1. Risk in Mega Projects Seminar and Workshop Mega Projects Life Cycle: Project Execution and Delivery Process , 2007 Trondheim, Norway Dr. George Jergeas PEng. Professor of Project Management University of Calgary, Alberta

2. References This section is based on presentations by:
Dr. Nick Lavingia, PE, Chevron
Bill Watson, VP Engineering and Project Management, Husky Energy
Public Works and Services Canada PDS

3. Agenda This presentation is in two parts
Oil and gas industry experience
Infrastructure projects best practice

4. Project Development & Execution Process (PDEP) in the Oil and Gas

5. Structured and Gated Process
Effective Communication Between Decision Makers, Multifunctional Project Team and Stakeholders

6. Objectives
To Gain:
Understanding of the PDE Process and framework for more effective delivery of projects and programs, based on shared experience & lessons learned
Structured and Gated Process to ensure Effective Communication Between Decision Makers, Multifunctional Project Team and Stakeholders
Understanding of processes and sub-processes associated with the PDE Process
Understanding of the opportunities for improving PM practices & the barriers to be overcome

7. Project Development & Execution Process (PDEP)
A Process that Facilitates the Optimal Use of Resources (Dollars, People and Technology) Over the Life of an Asset / Project to Maximize Value.
Desired Outcome
Select the Right Projects by Improving Decision Making
Improve Project Outcomes through Excellence in Execution of Decisions

8. Project Phases PHASE 1 PHASE 2 PHASE 3 PHASE 4 PHASE 5 Determine
AFE 1 2 3 4 5
PHASE 1
IDENTIFY & Assess
Opportunities
PHASE 2
SELECT from
Alternatives
PHASE 3
DEVELOP Preferred
Alternative
PHASE 4
EXECUTE
(Detail EPC)
PHASE 5
OPERATE &
Evaluate
Determine
Project
Feasibility and
Alignment with
Business Strategy
Select the
Preferred Project Development Option
Finalize
Project Scope, Cost
and Schedule
and Get the
Project Funded
Produce an Operating Asset Consistent with Scope, Cost and Schedule
Evaluate Asset to Ensure Performance to Specifications and Maximum Return to the Shareholders
REFER TO VIEWGRAPH
Key Points:
Key objectives of the five phases
Phase 1 - Clearly frame goal
Phase 2 - Generate several alternatives & then select the best alternative(s) to move forward
Phase 3 - Fully define scope of selected alternative(s); select one alternative to move forward
Phase 4 - Implement execution plan
Phase 5 - Monitor performance
Feasibility
DBM
Application
FEED
Long-Leads
- Reg. Approval
- AFE
- Detailed Design
- Procurement
- Fabrication
Construction
Commissioning
-Start-Up
- Perf’m Testing
- De-bottleneck

9. Project Phases Screening Feasibility DBM FEED Regulatory Approval AFE
Pre-AFE

10. Project Development & Execution Process (PDEP)
AFE 1 2 3 4 5
PHASE 1
IDENTIFY & Assess
Opportunities
PHASE 2
SELECT from
Alternatives
PHASE 3
DEVELOP Preferred
Alternative
PHASE 4
EXECUTE
(Detail EPC)
PHASE 5
OPERATE &
Evaluate
Clearly Frame Goal
Test for Strategic Fit
Preliminary Overall Plan
Preliminary Assessment
~1 % Engng.
Phase 1 Estimate
Generate Alternatives
Preliminary Development of Alternatives
Develop Expected Value
Identify Preferred Alternative
Phase 2 Est.
Fully Define Scope
Develop Detailed Execution Plans
Refine Estimate
Submit Funding for Approval
~25 % Engng.
Phase 3 Est. (+/- 10 % Accuracy)
Implement Execution Plan
Min. Changes
Finalize Operating Plan
Business Plan for Phase 5
Project Review
Operate Asset
Monitor & Evaluate Performance
Identify New Opportunities
REFER TO VIEWGRAPH
Key Points:
Key objectives of the five phases
Phase 1 - Clearly frame goal
Phase 2 - Generate several alternatives & then select the best alternative(s) to move forward
Phase 3 - Fully define scope of selected alternative(s); select one alternative to move forward
Phase 4 - Implement execution plan
Phase 5 - Monitor performance
AFE = Appropriation For Expenditure

11. Phase 1 Flow Chart: Identify
Recycle
Strategic
Business
Assessment
Quality
Review
To Phase 2
Define
Opportunity
Plan for
Phase 2
Yes
OK?
Identify
Stakeholders
Concept
Evaluation No
Identify
Expectations
Phase 1
Estimate
IDEA
Develop Project
Specific Business
Objectives
Develop
Conceptual
Scope
Frame
Project
Assess Current
Situation

12. Phase 1 Deliverables Business Objectives & Priorities
Business Objectives & Project Framework
Process
Preliminary Block Flow Diagram, Preliminary Capacity
Site / Infrastructure
Preliminary Site Selection, Integration, Development Plan
Execution
Defining Vision of Success
Risk Analysis
Strategic Risk Assessment
Permit / Regulatory requirements
Preliminary Permitting Plan
Contracting
Estimate
Phase 1 Estimate (High Contingency & Wide Accuracy)
Schedule
Preliminary Milestone Schedule
Resource Plan
Plan for Phase 2 Resources
Economics
Preliminary NPV, ROR, DPI, Payout

13. Typical Assess Phase Events
Determine project feasibility and alignment with business strategy
Define business objectives
Identify technology options
Determine market feasibility
Preliminary risk identification and mitigation planning
Establish preliminary HS&E issues
Develop project execution plan for next phase
Develop a work plan for the Select phase
Identify joint ventures/partner issues & opportunities
Develop a +/- 40% cost estimate ( ~/= 5% of total Engineering)
Incorporate shared learnings from After Action Reviews on similar projects executed by Husky & Competitors

14. Phase 2 Flow Chart: Select
Recycle
Pre AFE
Approval
From Phase 1
Appoint Project
Sponsor, GPM,
PM and Op. Rep.
To Phase 3
Prepare Pre AFE
Review
Phase 1
Package
Plan for
Phase 3
Yes
OK?
Establish
Objectives and
Priorities No
Project
Self-Evaluation
Begin
Execution
Planning
Phase 2
Estimate
Generate and
Evaluate
Alternatives
Select and Refine
Alternative

15. Phase 2 Deliverables Business Objectives & Priorities
Preliminary Facility & Project Objectives
Process
PFDs, Equipment List, Technology Selected
Site / Infrastructure
Site Selected, Utility Balances
Execution
Defining Strategy for Success
Risk Analysis
Project Risk Assessment
Permit / Regulatory requirements
Detailed Permitting Plan
Contracting
Preliminary Contracting Plan
Estimate
Phase 2 Estimate (Moderate Contingency & Moderate Accuracy)
Schedule
CPM Schedule
Resource Plan
Plan for Phase 3 Resources
Economics
Updated NPV, ROR, DPI, Payout

16. Typical Select Phase Events
Select the preferred development option(s)
Identify critical and major equipment needs
Refine HS&E assessment
Submit permit application(s)
Update Market feasibility and partnering plan
Develop Exit strategy
Update Cost Estimates to +/- 25% (5-10% of Engineering)
Update Risk identification and Mitigation plan
Conduct a Peer Review - as appropriate
Adjust core/extended project team membership
Update project execution plan for next phase
Develop a work plan for the next Phase (definition)

17. Phase 3 Flow Chart: Develop
Recycle
AFE
Approval
From Phase 2
Build
Project
Team
Finalize
Execution
Plan
To Phase 4
Continue
Execution
Planning
Yes
OK? No
Update
Permitting for
Selected
Alternative
IPA and
Self-Evaluation
Define
Project
Phase 3
Estimate

18. Phase 3 Deliverables Business Objectives & Priorities
Final Facility & Project Objectives
Process
P&IDs
Site / Infrastructure
Final Plot Plan, One Lines
Execution
Defining Tools for Success
Risk Analysis
Finalize Project Risk Assessment
Permit / Regulatory Requirements
Update Detailed Permitting Plan
Contracting
Detailed Contracting Plan
Estimate
Phase 3 Estimate (+/- 10% Accuracy)
Schedule
Resource Loaded CPM Schedule
Resource Plan
Plan for Phase 4 Resources
Economics
Final NPV, ROR, DPI, Payout

19. Typical Define Phase Events
Finalize Project Scope, Cost and Schedule
Prepare project AFE approval
Prepare Decision Support Package (DSP) for project sanction
Secure partner approvals if appropriate
Finalize the Project Execution Plan (PEP)
Update project team membership
Conduct independent peer review
Finalize cost estimates to +/- 10% (up to 20% of total Engineering)
Conduct value engineering - as appropriate
Finalize risk identification and mitigation plan
Finalize the Design Basis Memorandum (DBM)
Conduct After Action Review - as appropriate

20. Phase 4 Flow Chart: Execute
Recycle
Turnover
From Phase 3
Implement
Execution Plan
To Phase 5
Detailed Design
Operations
Planning
Procurement
Training
Construction
Commissioning

21. Phase 4 Deliverables Business Objectives & Priorities
Deliver Operating Asset
Process
Trained Personnel
Site / Infrastructure
Manage Progress
Execution
Implement Plan with Minimal Changes
Risk Analysis
Manage Project Risk Register
Permit / Regulatory Requirements
Manage Project Permit Schedule
Contracting
Execute Contracting Plan
Estimate
Monitor & Control Estimate
Schedule
Monitor & Control CPM Schedule
Resource Plan
Plan for Phase 5 Resources
Economics
Monitor NPV, ROR, DPI, Payout

22. Organization for PDEP Phase 4 -- Execution
SBU Strategy
Corp. Strategy
Project Goals
Marketing
Project Sponsor
Planning
Public Relations
Business
General
Project Manager
Operations
Human Resources
Manufacturing
Technical
Maintenance
Finance
Project Manager
Safety
Execution Team
Consultants
Safety
Specialists
Purchasing
Environmental
Constructability/Construction
Design
Process Engineering
Metrics
Regulation
IPA
Project Finance
Materials Management

23. Typical Execute Phase Events
Execute project execution plan
Deliver operating asset consistent with scope, cost & schedule
Implement project controls and reports on project metrics and status
Implement HS&E plan
Implement contracting strategy
Implement value practices
Commission and startup
Conduct After Action Review

24. Phase 5 Flow Chart: Operate
From Phase 4
Start-Up
Full
Operation
Post Project
Assessment
Business Evaluation

25. Phase 5 Deliverables Business Objectives & Priorities
Business Evaluation & Benchmark Performance
Process
Look for Debottlenecking Opportunities
Site / Infrastructure
Execution
Share Lessons Learned
Risk Analysis
Update Risk database
Permit / Regulatory Requirements
Update Permitting Database
Contracting
Update Contractor Database
Estimate
Update Cost Database
Schedule
Update Schedule Database
Resource Plan
Update Resource Database
Economics
Validate NPV, ROR, DPI, Payout

26. Typical Operate Phase Events
Operate and Evaluate the asset to ensure performance to specifications and maximum return to shareholders
Conduct a final After Action Review and capture shared learnings
Post appraise / evaluate the actual asset operation and business results versus the performance targets. The evaluation will be conducted under the approval market environment (pricing etc) and under the current market conditions.
Identify potential improvement opportunities for future projects
Develop a reservoir depletion plan - as appropriate
Identify new opportunities
Turn over operating documentation

27. Achieving World-Class Performance
EXECUTION
Diligently implement PDEP, Key Project Management Principles, and Project Management Best Practices. Strive for zero incidents.
COST
Final capital cost at least 10 percent below industry norm.
SCHEDULE
Final engineering/construction schedule amongst the best achieved by a similar project in the database.
ATTAINMENT
Attainment achieved at 100% design capacity per project objectives.

28. Project Delivery System for Infrastructure Projects

29. Project Delivery System
A framework within which projects are developed, acquired or implemented, and put into service
A series of project phases from inception to completion

30. Project Delivery System (PDS)
The six phases are:
Planning
Definition
Implementation
Commissioning
Operation
Evaluation

31. PROJECT DELIVERY SYSTEM
Investment
Analysis Report
Planning
phase
Definition
Phase
Built works
Project
Brief
Implementation
Comm.
Report
Commissioning
Operation
Evaluation
Report
Facility in
use
Evaluation

32. Phase 1
Planning

33. Objectives
Identify and define in detail the client investment opportunity, need or problem
Assess all feasible alternatives
Define organization and any required controls
Establish the project budget and completion date
Specify criteria for evaluating the project

34. 2 . Client Opportunity/Need Identification
Five Steps
1. Project Initiation
2 . Client Opportunity/Need Identification
3. Regulatory Considerations
4. Options Analysis
5. Owner/Investor Approval

35. Identify the optimum solution
Main Out Put: IAR
Investment Analysis Report (feasibility)
To ascertain whether the concept for a project is technically and/or economically feasible for further study
Identify the optimum solution

36. Phase 2
Definition

37. PROJECT DELIVERY SYSTEM
Investment
Analysis Report
Planning
Definition
Built works
Project
Brief
Implementation
Comm.
Report
Commissioning
Operation
Evaluation
Report
Facility in
use
Evaluation

38. 2. Objectives Translate the IAR into verifiable technical criteria
Prepare Project Brief or Scope definition
Define implementation strategies, including project management controls
Transfer responsibility to the PM
Select best alternative, technology, capacities and site location
Choose consultant

39. Production of the Project Brief/Scope Definition
Two Major Steps
Production of the Project Brief/Scope Definition
Option Refinement
Resource Strategy
Project Team/WBS
Project Funding Agreement
Regulatory Concerns
User Requirement Definition/Project Brief

40. 2- Consultant Selection
Two Major Steps
2- Consultant Selection
Project Terms of Reference
Consultant Service Agreement preparation
Consultant Selection
Consultant Contract
Proponent Debrief

41. Phase 3
Implementation

42. PROJECT DELIVERY SYSTEM
Investment
Analysis Report
Planning
Definition
Built works
Project
Brief
Implementation
Comm.
Report
Commissioning
Operation
Evaluation
Report
Facility in
use
Evaluation

43. 1. Design 2. Tendering and award 3. Construction
Implementation
1. Design
2. Tendering and award
3. Construction

44. Design
Objective
The objective is to design the project in detail, obtain necessary approvals, estimate costs and prepare drawings and specification.

45. Prepare: a concept design
a detailed design drawings, specifications and schedules
bills of quantities (if needed)
final cost estimates
time schedule

46. Design: 7 Steps
Set up design team
Define project control criteria
Pre-design report
Concept design
Design development
Project Approval
Construction documents

47. Tendering
Purpose
To select a contractor, or a number of contractors who will unconditionally meet all of the terms and conditions set out in the tender documents at a competitive market price.
Implementation

48. Contracting shall be conducted to:
Contracting Policy
Contracting shall be conducted to:
Stand the test of public scrutiny in matters of prudence and probity, facilitate access, encourage competition, and reflect fairness in the spending of public funds.
Ensure the pre-eminence of operational requirements.

49. Contracting Policy Honesty Fairness Best Value Three ingredients
Public sector and private sector contract are fundamentally administered in the same way
More later about bidding.
Implementation - Design

50. Construction
Purpose: To physically construct the project within the agreed limits of cost and time, and to specified quality within safe and healthy environment.
Construction is the most expensive, intensive and difficult phase

51. Construction Time schedules Site organization Labour resources plan
Activities
To plan, coordinate and control site operations
Planning includes the formulation of:
Time schedules
Site organization
Labour resources plan
Equipment plan
Material delivery plan

52. Construction
Activities
Site operations include
All temporary and permanent construction works, and supply of all built-in furniture and equipment
The coordination of subcontractors
General supervision/inspection

53. Main Activities During Construction
1. Start-up meeting
2. Management
3. Construction process
4. Post construction
5. Contract closure

54. Phase 4
Commissioning

55. PROJECT DELIVERY SYSTEM
Investment
Analysis Report
Planning
Definition
Built works
Project
Brief
Implementation
Comm.
Report
Commissioning
Operation
Evaluation
Report
Facility in
use
Evaluation

56. Commissioning
The process of advancing an installation from the state of static completion to full working order in accordance with the design intent.

57. Commission From two Perspectives
Why Do You Commission?
Commission From two Perspectives
The Engineering Perspective
The Contractual Perspective

58. Engineering Perspective
Ensure the design intent has been met relative to the design specifications.
Ensure the design intent will meet the operational requirements relative to:
Program
O&M
Cost
Safety

59. Contractual Perspective
Ensure contractual responsibilities in terms of supply and installation versus design are not compromised or negated.

60. Phase 5
Operation

61. PROJECT DELIVERY SYSTEM
Investment
Analysis Report
Planning
Definition
Built works
Project
Brief
Implementation
Comm.
Report
Commissioning
Operation
Evaluation
Report
Facility in
use
Evaluation

62. Objectives
Establish and ensure reliable (operating systems) in the facility
Establish, test and record the operating performance of the systems
Maintain adequate operation and maintenance records
Establish a preventative maintenance program
Identify an operating and maintenance budget
Respond to specific requests for services from the Client

63. Phase 6
Evaluation

64. PROJECT DELIVERY SYSTEM
Investment
Analysis Report
Planning
Definition
Built works
Project
Brief
Implementation
Comm.
Report
Commissioning
Operation
Evaluation
Report
Facility in
use
Evaluation

65. Objectives Four main objectives:
1. To assess the project in specific terms, comparing planned and actual;
2. To compare the actual performance with the plans and the appropriate norms considered, in order to determine any variances;

66. Objectives
3. To clearly identify variances outside acceptable limits, so they can be reviewed for further action; and
4. To record the project performance for:
Management review
Sharing with other regions, and
Contributing to PWGSC’s lessons learned database

67. 3. Types of Evaluation 1. Project evaluation 2. Contractor evaluation
3. Consultant evaluation

68. What We Learned
A good framework to deliver a Quality end product, on time and within budget to client satisfaction
Procedural guide and reference for project team members and managers
Basis for training
Best practices are implemented
Achieves good working environment
Due diligence is exercised