Types of Projects – Excerpts from Vol II Ch 26Mihir
26.1 PROJECT STAGES:
A process engineer should be aware of the various stages (table 26.1) that a project can undergo. It is not necessary for all projects to pass through each and every of below mentioned stages, however, it is important to understand significance of each. It is to be specifically noted that there is a purpose behind each stage of any project. Few examples would illustrate this better.
Example (25-1): Example of a new mega greenfield project:
Suppose a major international corporation intends to put up a new mega greenfield petrochemicals complex catering to various chemicals production. Such a company will find it very beneficial to go through the various stages as listed in table 26.1 below, to obtain concrete evidence that the project envisaged is a winner.
- First, it will proceed with ACCESS stage where it may undergo the study with its own staff or employ a specialist third party to carry out the project feasibility and confirmation of alignment with its business strategy. It will also obtain the full picture of various licensors providing technologies for each chemical, their pro-cons in technology, as well as the potential buyer’s database.
- Secondly, once it is satisfied with viability of project, it will go one step further into SELECT phase (also called Pre-FEED stage), where having selected the suitable technologies for each chemical, it will most likely, engage a specialist third party, to refine the engineering to include not only licensed units but also the offsites and utilities (O&U) definition which should lead to a rough order of magnitude (ROM) costing of project (+/- 30% costing approximately) as well as the profitability of project and return on investment. During the ROM costing, budgetary quotes are obtained for many major equipment and suitable judgmental factors are taken for many items like cabling, piping, instrumentation, insulation, overheads based on equipment costs. This stage will facilitate it to plan the budget / resources it would require to put up such a project, having in hand most probably the report approved by the board of directors as a gated exercise.
- Having been satisfied with SELECT phase project report, the company will proceed to next stage i.e. DEFINE stage (also called FEED).
In DEFINE stage, each unit licensor are engaged to provide their basic engineering design packages (BEDP) and an engineering company is hired, to carry out FEED engineering (Front End Engineering Design) of complete project incorporating information from BEDP of each licensed unit and its own engineering effort in offsites and utilities (O&U).
List of FEED deliverables is listed in Volume II, chapter 28 for all disciplines involved in engineering. In FEED, actual quotations are obtained for most equipment including electrical / instrumentation equipment (like panels), material take-offs (MTOs) generated for piping, insulation, instrumentation, cables, civil materials, safety equipment/systems, etc. and quotations obtained for these. Similarly, quotations are obtained from erection contractors for all disciplines. Costs are also obtained for site related infrastructure like temporary DG set, temporary porta cabins at site, labor camps, etc.
All of these provide the company with detailed engineering documentation which leads to cost estimate of +/- 10% accuracy, definition of total project scope as well as schedule of project. Note that although our example is for greenfield project, in the case of a brownfield project, it also gets clear idea of demolition scope as well as risk involved in construction of new facilities next to a running plant (SIMOPS study).
The FEED report is extremely useful to company to line up resources for project funding. It is also useful for it to create a scope of work (SOW) for next stage of project which is the implementation stage (EXECUTE stage).
Many a times, in FEED, the company insists on the engineering firm to identify the LLI’s (long lead items- e.g. incinerator which can have delivery of 12 months), obtain detailed quotes from vendors and have TBE (technical bid evaluation) ready for such LLI’s so that at start of EXECUTE phase, order can be placed on such LLIs to ensure actual project implementation can be completed fast.
Table 25-1: Overview of Stages of a Project
|Sr No.||STAGES OF PROJECT||DEFINITION of STAGE|
|I||ASSESS||Determine project feasibility and alignment with business strategy|
|II||SELECT||Select preferred project option (s) incorporating pre-DEFINE Engineering|
|III||DEFINE||Finalize project scope, cost, and schedule and get project funding|
|IV||EXECUTE||Produce an operating asset consistent with scope, cost, and schedule incorporating EPC and commissioning|
|V||OPERATE||Evaluate asset to ensure performance to specification and maximum return to stakeholders.|
In EXECUTE phase (also called detail engineering, procurement, construction and commissioning phase), the actual implementation of the project takes place. Here, the company has much flexibility on the project contract to be placed on contractors who will carry out the further project implementation work. These are defined in point 2. Once it firms up the contract type, it floats an ITB in the market (invitation to bid), obtains bids from selected bidders on one of which order is placed for EXECUTE phase. Refer Volume II, Chapter 28 for engineering deliverables as normally prepared by contractors in EXECUTE phase.
In addition to contractor, the company has also many responsibilities in this phase namely, providing cash flow for procurement, supervising / reviewing of contractors work, ensuring schedule is on correct path, tying up with external utility suppliers (e.g. fuel gas from Saudi Aramco gas line supply if project is in KSA) as well as tying up with parties who will take away company generated wastes, interviewing / hiring of operations staff, training to be provided for technical staff from licensors, etc.