution phases. The contractor should be able to identify critical safety behaviors as well as potential risks and hazards to reduce accidents, injuries, illnesses, and environmental incidents.
The evaluation and comparison of various bids received becomes easy for the client if the contractor and his team have fully understood the various execution elements described above. Based on these understandings the final execution recommendations can be made.
In the next part of this series, we will discuss the technical aspects involved in this phase.
