Construction Management for Industrial Projects

A Modular Guide for Project Managers

Mohamed A. El-Reedy

• Publisher: Wiley-Scrivener
• Year: 2012
• ISBN:
  9781118107225
• Edition: 1
• Topic: Tecnologia e ingegneria
• Subtopic: Combustibili fossili

This book presents techniques for effective and successful project management across all phases of the project, covering all of the management tools and leadership skills for any industrial project, from the beginning of the project, through the feasibility study, execution, and through to operations and maintenance strategy. This book presents advanced modern tools for use by management and engineers in decision making, and it covers the gap between project management theories of the actual project. All statistical tools and probability distributions are discussed for use in the qualitative risk assessment of the project. The Monte-Carlo simulation technique is presented as a tool for risk assessment in the feasibility study phase and the construction management skills that are required on site to control the different parameters that affect quality, time and cost are discussed. The new concept of the total building commissioning technique will be presented, as well, a new method that is not covered in other volumes.

Moreover, all the methods that are used in the economic analysis and the evaluation between alternatives are illustrated. The planning and scheduling of the project are illustrated by the Critical Path Method (CPM) and the Program Evaluation and Review Technique (PERT). The control of resources and costs are very important issues that are covered in the book, and these provide the main tools for controlling and monitoring the performance of the project. Tendering, bidding and contracting methods are critical issues in any project due to their impact on the project performance and are discussed along with different methods and ways for dealing with these issues worldwide and on international projects. Resources organization and ways for enhancing project performance by controlling individual attitudes are very important issues that are clarified.

Finally, managing project risk is the main tool for a successful project, so all the techniques for risk analysis, assessment and evaluation is presented. This volume is a "one-stop shop" for project and construction management of industrial projects, for engineers, managers, owners, and anyone else working on the project.

Chapter 1

Introduction

Most project management books focus on the management of building projects, such as housing, administration, and commercial building projects. Likewise, most engineering faculties focus on housing projects in their curricula, while industrial projects are, for the most part, in the oil and gas sector and other process industries. The aim of this book is to focus on the main tools of project management that are essential to industrial projects, focusing on, but not limited by, projects in the oil and gas sector.

A good place to start, for anyone wishing to be a project manager, is to obtain a Project Management Professional (PMP) certificate, which is a credential offered by the Project Management Institute (PMI). As of March 31,2010, there were 375,959 active PMP certified individuals worldwide.

This credential is obtained by documenting 3 to 5 years of work experience in project management, completing 35 hours of project management related training, and scoring a certain percentage of questions on a written, multiple choice examination.

This book provides questions and answers for the subjects that are more traditional in the PMP exam, but it will be more beneficial to focus on practical life applications, so these questions are tailored to help in situations that are faced in real projects. It would not be beneficial to take this exam and receive certification but later fail in real, practical projects.

The definition of a project is a series of activities that have a start and finish time. A project, in general, is unique, and no project is similar to another. This is very important, because one should know that the problem one may face in managing a project may be unique. Also, one should have a creative mind in order to get to the right solution without a reference, so that the professionalism of the project manager depends on his or her previous experience.

Real life is like the theater, where everyone has a role in the story. So, you may be in the project play as an owner, engineering office, contractor, supplier, or service provider doing logistic service for the project. You may be at a higher level in the organization or at a lower level. In any case, you play a role in this story, so you should understand the whole story - who does what, and who is responsible for this and that issue. With this information, you will succeed at any project you are working on.

Chapter two discusses the scope of projects and the main characteristics of project management. To have a complete grasp of project management, one must first understand these basic principles and see how they work in the real world.

For us as engineers, a feasibility study is a mystery, because we are rarely working in this phase. Chapter three explains our role as engineers in the feasibility study. This chapter presents the main tools of economics to use in deciding whether to proceed with the new project. It also describes the scientific way to choose between the various alternatives. The principal of statistics is described in this chapter, in addition to the theory of probability from a practical point of view, and how we can use these tools to make the right decision. The Monte-Carlo simulation technique is presented, as it is the main tool in a feasibility study for oil and gas projects, which is the main tool that we use in the decision tree method. The decision tree method is very important and easy to use, and anyone who has read about it or attended a course on it is eager to apply it. However, the actual application of this method can be difficult. In this chapter, a practical way of applying the decision tree method in conjunction with the Monte-Carlo simulation is presented.

Time management is a primary tool in project management. There are many methods for making a time schedule for a project, and these methods will be discussed in chapter four. In addition, a method for estimating activities and project time using a traditional case study in a petrochemical project will be presented in this chapter.

Resources management is another element in project management. Resource management is the main area that should be controlled by the project manager and the team member. Chapter five provides the key to understanding resources management for the project manager and the team member, as well. It is very important that when you join a new project the team members know what the project manager is looking for and what he or she has in mind when choosing the team members. The project manager should have special skills and experience, as he or she is responsible for implementing project management strategy when handling an international project with labor from different countries and different cultures. The distribution of resources on a time schedule will also be discussed in chapter five.

Another main element in project management is cost. Therefore, chapter six presents a way to predict the cost estimate in each phase of a project, a way to define the project budget, and a method for monitoring the project cost during the project’s time-frame.

Older project management principals focus on time, cost, and quality. Nowadays, and especially in our case as we are discussing the management for petrochemical, power stations, and other middle sized industrial projects, safety, health, and the environment are very important to these types of projects, and in some cases they will be the big challenges facing project managers and project sponsors. Therefore, the four elements presented in Figure (1.1) are the main constraints to project managers’ decisions and should be managed by a project manager and his or her team members. This will also be covered in chapter six.

Figure 1.1 Project manager constraints.

Contracts are the chain that connects the primary parties of the projects, such as the owners, the engineering firm, and the contractors. Chapter seven describes the tender and bidding procedure and some of the ways to evaluate the bidders technically and commercially, especially in an international environment.

The market is open, and as an owner you can choose any contractors or engineering firm from any country all over the world, so there is a lot of competition between international companies to provide good quality to their products or services. Therefore, all the international companies follow the standards of the International Organization for Standardization (ISO) and apply the total quality management system as stated by the ISO. This will be discussed from a practical standpoint in chapter eight.

Before starting a project, one should have a scientific way to expect the problems that he or she will face on the project during implementation and to solve them in a timely manner without affecting cost, time-frame, and quality. Risk assessment, which is discussed in chapter three, is about economic assessment, and this form of risk assessment is essentially qualitative. It is not feasible in the implementation phase. For that phase, a more quantitative risk assessment is appropriate, in order to exectute the project properly. This is discussed in chapter nine.

In chapter ten there are one hundred questions with answers that may be seen on the PMP exam. However, these questions are chosen to serve our practical purposes, as these questions are not for the exam but are complementary for a project that presents these practical cases.

Chapter 2

Project Management

2.1 The Principle of Project Management

The subject of project management has recently become as a key concern in various engineering fields. The proliferation of mega-projects worldwide, aiming to take best advantage of the latest technological developments, itself demands new or improved methods of project management to cope with the fast developing.

As the concept of a project differs fundamentally from that of daily or routine operations, it follows that a number of principles and conceptions of project management must also diverge from those followed in the realm of daily operations management.

In operations management, production managers tend generally to focus on production/output volume per unit time — usually the current week compared to the previous week and-or the same week last year; profits accumulated and-or compared for the same time unit(s); sales or operational orders accumulated and-or compared for the same time unit(s); actual versus budgeted expenditure for the current quarter and the same quarter the year before; and sales revenue and sales volume for a given product compared to the performance of competitors producing/marketing a similar product.

Project management may be defined as the planning, organization, direction, and control of all kinds of resources in a specific time period for achieving a specific objective comprised of various financial and non-financial targets.

This should help clarify the difference in outlook of the project manager and the operations manager. The project manager’s goal is to finish the project on time. Then he evaluates where he will relocate after finishing the project. The operations manager, on the other hand, never wants daily production to stop, and cannot dream of work stopping — as distinct from the project manager’s goal of overall task completion.

2.2 Project Characteristics

The selection and assignment of the most appropriate personnel at different locations within the same company constitutes one of the most critical skills in the project manager’s arsenal. In some international projects, personnel originate from different countries, cultures, educations, employment, and possess a range of different skills. With all those differences, they must work together to complete the work in a specific time and definite target.

The project manager has to coordinate the deployment of available personnel, and the range of skills they bring, to accomplish project goals on time and and on budget. This skill has become increasingly important as most projects bring together so many different disciplines. In construction projects, for example, there is a team for constructing the reinforcing concrete (for example); other teams for finishing the work, such as plumbing and electrical installations — and every branch entails deployment of its own specialized technologies and skills, which it is the project manager’s job to coordinate. On the project manager’s shoulders devolves the requirement of ensuring the highest-quality work on time.

Two drivers contend for the project manager’s attention: that of cost and that of time. Only one of these can be the project’s main driver, and the responsibility falls on the shoulders of the project manager to find the right balance in each project. It is inevitably a balancing act because the selection of the main driver in each project is not determined by the project manager alone but by discussion and consultation between the project manager, its director, its sponsor, and other major stakeholders.

In some projects, reducing cost is the major factor whereas meeting the time target(s) is a subordinate consideration. For example, in the building of houses, mosques, churches, museums, and other projects that have a social aspect, the owner’s investment may not be significantly affected by some extension of the time needed for the project’s completion. On the other hand, with hotel construction projects, or oil and gas extraction and-or refinery construction projects, the owner’s projected profits are extremely sensitive to unanticipated extensions of the completion date. For example, if the gain of production from an oil/gas project project is 50,000 barrels of oil per day, with an oil price of $80, every day that can be saved gains the owner $4,000,000; the owner of a hotel under construction will similarly be concerned to minimize losses in room rental revenues arising from project completion delays. It is the responsibility of the project manager to ensure both that ail staff working on the project are kept fully aware of the main driver and its importance in material terms such as these, and to find ways that work teams involved in the design or execution of the project are encouraged to provide their own proposals, recommendations, and action steps that strengthen the ability and resolve of the entire workforce to are in the same direction of the project driver in reducing the time or cost.

At the same time, in each specific case, it falls to the project manager to figure out how best to balance how specific proposals affect the constraints of the cost/time tradeoff. For example, during a housing project, a proposal might come up from the engineers to use a type of cement to provide a rapid setting to reduce the time of construction, but it will increase the cost. Is this proposal acceptable? Certainly, it will not be accepted. On the other hand, consider the case of the construction of an oil or gas plant or new offshore platform, in which a proposal comes forward to use materials that are the cheapest, but require extra time to import from abroad which will delay the project some days. Is this proposal acceptable? Of course, this proposal is unacceptable, but if the same proposal was raised in the other project like residential, administration buildings or any similar projects, the proposal would indeed be excellent and acceptable.

These simplified but not unrealistic examples underline the importance of the clearest possible lines of communication being maintained between the project manager and the various personnel. No matter whether the driver happens to be time or cost, it is the driver sets the direction and if everyone involved in a project works hard, but in different directions, that effort becomes wasted. The same caveat applies to dealings between the project manager and elements outside but involved with the project, such as suppliers and contractors, so that their proposals in the supply materials and construction should be embraced and adjusted according to the criteria driving the project overall.

Project characteristics can be summarized as follows:

• A project has a specific target.
• A project is unique and cannot be replicated with the same task and resources expecting to give the same results.
• The fo...