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,
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).
“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.
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.
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:
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
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.
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
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
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
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).
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
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.
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:
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:
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
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
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).