Practical risk management for EPC/design-build projects : manage risks effectively - stop the losses / txt
by Walter A. Salmon FRICS MAPM MACostE.
- First edition.
- xix, 299 pages ; 25 cm. book
Includes index.
1 Introduction -- 1.1 The Book's Focus and Objectives -- 1.2 The Book's Content and Structure -- 1.3 Generality of Contractual Advice Given -- 1.4 Common Elements for Construction Projects -- 2 Construction Project Implementation Routes -- 2.1 Different Approaches -- 2.2 Traditional Contracting Approach -- 2.2.1 Design Team's Appointment and Role -- 2.2.2 Employer's Participation -- 2.2.3 Contractor's Role and Responsibilities -- 2.2.4 Traditional Approach Advantages -- 2.2.5 Traditional Approach Disadvantages -- 2.3 Design-Build Approach -- 2.4 EPC Approach -- 2.4.1 EPC Project Suitability -- 2.4.2 Contractor's Obligations -- 2.4.3 Employer's Participation -- 2.4.4 Standard EPC Contracts Available -- 2.4.5 General Notes of Interest -- 2.5 EPCM Approach -- 2.6 Employers Prefer Lump-Sum Contracts -- 2.7 Fixed-Price Lump-Sum Contracts -- 2.8 Selecting the EPC Contractor -- 3 EPC Project Risk Management Overview -- 3.1 Project Risk Management - Definition -- 3.2 Construction Project Hazards Abound -- 3.3 Importance of Project Risk Management -- 3.4 Corporate Risks Versus Project Risks -- 3.5 Greater Risks for EPC Contractors -- 3.6 Principal Disaster Areas on EPC Projects -- 3.7 Maintaining the Project Schedule -- 3.8 Departmental Interface Issues -- 3.8.1 Rework -- 3.8.2 Delayed Technical Bid Evaluations -- 3.8.3 Late Mobilisation of Procurement Team - 3.8.4 Red-Line Drawings Left Too Late -- 3.9 Forging an Integrated Implementation Team -- 3.10 Allocating Responsibility for Handling Risks -- 4 EPC Project Pre-Implementation Problems -- 4.1 Bidding Process Pitfalls -- 4.2 Failure to Embrace Lessons Learnt -- 4.3 Failure to Understand Contract Terms -- 4.4 Qualifications, Deviations and Exceptions List -- 4.5 False Management Resourcing Plan -- 4.6 Underestimating the Costs -- 4.7 Conceptual Design Bid Pricing Problems -- 4.8 Agreeing to Inadequate Completion Time -- 4.9 Reliance on Employer's Information/Data -- 4.10 Late Approval of CDVR - 4.11 Gateway Between FEED and Detailed Design -- 4.12 Extended Review Period for Deliverables -- 4.13 Objecting to Impractical Review Process -- 4.14 Underestimating Equipment Procurement Packages -- 4.15 Rejection of Country of Origin -- 4.16 Responsibility for Governmental Problems -- 4.17 Performance Bond Early Submission -- 4.18 Requirement for On-Demand Bonds -- 4.19 Import Duty Responsibilities -- 4.20 Local Content Obligations Downplayed -- 4.21 Contractor's Bid Modifications Ignored -- 4.22 Relying on Carrots -- 4.23 Square Pegs and Round Holes -- 4.24 Failure to Check the Margin -- 5 Overseas EPC Project Preparatory Work -- 5.1 Critical Path Identification -- 5.2 Setting Up Contractor's Administrative Systems -- 5.3 Determining Appropriate Management Structure -- 6 Project Roles, Functions and Responsibilities -- 6.1 The Project Management Consultant -- 6.1.1 Primary Functions -- 6.1.2 PMC's Duty and Loyalty is to Employer -- 6.1.3 PMC's Different Take on Time -- 6.1.4 Employer's Direct Personnel in Lieu of PMC -- 6.2 The Board of Directors -- 6.2.1 Primary Functions -- 6.2.2 Ethical Compliance Responsibilities -- 6.2.3 Shop Floor Compliance Problems -- 6.2.4 Corporate Directives for Limiting Compliance Transgressions -- 6.2.5 Speeding Up Financial Decision-Making -- 6.2.6 Ensuring Veracity of Reporting -- 6.3 The Project Director -- 6.3.1 Standing of Project Director -- 6.3.2 PD's Functions and Responsibilities -- 6.3.3 Good Communication and Quality Reporting -- 6.3.4 Importance of a Good PD -- 6.4 The Project Manager -- 6.4.1 Primary Functions -- 6.4.2 PM's Reporting Duties -- 6.4.3 Preparation of Project Execution Plan -- 6.4.4 PM's Responsibility for Risk Management -- 6.4.5 PM's Key Considerations for Minimising Risks -- 6.4.5.1 Identifying and Managing the Project's Major Risks -- 6.4.5.2 Helping to Develop the Project Execution Plan -- 6.4.5.3 Organising, Monitoring and Controlling the Project's Resources -- 6.4.5.4 Ensuring Safe Working at All Times -- 6.4.5.5 Directing and Monitoring the Project's Management Staff -- 6.4.5.6 Monitoring and Reporting on the Project's Actual Progress -- 6.4.5.7 Developing/Implementing Appropriate Plans to Redress Delays -- 6.4.5.8 Completing within the Agreed Time-Frame -- 6.4.5.9 Delivering the Expected Quality of Finished Product -- 6.4.5.10 Completing within the Approved Budget -- 6.4.6 PM's Preferred Communication Style -- 6.5 The Project Controls Manager -- 6.5.1 Range of Functions May Vary -- 6.5.2 PCM's Primary Functions in the Wider Role -- 6.5.3 Importance of the PCM's Reporting -- 6.5.4 Overloading the PCM's Responsibilities -- 6.6 The Project Controls Department -- 6.6.1 The Department's Objectives -- 6.6.2 Planning and Controls Explained -- 6.6.3 PCD's Planning and Controls in Practice -- 6.7 The Planning/Scheduling Team -- 6.7.1 Unrealistically Short Project Schedules -- 6.7.2 Importance of a Sound Project Schedule -- 6.7.3 The Project Schedule's Owner -- 6.7.4 Managers Must Embrace the Project Schedule -- 6.7.5 Compiling the Work Breakdown Structure -- 6.7.6 Determining the Planning Strategy -- 6.7.7 Finalising the Baseline Project Schedule - 6.7.8 Schedules Beyond the Project Schedule -- 6.7.9 Major Risks for the Planning Manager -- 6.7.10 Retrospective Compilation of Project Schedule -- 6.8 The Engineering Manager 1256.8.1 Primary Responsibilities -- 6.8.2 The Engineering Department's Customers -- 6.8.3 Key Preparatory Activities for Engineering Work -- 6.8.4 Primary Risks for Engineering Work Activities -- 6.8.4.1 Late Delivery of Engineering Documentation -- 6.8.4.2 Gradual Scope Creep -- 6.8.4.3 Inadequate Monitoring of Engineering Subcontractors -- 6.8.4.4 Disruption of Information Management Tasks -- 6.8.4.5 Failure to Rationalise the Information Management System -- 6.8.4.6 Reliance on Document-focused Progress Reporting -- 6.8.4.7 Problems Caused by Employer's Non-readiness -- 6.9 The Procurement Manager -- 6.9.1 Primary Responsibilities -- 6.9.2 The Procurement Department's Prime Customer -- 6.9.3 Deciding Equipment/Deliverables Delivery Dates -- 6.9.4 Considerations for Long-Lead Items -- 6.9.5 Late Engineering Deliverables -- 6.9.6 Risk of Corruption Occurring -- 6.9.7 Tracking Manufacturing and Delivery Status -- 6.9.8 Effective Use of Expediters -- 6.9.9 Avoiding Delays from Employer's Side -- 6.9.10 Due Diligence on Vendors and Subcontractors -- 6.9.11 In-Country Services Problems -- 6.9.12 Customs Clearance Problems -- 6.9.13 Reducing the Risks of Non-Performing Service Providers -- 6.9.14 Obtaining All Available Discounts -- 6.9.15 Arranging On-Site Support Services -- 6.9.16 Ordering More Spares than Necessary -- 6.10 The Expediting/Logistics Manager -- 6.10.1 Primary Responsibilities -- 6.10.2 The Expediter's Role-- 6.10.3 Where Vendors Can Fai-- 6.10.4 Spare Parts Documentation -- 6.10.5 The Logistics Support Activities -- 6.11 The Construction Manager -- 6.11.1 Principal Function and Responsibilities -- 6.11.2 Working Quickly, Effectively and Safely -- 6.11.3 Poor Quality Work Delays Pre-Commissioning -- 6.11.4 Implementation Pitfalls -- 6.11.4.1 Not Following the Project Schedule -- 6.11.4.2 Not Holding Regular Formal Meetings -- 6.11.4.3 Not Preparing for Mobilisation Adequately -- 6.11.4.4 Not Making Surprise Work Area Visits -- 6.11.4.5 Not Holding Job Performers Accountable -- 6.11.4.6 Not Documenting Changes Adequately -- 6.11.4.7 Not Limiting Authority for Managing Resources -- 6.11.4.8 Not Assessing Productivity Properly -- 6.11.4.9 Not Progressing Completion Certification Adequately -- 6.11.5 Subcontracting Risks 1566.11.6 Permit to Work Compliance -- 6.11.7 Delay Risks Caused by Suppliers 1586.11.8 Controlling Wastage -- 6.12 The Commissioning Manager 1606.12.1 Primary Responsibilities -- 6.12.2 Major Risks -- 6.12.2.1 Spare Parts Availability -- 6.12.2.2 Commissioning Safely -- 6.12.2.3 Commissioning Equipment Jointly with the Employer's Team -- 6.12.3 Emergency Vehicles Requirements -- 6.13 The Operational Readiness Manager -- 6.13.1 Primary Function -- 6.13.2 Reliance on the Information Management Team -- 6.13.3 Inputs from the Operational Readiness Manager -- 6.13.4 Lack of Operational Readiness Information from Others -- 6.13.5 Operational Readiness Documentation Focus -- 6.13.6 Employer Pressure to Improve Facilities -- 6.14 The QA/QC Manager 1656.14.1 Quality Assurance Versus Quality Control -- 6.14.2 QA/QC Manager's Primary Responsibilities -- 6.14.3 Main Risks for QA/QC Manager -- 6.14.4 Avoiding Quality Assurance Risks -- 6.14.5 Reducing Quality Control Risks on the Site -- 6.14.6 Reducing Vendor Quality Control Risks -- 6.15 The HSE Manager -- 6.15.1 Importance of HSE Inputs from Everybody -- 6.15.2 Primary Responsibilities 1686.15.3 Safety Provisions and Training -- 6.15.4 Enforcing HSE Rules to Prevent Accidents -- 6.15.5 Motivating On-Site HSE Officers -- 6.15.6 Off-Site HSE Incidents -- 6.15.7 Safety Moment Chats -- 6.16 The Camp Boss -- 6.16.1 Primary Responsibilities -- 6.16.2 Major Risks -- 6.17 The Project Information Manager -- 6.17.1 Importance of Information Management -- 6.17.2 Information Overview -- 6.17.3 Electronic Document Management Systems -- 6.17.4 PIM Role and Primary Responsibilities -- 6.17.5 Major Risks for the PIM -- 6.17.6 Dedicated Data Inputters -- 6.17.7 Information Management Support Personnel -- 6.18 The Document Control Manager -- 6.18.1 Standardised Document Management System -- 6.18.2 Controlling Communications -- 6.18.3 Vetting Documents Before Issuing --- 6.18.4 Restricting Email Usage -- 6.18.5 Benefits of a Standard Documents Library -- 6.19 The Information Technology Manager -- 6.19.1 IT System Security -- 6.19.2 Backing Up Work from Personal Computers -- 6.19.3 Ensuring Integrity of Computerised Data -- 6.19.4 Reducing Contractor's Software Costs -- 6.20 The Interface Manager -- 6.20.1 Primary Function and Responsibilities -- 6.20.2 Interface Management Plan -- 6.20.3 External and Internal Interfaces Explained -- 6.20.4 Identifying/Locating Interfaces -- 6.20.5 Interface Slip-Ups -- 6.20.6 Closing Interface Activities is Hard Work -- 6.21 The Contract Administration Team -- 6.21.1 Determining the Compilation of the Team -- 6.21.2 The Project Contract Manager -- 6.21.3 The Contract Administration Manager -- 6.21.4 The Subcontracts Manager -- 6.21.5 Compiling the Contract Summary -- 6.21.6 Identifying Risk Exposure -- 6.21.7 Importance of Keeping Records -- 6.21.8 Risk of Collusion in Measurement/Costing Team -- 6.21.9 Facilitation Role of the Contract Administration Team -- 6.21.10 Illusory Claims -- 6.22 The Human Resources Manager -- 6.22.1 Primary Responsibilities -- 6.22.2 Becoming the Employer of Choice -- 6.22.3 Recruitment Issues -- 6.22.4 Emergency Replacement for Key Personnel -- 6.23 The Administration Department -- 6.23.1 Primary Responsibilities -- 6.23.2 Providing Back-Up Support to Site Quickly -- 6.24 The Financial Management Team -- 6.24.1 Primary Responsibilities of Finance Manager -- 6.24.2 The Budget Controller -- 6.24.3 Controlling Purchases -- 6.24.4 Keeping Track of Expenditure -- 6.25 The Compliance Team -- 6.26 The Legal Department -- 6.26.1 Utilising External Legal Team 2-- Venture Versus Consortium -- 7.2 JV Considerations -- 7.3 Setting Up a JV Steering Committee -- 7.4 Objectives of JV Steering Committee -- 7.5 JV Members are Partners -- 8 Claims Management Risks and Problems -- 8.1 Relying on Claims to Achieve Profitability -- 8.2 Factors Legislating Against a Claim's Success -- 8.3 Key Ingredients for Worthwhile Claims -- 8.4 Proving Excusable Delay -- 8.5 Key Components of Successful Claims -- 9 Identifying Hazards and Managing the Risks -- 9.1 Introduction -- 9.2 Potential Hazards for Construction Projects -- 9.3 Responsibility for Project Risk Assessment -- 9.4 Identifying and Managing Project Risks -- 9.5 Project Main Risks Register -- 9.6 Risk Assessment Team Inputs -- 9.7 Relative Risk Factor Assessment -- 9.8 Risks Arising from Safety Studies -- 9.9 Dealing with Safety Risks to On-Site Personnel -- 9.10 Dealing with Health Matters for On-Site Personnel -- 9.11 Dealing with Risks to the Environment -- Figure 6.1 Interfaces for EPC Project's Departments and Teams -- Attachment A Matrix of Project Risk Areas and Corresponding Risk Management Solutions -- Attachment B Matrix of Prime Risk Considerations, Impacts & Consequences -- Attachment C Example Project Main Risks Register -- Attachment D Steps in Task Risk Assessment -- Attachment E Task Hazard Assessment Worksheet -- Appendix A Abbreviations and Acronyms -- Appendix B Glossary -- Appendix C EPC Project Management Team Organisation Structure -- Appendix D EPC Project Departmental Organisation Structure --
"The idea for me to write this book came about from the many questions I received from colleagues when I was assisting Project Managers in the compilation and updating of the Risks Registers for the primary risks particular to their Engineering, Procurement & Construction (EPC) Projects. At the same time, I was often involved in chairing the Risk Management Meetings on behalf of those Project Managers, and then following up the required actions with my colleagues. My participation in those tasks came about despite my principal role having been to undertake the contract administration functions for the mega EPC Projects I had been allocated to. This was simply because most other managers seemed to believe that risk management was more suited to my line of work than theirs. In the course of undertaking those tasks, some of my co-workers from whom input was required told me that the concept of risk management was a mystery to them, and it was therefore a subject that they shied away from. I had a fair degree of sympathy for them, largely because, when I first embarked on studying the subject of project risk management in the mid 1980's (as part of a project management course I was undertaking in pre-Internet days), I was overwhelmed by the almost pure academic treatment of the subject (as compared to the practical application I had been looking for). Sadly, I find that this is still the case today, as researching on the Internet would soon reveal"--