OWN-1042: Owners - What to Look For in a Contractors Project Control Capability Stephen L. Cabano and Paul G. Williams

2 Biography- Stephen L. Cabano Degrees: –BS - Mechanical Engineering, Villanova University Years of Experience/Professional Field: –More than 25 years direct project management experience for owner and government clients in the Petroleum, Petrochemical, Chemical, Environmental, Pharmaceutical, Industrial and Commercial industries. –As Project Manager, or team member in large project teams, Mr. Cabano has had the responsibility for costs, planning, scheduling, procurement, and similar project-related services. Title: –President/COO, Pathfinder, LLC Something you may not know: –Avid offshore fisherman

3 Biography- Paul G. Williams Degrees: –MS - Engineering Management, Drexel University –BS - Mechanical Engineering, Pennsylvania State University Credentials: –Licensed Professional Engineer (PE) –Certified Project Management Professional (PMP) Years of Experience/Professional Field: –More than 25 years Project Management and Project Engineering experience working for Owner and Contractor organizations in the Petroleum, Chemical Process, Mining, Pharmaceutical, Biotech, Microelectronics and the Food and Beverage industries. Title: –Vice President, Pathfinder, LLC

4 Introduction

Introduction Trend: Greater Owner reliance on Contractors to provide accurate, timely, and value-added Project Control (PC) information Owners require Contractors to provide periodic PC information to be aware of actual vs. planned performance –Enabling timely corrective actions as necessary –Usually defined prior to contract award Extensive definition is needed of what specific information is to be presented, when, how and in what format –Misinterpretations can occur – sometimes not evident until after project has been awarded/is underway

Introduction (Contd.) PC System requirements vary: –Project to project –One contracting platform to another Owner is most knowledgeable of specific project parameters –Alignment will not occur unless Owner specifies PC requirements –Information should be conveyed in Request For Proposal (RFP) Owner should evaluate Contractors capability to deliver these requirements –Prior to award –Incorporated into final contract

Introduction (Contd.) This paper will convey realistic rules of the road to assure effective Contractor/Owner collaboration/alignment in establishing a PC System –Part 1 – Causes of PC disparity –Part 2 – Basic ground rules for parties to follow Authors have assumed an Oil & Gas industry project executed under a Reimbursable Cost Engineering, Procurement, Construction (EPC) contract –End of Part 2 will also discuss Fixed Price or Lump Sum type contracts

8 Part 1 – The Problem

The Problem Numerous and complex factors contribute to misalignment between Owner expectations and Contractor capabilities –Owners and Contractors have resorted to generalities rather than specifics when addressing important PM features Owners assume that Contractors standard PC System can accommodate Owner requirements –Rather than identifying the relevant/important business, technical and operational control parameters Owner is later disappointed –Unique and specific project requirements cannot be tracked/monitored by Contractors standard PC System –Owners Project Team then scrambles to collect such information/argues with the Contractor rather than jointly developing remedial actions for already identified project performance deviations

10 Contributing Factors to Misalignment

Basic PC Systems scope and reach –PC is often perceived as singular, overall function, failing to recognize its various diverse aspects The Basic Project Control Universe

Contributing Factors to Misalignment (Contd.) Extended PC Systems scope and reach –As scope of Contractors PC function expands beyond Basic level, the need for Owner requirement definition expands as well –Extended PC Systems may include: Materials management & logistics Staffing & resource management Invoicing and cash flow Document control Safety statistics & records Etc.

Contributing Factors to Misalignment (Contd.) Heterogeneous Contractor PC Systems –Most Contractor PC Systems are hybrids/combination of: In-house generated Purchased proprietary software packages –Individual component packages Often use different versions of software packages Are uniquely customized versions of each package Can vary even within a single Contractors multi-office organization

Contributing Factors to Misalignment (Contd.) Integrated Basic Project Control System

Contributing Factors to Misalignment (Contd.) PC System coverage and features – Contractor PC Systems often have differing features. Typical among these are: –Number of performance parameters monitored –Scope and extent of coverage –Degree of integration –Depth of penetration or levels of detail –Data collection & assembly formulation –Element & performance measurement bases –Presentation format & media –Degree of accuracy –Timeliness –Responsiveness –Flexibility –Accessibility –Etc., etc., etc.

Contributing Factors to Misalignment (Contd.) Commercial PC software development –PC software tools have matured significantly over the years into advanced & flexible systems Some features were incorporated at users request and not necessarily to improve application of best practices Many include open architecture designs that could inadvertently alter their intended purpose and skew results

Contributing Factors to Misalignment (Contd.) Differing application philosophy and practices –Contractors tend to develop their own philosophy / application protocols with regard to their PC Systems These will vary and may involve differing integration relationships

Contributing Factors to Misalignment (Contd.) Limited experienced, qualified PC practitioners –May only be a few experienced, highly qualified PC engineers or practitioners within organization who are familiar with both their PC Systems design and capabilities Also need a deep understanding/appreciation of effective PC applications

Contributing Factors to Misalignment (Contd.) Project uniqueness –Most experienced PMs acknowledge that no two capital projects are alike but special characteristics are not fully identified / given appropriate focus until after Contractor is awarded work

20 Part 2 – The Fix

The Fix Establishing & Maintaining an Effective Project-Specific Contractor Project Control System Step 1 – Define project-specific PC needs & capabilities –Owner knows business, technical and operational sensitivities of project Identify what aspects or attributes of project performance should be measured, how, how often, and to what level of detail, etc. Should include, along with the results of Steps 2 and 3, in RFP documents / award contract or its attachments

The Fix (Contd) Establishing & Maintaining an Effective Project-Specific Contractor Project Control System Step 2 – Define monitoring basis –Owner should also define the monitoring basis, format, frequency and penetration cascade/level of detail to be provided

The Fix (Contd) Establishing & Maintaining an Effective Project-Specific Contractor Project Control System Step 3 – Define accuracy/tolerance/sensitivity requirements –Owner needs to indicate desired levels and performance indicators

The Fix (Contd) Establishing & Maintaining an Effective Project-Specific Contractor Project Control System Step 4 – Set up and operate data collection/processing systems – –After award, Contractor (with the assistance of Owner) sets up, populates and operates the elements of Contractors data collection & processing systems –Includes staffing the team with the people recommended in the Contractors proposal and accepted by Owners prequalification team

The Fix (Contd) Establishing & Maintaining an Effective Project-Specific Contractor Project Control System Step 5 – Compare performance against plan –Contractors PC System will collect project performance data on the prescribed frequency, sort it appropriately and compare interval and cumulative performance to date against planned or expected performance –Contractors PC team should be collecting data and providing results in the pre-agreed format at the first report period!

The Fix (Contd) Establishing & Maintaining an Effective Project-Specific Contractor Project Control System Step 6 – Evaluate and recommend remedial actions –Based on results of Step 5, the Contractors PC team will analyze project performance evaluated against expectation and forecast their implications. Should recommended remedial actions - developed in conjunction with Contractors PM staff

The Fix (Contd) Establishing & Maintaining an Effective Project-Specific Contractor Project Control System Step 7 – Reporting –Contractors PC System will issue reports on above results in the format & frequency agreed to with Owner –Status reports should include: All Owner-requested & supplementary information that Contractor believes to be important All relevant supporting details Concise, understandable summary Recommended actions Performance dashboards are helpful

The Fix (Contd) Establishing & Maintaining an Effective Project-Specific Contractor Project Control System Step 8 – Action –Depending on the type of contract - the parties will agree on what remedial actions will be taken and establish the expected consequences

The Fix (Contd) Establishing & Maintaining an Effective Project-Specific Contractor Project Control System Step 9 – Feedback –Based on lessons learned, appropriate adjustments will be made to previous Step activities to improve PC System performance

The Fix (Contd) Establishing & Maintaining an Effective Project-Specific Contractor Project Control System Step 10 – Follow-up –Owner and Contractor management teams will carefully monitor any remedial actions taken to ensure positive impact and corrective effect

The Fix (Contd)

32 Pre-Contract Award Due Diligence

Best way for Owner to convey requirements: –Through written specification defining attribute-by-attribute requirements and type/depth of coverage expected –Can be accompanied by a set of demonstration test case scenarios Can be documented descriptions of situations, with the response format left to the Contractors discretion or Owner-formatted, partially- completed report tabulations Initial results may need more extensive interaction with Contractors who appear to meet specified capabilities

Pre-Contract Award Due Diligence The Owners PC System specification should include: –Preferred reporting formats, diagrams, measurement bases, performance metrics, etc. –PC System operating policies/principles required Contractors do not have to change their standard PC System components, integration design or operations –May cause disorientation to their staff or loss of confidence in system results –Contractor should confirm (pre contract award) that Owners needs can be met within Contractors existing capabilities – with a few mutually-accepted adjustments –Owners may insist on limits/adjustments to certain Contractor PC System protocols in order to avoid misapplication of certain system software flexibility features

35 Other Contracting Platforms

Other contracting platforms might bring certain cost information constraints or restrictions –Owners project-specific PC System specifications should convey and confirm that contending Contractors can comply with the non-restricted PC requirements Fixed Price or Lump Sum type contracts tend to focus on schedule- related capabilities and associated progress/performance measurement Owner PC System specifications should emphasize importance of the Contractor demonstrating its capabilities (System & Personnel) to develop: –Credible schedules - proper logic, proper use of constraints, durations broken down to controllable, measurable levels, accurately & responsively capturing quantities installed –Labor hours consumed –Rates and cumulative earned value physical progress –Etc.

37 Conclusion

Conclusion Due to industrial capital projects becoming larger and more complex, the dilemma regarding compatibility to become even more severe Owners & Contractors must resolve compatibility issues before award of contract There is a trust factor in any Owner/Contractor relationship – trust can be reinforced with clearly articulated PC data In pre-qualifying, qualifying and selecting their Contractors, Owner organizations examine a given Contractors EPC experience, expertise, capabilities and capacities in detail – including the caliber and quality of their systems, processes, procedures, tools and most importantly their people –When it comes to PC, however, this diligence is not usually applied to the same degree

Conclusion (Contd) PC should not be a secondary consideration! –Most Owner RFPs & Contracts relegate details of how the PC function will actually work (& what will actually be provided to the Owner) to post-award deliverables –Not uncommon for Contracts to specify that important PC features are due 60 to 90 days after Contract award Strongly recommend that Contractor PC System capabilities and the quality of the personnel assigned to operate and manage these systems are vetted with equal thoroughness and diligence

40 Question & Answer

Contact Information Stephen Cabano Paul Williams Pathfinder, LLC 11 Allison Drive Cherry Hill, NJ (856) Cherry Hill Calgary Houston Mexico City