Great Taste, Less Filling PDRI Small Industrial Projects (PDRI-SIP) Brad Lynch, TransCanada Project Definition Rating Index for Small Industrial Projects

“Lead the Performance Revolution” We know that project teams want and need effective and easy to use tools to LEAD “their” Performance Revolution. PDRI tools provide more certainty in project cost and schedule outcomes while helping the team reduce risk. We believe that we have the best product supporting the conference theme here in Boston.

Questions about small industrial projects to ponder? Do you have a definition for a small project in your organization? Do you have a large number of small projects? Are your small projects commonly over budget? Are your small projects commonly behind schedule? Does the current industrial PDRI meet your assessment needs for your small projects? We want you to consider THESE questions about small projects within your organization. PAUSE 5 SECONDS Our research has confirmed that companies do have a large number of smaller projects and this number is growing, moreover cost and schedule over runs are fairly common. CII addressed these issues by convening our research team to develop an assessment tool directed toward smaller projects.

What was our Task? To produce an effective, simple, and easy-to-use scope definition tool for small industrial projects. So what was the task of this research team? We wanted to ensure that we complemented the existing PDRI tools without reinventing the wheel. The tool had to be easy to use and be able to quantitatively measure the level of scope definition at different stages in the planning process. AND the tool must provide a comprehensive checklist and action plan to address planning gaps.

Who are the Members of Research Team 314? Jeffrey Allen - Burns & McDonnell Jere Brubaker - Wood Group Mustang David Buttrum - Technip Thea Cummings - AB InBev Wesley Dubois - SABIC Innovative Plastics Gregory Duffy - Pioneer Natural Resources John Fish - Ford, Bacon & Davis Doug Helmann - Architect of the Capitol Paul Katers - American Transmission Company Stephanie Quinn - Pioneer Natural Resources Brett Smedley - Eli Lilly and Company David Sonntag - DTE Energy Graham Targett - Irving Oil Refining William Thornton - Hargrove Engineers + Constructors G. Edward Gibson, Jr. - Arizona State University Kristen Parrish - Arizona State University Brad Lynch – TransCanada (Owner Co-Chair) Scott Penrod – Walbridge (Contractor Co-Chair) Amy Busse* - Air Products Don Cooley* - Retired (CH2MHill) Arno Jansen* - CCC Group Julia Speed* - Audubon Engineering Student: Wesley Collins - Arizona State University * Contributors who have left the team Our research team was formed in May 2013. Our team represents world leading Owner and Contractor organizations in the industry. More specifically, our team members are experienced professionals with a heavy focus on Industrial type projects.

What Is the PDRI? An acronym An index A risk management tool Project Definition Rating Index An index Score along a continuum representing the level of scope definition A risk management tool Identify—score sheet and descriptions Measure—scoring mechanism Mitigate—action items Lets start with the basics for those not familiar with PDRI .   The PDRI was developed to help project teams understand and take action on issues of importance in front end planning. The tool helps the team identify the issues that require attention to achieve project success. In reality, the PDRI is best used as an in-progress risk management tool during the front-end planning phase of a project. It facilitates dialog and alignment among project team members…… In effect it gets all team members nodding (NOD HEAD IN A YES MOTION) in the same direction regarding project scope definition.

PDRI Suite of Tools Small Industrial 2015 Industrial 1996 Building 1999 Infrastructure 2010 PDRI Suite of Tools Small Industrial 2015 Over the last 20 years four PDRI tools have been developed; The PDRI Industrial is used to assess generation facilities, chemical processing facilities, tank farms or paper mills The PDRI Building is used to assess hospitals, schools, office towers or hotels and the PDRI Infrastructure is used to assess highways, electrical transmission lines, pipelines or gas distribution systems, CLICK FOR TRANSITION These efforts culminate with the PDRI Small Industrial Projects in 2015. The PDRI Small Industrial projects is used to assess smaller industrial projects with less expenditure and less complexity….continuing the same GREAT TASTE of the other tools.

PDRI Development Process Develop definition for Small Industrial Projects Developed score sheet and descriptions Weighted the elements using workshops Tested on actual projects Produced publications In developing the PDRI SIP we followed a similar path to previous PDRI research teams. First we had to clearly define what an small industrial project is to set our research boundaries. Using PDRI Industrial as a baseline, our team created a detailed list of elements required to fully define the scope of a small Industrial Project. We organized these elements into categories and sections to create the basis of the Score Sheet. We then conducted a series of workshops engaging 65 participants to: Test the element descriptions Weight the elements and Ensure that the descriptions were applicable to all types of small Industrial projects. Next we tested our tool on 54 real projects And finally we produced the publications and tool which is now available for download Come to the Implementation session and we can share details on these development activities.

What is unique about small projects? No widely accepted definition of “small industrial project” Dependent on the company’s context and criteria Small projects are different: - Sensitive to change - Funding approval - Fewer stakeholders - Project member expertise - Part-time workforce - Interfaces important - Shorter in duration and less costly To develop a definition for small projects we conducted a survey of 90 participants from 39 companies and found that there wasn’t a widely accepted definition of “small”. Even a previous CII research team in 1991 was challenged with a definition and concluded that (WAIT FOR IT……) “a small project was not a large project” We found that Small Projects ARE different in a number of ways, for instance: changes have a greater impact on cost and schedule, Many small industrial projects are brownfield so interfaces to the existing facilities are important, Though shorter in duration and less costly the combined number of projects has a large impact on the organization We will discuss these and others in our Implementation session

Selection Guide – which one to use? 100 Range of Possible Scores Total Installed Cost Construction Duration Level of Funding Approval Visibility to Owner Management Number of Core Team Members Availability of Core Team Members Extent of Permitting Types of Permits Necessary Number of Separate Trade Contractors Magnitude of Project Complexity Indicators High Low 45 55 Refer to Table PDRI Industrial Projects Small Since there is no single definition of “small” we developed a Selection Guide to determine which PDRI to use….PDRI Small Industrial or PDRI Industrial. With this guide each company has the opportunity to define which tool is best to use for their projects. The Project Complexity Indicators and the use of the Selection Guide will be discussed further in the Implementation Sessions

Overlapping project activities for FEP PDRI-Early Feasibility PDRI-Final Concept Detailed Scope Design, Procurement, and Construction Our research concluded that small projects had a more concurrent approach to front end planning as indicated in the diagram. We recommend that the tool be used one or two times during the front end planning phase to measure progress in the scope definition as shown on the diagram The assessments should be facilitated by a third party to improve consistency. Note that project assessments using the PDRI Industrial Projects takes 2-5 hours while using PDRI SIP should take 60-90 minutes. It truly is “Less Filling” Front End Planning

Revised Focus, Fewer Elements, Shorter Duration Basis of Project Decision Basis of Design Execution Approach PDRI Industrial Projects (70 Elements) Evaluation Time 60 to 90 minutes Evaluation Time 2 to 5 hours PDRI for Small Industrial Projects (41 Elements) Same Great Taste, Less Filling! For those of you who are familiar with the PDRI Industrial, there is a different focus in the PDRI Small Industrial. All of the sections are shorter with fewer elements. The Basis of Decision section has a lower weighting because these small projects are typically given to the project team, as opposed to having them develop the rationale as part of the project. An example of this is where a maintenance program is developed by an asset management group The Execution Approach Sections has a significantly higher weighting than in PDRI Industrial. Our research shows that more emphasis should be on execution since the bulk of these costs and activities are more important in smaller projects.

Understanding PDRI Scores 1000 Points (Undefined) 70 Points (Fully Defined) The PDRI is like golf: the lower the score or rating the better defined your project is. The PDRI scoring process for the project will yield a range from a maximum of 1000 points, essentially we know nothing about the project, down to a minimum of 70 points, where all elements are fully defined. In evaluating your project you should be striving for an appropriate score or rating that is indicative of how well defined your project is at that point.

Comparison of Small Industrial Projects with scores below and above 300 Performance PDRI Score <300 PDRI Score >300 Difference Cost -2% +14% +16 Schedule +7% +22% +15 Sub-Sample Size 24 16 For those of you familiar with the existing three PDRI tools you know that “Par” or an appropriate level of definition is around 200. On the PDRI Small industrial golf course, our research shows that “Par” is 300 We evaluated a total of 40 completed projects with our new tool representing about $151 million dollars in investment CLICK FOR TRANSITION We compared projects with a PDRI score below 300 to those above 300 at the end of front end planning and found that projects with the lower score on average performed 16% better in terms of cost and 15 % better in terms of schedule, with cost being statistically significant. Do you want 16% better cost results on your project? Then come to our Implementation Sessions and find out how!

Come to our Implementation Sessions Moderator: Scott Penrod Walbridge Panelists: Dave Sonntag DTE Energy Kristen Parrish Arizona State University Doug Helmann Architect of the Capitol Brett Smedley Eli Lilly and Company Thea Cummings AB InBev Still pondering the questions I asked at the start of this session? We will have a panel of highly qualified industry professionals that will provide more details on the development of the PDRI Small Industrial Projects, how the tool is used, how to score or assess and how to implement it in your organization. As well you will hear testimonials from organizations that have already used the tool. Of course there will be time for questions and we will be handing out a trifold information sheet and thumb drive with the new tool and documents. For those of you who can’t find space in the room during our Implementation Sessions, come to our booth in the display area where you take a “SIP” of the newest PDRI.