Executing engineering and EPC projects on a one-off basis is a common practice. However, does this enable the best results? Each project award typically includes the development of a request for proposal and associated documents, a long bid cycle, post-award ramp-up time for the teams to become familiar with site standards and work processes as well as the facility, etc. This can be an inefficient business model with some significant drawbacks, including higher costs, longer schedules and reduced quality.
What is the alternative? Alliance models, whether on a per-discipline basis or inclusive of all aspects of EPC, can be a real benefit to end users. The caveat is end users must collaborate with the right partner for their specific needs and execute within the proper framework.
Consider the scenario in which a refinery has three upcoming projects. If each project is bid individually, the refinery can end up with three different EPC partners all handling their projects separately. With an alliance model, each project is considered in an overall approach. Even though the projects may not all be executed simultaneously, the needs of the latter projects can be integrated into the purchasing, engineering and construction aspects of the earlier projects.
For example, if the future projects are going to require analog points in the control system, then a larger analog input/output (I/O) capacity might be purchased on the first project at a reduced cost that will allow for the other planned projects to be completed without having to purchase smaller I/O capacity on each project, which is often more expensive.
In addition to leveraged purchasing power, there are huge benefits in other areas, such as reduced ramp-up time because a carry-over team slides from one project to the next. The schedule can often be accelerated as well by overlapping the projects to keep resources fully utilized.
What are the keys to a successful alliance program? First, establish a steering committee and hold quarterly meetings. This gives the program shape and enables both organizations to collaborate at the highest level. It also promotes ongoing planning and provides a forum for expediently handling issues.
Second, identify the vendor's core support team per site to build lasting operational and organizational knowledge. Over time, this will reduce project ramp-up time and establish a knowledge repository. This team stability and the resulting familiarity with the end user are the foundation for many of the benefits of an alliance model.
It is also critical to establish and implement a key performance indicator (KPI) program, including metrics for safety, quality (rework, change orders, productivity), schedule, cost and client satisfaction. These KPIs define expectations and give measurable performance goals to the team. Thorough monthly reports are another essential ingredient and should capture performance versus steering committee expectations. These program-level reports should capture the advantages of the alliance partnership model.
Finally, create and implement a value awareness program (VAP). A VAP feature adds value in some way to the project, whether it is cash flow savings, productivity gains, schedule reductions, etc. Having the team identify VAPs documents the success of the partnership and encourages creative thinking. Financial incentives and recognition for value-added achievements are also beneficial.
When end users are selecting a partner, it is helpful to look for EPCs that establish these core elements as a part of their alliance model. Also, seek evidence of successful alliance management relationships. The EPC's work processes and project tools are valuable contributors to success and should also be evaluated.
In addition, strong leadership is critical. The partnering company should have executive sponsorship so end users have a direct route to issue resolution at the highest levels.
End users should expect to reap the benefits of alliance partnerships over time as the relationship solidifies. The effectiveness of the alliance will largely hinge on the cooperation and collaboration between the parties that work together on a daily basis.
For more information, visit www.burrowglobal.com or call (713) 963-0930.
