The risk factor

Steven Kratsis looks at how to manage your risk factor across the lifecycle of a project

With increasing globalisation, engineering and construction (E&C) companies need to deliver project proposals faster, adding design value and providing differentiating services. While contractors must manage change by utilising skills and flexible technology to serve as reliable partners for their oil and gas clients.
 
Managing risk and project changes is a fundamental part of business. Coping with unforeseen events and reducing the impact on costs, resources and materials is essential to add value when large oil and gas companies need E&Cs to mitigate expensive delays or production issues. Adopting best practices builds better bids and achieves improved economics across the lifecycle of capital projects to enhance decision-making.
 
Buyers and bidders
 
The relationship between buyers and bidders is vital to construction industry success. On the one hand, for owner-operators it is a 'buyer's market' with the insistence for greater support from their construction service providers and the desire for the lowest price bid on contracts. On the other, bidding should not always be about low cost, but more for towards quality design-to-build bids.
  
Too many contractors fail to calculate real project costs. Working more effectively and improving the bottom line can be achieved by integrating every step within the profit cycle. Greater precision and predictability built into a job means E&Cs can be flexible, reliable and efficient throughout the project lifecycle.
 
Achieving best practice  
Being a preferred E&C supplier gives companies an advantage in the battle to win contracts. Establishing the disciplines of commercial differentiation allows an engineering company to drive competitive edge and build stronger, long-term relationships with owner-operators.
 
For E&Cs, an integrated workflow approach involving all engineering disciplines in the conceptual design phase is critical to achieving optimal economic decisions. In addition, the right software tools will provide flexibility to meet commercial challenges. Best practice for achieving superior cost results includes key characteristics such as:
 
. Use of the same software by the owner-operator and E&C, especially when employed with a transparent software system, the scope and resource requirements are clearly communicated between owner-operator and E&C. The owner uses this to evaluate bids on a 'like for like' basis and ensures that all requested scope is included
 
. Employ an estimating system that can be integrated with the process modelling environment and FEED deliverables software. This enables rapidly re-evaluating the estimate based on conceptual engineering changes, ensuring project change management consistency
 
. Employ the same estimating platform from pre-feasibility through detailed estimating. This can help improve the estimator's productivity by up to 80%
 
E&C companies that adopt integrated project modelling techniques and build flexibility into their risk management or project changes typically support large-scale projects more effectively. When an E&C firm helps reduce the cycle time of an oil & gas well development project by a significant amount, it can help clients deliver faster results.

Economic evaluation software
 
One of the biggest challenges in the industry is that process engineers must achieve more than traditional process modelling and calculations. Achieving optimised design versus a number of design objectives presents issues, which include changes during the conceptual design and basic engineering process. E&Cs do have opportunities to win contracts from government and private ventures.

The challenge is being able to productively manage regulation, procurement strategies and market trends. We are also seeing a 'knowledge gap', resulting from underinvestment in quality training and talent development. Companies that invest in developing the necessary skills, think strategically and execute efficiently will survive. Consistent, effective training also improves process and profitability and should be looked upon as an investment not an expense.
 
With integrated engineering software, engineers and project managers can have the necessary tools in place to make the trade-off between process yields, reliability, energy use, capital and operating cost without compromising quality or incurring unnecessary costs. Advanced software technology is key in providing integrated engineering tools to produce safe, accurate, efficient designs. Such tools deliver easy-to-use, enhanced capability and embedded knowledge, which supports collaboration and equips the next generation of engineers to quickly add value to projects and comply with standards.

Effective decision-making
 
The E&C industry is rapidly changing. Customer demands are growing, so adapting strategy and equipping engineering expertise with cutting-edge economic evaluation software platforms throughout the engineering cycle will help capitalise on project opportunities. By providing cost estimators and project managers with the right tools, project uncertainty and risk can be reduced and capability enhanced for effective decision-making to control capital costs.
 
 Steven Kratsis is vice president of engineering and construction at AspenTech

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