G. Ladnier, JEM Advisors, Biloxi, Mississippi; G. McLEOD, GMcLeodConsulting LLC, San Rafael, California; B. STRAKER and T. HANSON, JEM Advisors, Houston, Texas; R. KENYON, JEM Advisors, Big Bear Lake, California; and A. MATTSON, Austin Mattson Project Management, Las Vegas, Nevada
Over the last 20 yr–30 yr, manufacturing facilities and project teams have spent significant time and money developing tools to navigate the issues of designing, procuring and building projects. During this time, there was often less focus on how these new projects would be received and put into service by the facility operations organization. Many project owners have struggled to recover their projected return on investments (ROIs) due to their inability to start up and run the new facilities to capacity on time (FIG. 1).
This has led many companies to develop processes and tools designed to ensure that operating organizations are prepared to receive the completed project, and then to safely start up and ramp up the new facilities. Many companies have begun to introduce key personnel from the operations group (including operators, maintenance, engineering and other relevant disciplines) into the project during early front-end loading (FEL) phases. Their mandate is to provide valuable input for design and equipment selection, and to prepare people, processes and procedures for commissioning, startup and facility operations. Adding key operations representatives to the project team in the early phases helps to fully analyze the trade-offs between capital expenditures (CAPEX) and long-term operating expenses (OPEX) when making decisions on design and equipment selection, as well as provide additional assurance that the project will deliver an asset that will be functional, operable, maintainable and reliable for the planned project life. A common name for these processes is operational readiness (OR).
The often-referred-to “influence vs. cost” profile is still valid to this day. FIG. 2 provides an overview of how operations input can have a huge impact on the total lifecycle cost.
Big decisions are made early in the project phases, and these decisions can have a major bearing on CAPEX and, more importantly, on the lifecycle costs and reliability of the asset. History shows that project managers have, for the most part, been rewarded for delivering a project on schedule and within budget; however, one potential trade-off can be a lack of focus on the asset owner’s objectives and the lifecycle reliability of the new asset. Repeatedly, project teams are disbanded immediately after commissioning/startup, with little accountability for ensuring that the new asset will achieve the production goals—this can result in operations being left with a facility that is not completed to the standard required to support lifecycle integrity and reliability. To deliver an operationally successful project that meets its project objectives, this must change.
The authors’ organizations recognize this issue and have built an OR process to ensure that lifecycle costs are identified and considered during the early stages of the project. The purpose of this article is to:
What is OR? OR encompasses all activities under the asset owner’s responsibility regarding operation of the new or modified asset. OR ensures that all site systems, processes, organizations (maintenance, technical, reliability) and people are ready for turnover and safe operation of the facility.
OR is a process that starts in early FEL of a project and increases in effort as the project proceeds toward completion. The OR process provides for critical operational input during project development and execution, considering the needs of the site’s operating organization. It ensures that all aspects of operations are prepared to receive, commission, start up and maintain the facility. The definition of operations for the purpose of OR is inclusive of all groups within the facility that directly or indirectly support plant operations. OR planning starts very early in the project lifecycle and increases in importance as the project progresses.
Some of the key attributes that the operations organization contributes to early project phases include:
Development of the OR process should cover all aspects that may be required for a project. Each type of project can customize the process to fit the need, including the staffing and effort required for OR activities in each of the project phases. The different types of projects and how that impacts OR will be discussed later.
In providing requirements of OR, the authors group the activities into two areas:
As shown by this listing of activities, the operations team will need assistance from many, if not all, of the supporting groups within the facility to complete this effort. The OR effort should be driven by operations and supported by maintenance, engineering, HSSE, information technology (IT), procurement and other support organizations. Staffing to cover all these activities must be included in the project budgeting process to ensure complete OR at the handover point of the project. Many organizations have developed a work practice or procedure to make sure that all this planning and these activities occur at the proper time.
OR means achieving a configuration that places the right people in the right places at the right times—working with the right hardware, and with the right procedures and management controls. The project hardware must be installed and tested per project specifications to ensure that it will function properly. FIG. 3 helps illustrate the relationship among the different readiness elements.
OR requirements must be covered within EPC or EPCm contracts. OR considerations must be included in the project contract, regardless of the contract type. This is necessary to clearly identify OR responsibilities and to avoid misalignment between the contractor and the owner’s teams. Because the construction team’s primary focus at the start is bulk completion, priorities are often misaligned between the construction group and the commissioning and startup groups that work at the system/subsystem level. There are many reasons for this misalignment, and a main contributing factor includes unclear or ambiguous contractual requirements, which inevitably lead to conflict and delays when projects reach the stage of systems or subsystems pre-commissioning.
Many contracts are technically complicated or full of legal speak to protect one or both parties. This is not what contracts are meant to do. Contracts are meant to clearly lay out expectations for both parties so that there is no ambiguity about what is expected of, and by, both parties. Phrases like “good industry practices” or “industry norms” should be avoided. For a project to have the best chance for success, OR requirements must be covered within the EPC or EPCm contracts for projects of all kinds, including restart/preservation efforts for long-idle facilities. OR is one of the building blocks of a successful project foundation, and, thus, must be clearly defined and agreed to by all relevant parties in the very early stages of a project. Critical project milestones (e.g., mechanical completion, pre-commissioning, ready for commissioning, ready for startup) must be clearly defined and agreed upon in the contract by the contractor and owner’s teams well in advance of starting the project work. Requirements and timing for shifting construction focus to systems-based completions should also be included.
Readily available industry data shows that 75%–80% of projects fail to meet operational objectives in the first year of operations. The metric “meeting operational objectives” must be carefully balanced with schedule and cost metrics when measuring the success of projects. Project objectives must go beyond simply project delivery—they should expand to include an operationally effective project delivery. Unfortunately, cost and schedule usually grab the main headlines when past successes are discussed among the project community. Schedule and cost successes are also main selling points for EPC companies.
There are many reasons for common failures in meeting operational objectives. By far, the biggest contributing factors are failures during commissioning, or, to put it another way, failing to achieve OR before commissioning commenced. OR does not just occur naturally—it is not the default result of good engineering, construction and quality control. It is something that must be planned, designed and staffed to be successful. Having the best contractors with the best engineering designs is not enough to ensure success. The facility must also be ready for safe and reliable operations.
The only way to accomplish this is to have a robust OR program in place with roots planted in early phases of the project. The longer OR planning is delayed, the more the potential for OR success decreases. Just like project schedules, OR must begin with the end in mind. The questions surrounding what it will take to ensure a safe and reliable facility must be asked. Too often, project teams develop schedules with a hard limit on the end date, or a maximum spending limit, and then they try to force OR to “fit in the cracks.” This approach is fraught with risk and is a very large contributing factor in the high project failure rate previously mentioned. The contract must unambiguously state the requirement of an OR program.
How do we ensure that OR is a focus area when the contract is being written? The best approach is for an experienced project operations team to be involved in early negotiations with the contractor. The operations team must be embedded within the project management team so that the facility is designed with a primary focus on operational safety and reliability.
To summarize, project contracts must be clear concerning the requirements and expectations for pre-commissioning, commissioning and startup, which are all integral parts of an OR program. The contract must clearly identify who is responsible for each activity and how the transition from one milestone to the next will be accomplished. The verification and validation of these milestones and handover documentation are critical to the project’s ultimate success. Successful commissioning and startup, verified by a robust OR program, require that the appropriate focus be on resource, budget and project schedule allocation to ensure overall project success.
Types of projects requiring OR. The following are projects that require OR:
As mentioned, the OR basics will be required for all these projects, but the process should be flexible and customized to fit the purpose of each type of project (FIG. 4).
Measuring and monitoring OR. Planning is paramount to a successful OR process. An OR plan should be developed in early FEL of the project and should be a live document that can be updated as the project proceeds. This plan should include OR metrics that can be used to measure and monitor OR progress. Project personnel have seen construction metrics, such as instruments installed, instruments wired and connected, instruments loop-tested, welding inches completed, and welding inches remaining. However, how many have seen metrics for OR shown for a project?
These metrics will be most useful to communicate progress and shortfalls for OR, and they can be monitored by project and operations management for assurance that operations will be ready at handover of the project. This type of monitoring will be self-monitoring. Due to the importance of this process, it is highly recommended that a cold-eye OR review (ORR) be done at designated checkpoints within the project process. The authors believe that a cold-eye review by knowledgeable and experienced project operational subject matter experts (SMEs) will provide maximum benefits in the ORR process, as a third party can be very straightforward and honest when assessing the project. If the organization has the experience and capacity to conduct these reviews, they should be done prior to each phase gate and should include internal peers not directly associated with the project. If the organization does not have the capacity for this review, then third-party resources should be utilized for the ORR. The timing of the reviews should be tied to gate/phase changes. TABLE 1 shows the recommended timing of ORRs.
Improvements and changes that organizations have witnessed after the development of a rigorous OR process and ORRs prior to phase-gate changes will be discussed later in the article.
Why is OR important? Industry data confirms that 75%–80% of large and mega projects fail to meet operational objectives within the first year of operation. Exhaustive studies have concluded that these projects typically fail during commissioning. Commissioning failures are primarily due to improper pre-commissioning (cleaning and flushing) and/or handover activities (punch listing, improper documentation). FIG. 5 provides a breakdown of commissioning delays.
Good OR planning will address these issues and many more that could impact a project’s ability to safely commission, start up and reach design capacity. For brevity’s sake, the following will address only two of the top reasons causing commissioning delays.
Quality problems, equipment failures and poor preservation. Quality and equipment failure issues should be managed and resolved at the project delivery level. For this article, the authors will focus on poor preservation. Poor preservation has a dual impact on projects because it incurs repair costs, and the late discovery of the issue will cause delays in the schedule. Preservation is not easily addressed; however, with good planning, proper attention, proper resourcing and management monitoring, preservation programs can be very successful. The authors have three main recommendations to ensure that poor preservation does not impact the project:
Inadequate cleaning and flushing during pre-commissioning. Inadequate cleaning can affect both utility and process units. Steam systems, cooling water systems and other utility systems require a significant level of cleanliness. Lubrication systems require cleaning to the rotating equipment manufacturers’ specifications. Most process units demand high levels of cleanliness, and in some cases, like an oxygen service, these requirements can be critical. Many projects have started up, only to shut back down multiple times to redo inadequate cleaning. The authors have three recommendations to assist in proper cleaning and flushing:
CASE STUDY
The following case study discusses the challenges faced in the expansion of an aromatics facility, the actions taken to resolve these challenges and the results.
Challenge. An aromatics expansion project team had a project objective to produce on-spec product at a normal rate within 6 wk–8 wk of feed introduction. The project had many risk factors to successful startup, and industry SMEs projected a 1% chance of meeting this startup objective and expected an 8-mos startup period, based on a historical database of projects.
Actions. Project operations personnel, led by one of the authors’ company’s advisors with support from industry SMEs, determined reasons for the protracted startup forecast. The advisor also visited a company known for its success at starting up new plants and maximizing returns. The aromatics project contained many of the items that made startups difficult, and two of these will be discussed here.
One common reason for protracted startup was the introduction of new technology. The project operations team addressed this by:
Another common reason for protracted startup was the incorrect operator response to an emergency, due to pressure to meet the schedule, even when operational upsets occur. As a result, a concept of “safe havens” was incorporated into procedures to allow operators the ability to hold a project’s startup until the plant was in a safe condition if an issue/emergency occurred. Operators should be encouraged to take the time to address the issue/emergency with SMEs, and to develop a path forward regardless of what schedule is required.
Results. By engaging industry SMEs and utilizing sound OR principles, the aromatics plant managed an effective startup and obtained a normal rate with on-spec product within 7 wk of feed introduction.
Takeaways. Detailed planning has always been the standard for the delivery side of a project. With a rigid OR process, the facility’s operations team can be ready to receive a well-executed project, and to turn it into a safe and functioning asset to meet project objectives (FIG. 6).
To demonstrate that OR adds value, the authors’ company has developed an ORR process that includes a scorecard to quantify the OR status in Phases 2, 3 and 4 of the project. FIG. 7 presents the scoring for one client, which captures 24 projects over the past 3 yr. There has been a defined shift in recognizing the value of OR by assessing more projects in Phases 2 and 3. Furthermore, the scores in each project phase have generally improved over the 3-yr period. There is a higher probability that most of these projects will have a successful startup and achieve their lifecycle targets. HP
LITERATURE CITED
GARY LADNIER has more than 40 yr of oil and gas experience, with an emphasis on operations, systems completion and commissioning. He now works with JEM Advisors.
GAVIN McLEOD has more than 40 yr of oil and gas experience, with an emphasis on systems completion and commissioning.
BILL STRAKER works with JEM Advisors and has more than 40 yr of oil and gas experience, with an emphasis on maintenance, reliability and OR.
TOM HANSON has more than 40 yr of oil and gas experience, with an emphasis on operations, maintenance, reliability and OR. He works with JEM Advisors and others.
REX KENYON has more than 50 yr of oil and gas experience, with an emphasis on maintenance, reliability and operations. He now works with JEM Advisors.
AUSTIN MATTSON has more than 40 yr of experience in manufacturing operations and project management leadership positions with various companies. He is now the owner of, and senior consultant at, Austin Mattson Project Management (AMPM).