M. Van Wagenberg, IBASC, Easton, Maryland
The energy sector is executing demanding projects to make LNG plants and refineries greener, and to implement completely new green energy solutions. These are now added to the familiar portfolio of projects by engineering, procurement and construction (EPC) companies and by licensors of processes and equipment.
Some projects are less taxing and may present less uncertainty or limited issues, but many are in uncharted territory. In addition, these projects require solutions under lead-time pressure.
These developments are taking place in settings where governments are subsidizing innovation. This encourages partners to tune their organizational structure and processes per project to address:
This article will explore the tuning of an organization to deliver a successful project, beginning with the organizational model within EPC firms, followed by the tuning steps needed once uncertainty, cooperation and challenges are introduced.
The current perspective: Functional engineering and low-cost solutions. For large projects, all EPC companies are organized around functional capabilities and a reliance on strong project management. Most EPC organizations have an execution model where much of the engineering is performed with low-cost labor. The office where the basic design work is completed will hand over further engineering to a separate office that will then detail piping, structure and controls. A solid quality process has been added. The goal is to avoid design questions that will lead to unnecessary backward and forward communication, which would add to costs, lead to extra reviews and extend lead time. Efficiency requires a sequential process with a solid handover of work.
Additional perspectives. What if an innovative green process is part of the project? Let us assume that the new process has been lab tested. Next, equipment must be designed—this step usually requires process engineers and mechanical engineers to solve issues together. These issues cannot all be itemized beforehand, and new problems will also typically arise, meaning that this process requires daily cooperation. This is an unpredictable way for information to be exchanged for tasks that must often be redone and for decisions that must be made. This mix makes the “functional division” of labor, along with an emphasis on the project schedule, to be ineffective. It is better to have a team that is flexible, that works full time and that has individuals that are mutually accessible, among others.
Another factor is that innovative development is being supported by governments under provisions that parties cooperate with labs and researchers. In principle, the required process is the same but requires perfect alignment. In particular, designers from the various organizations must have accountability to the project alone; otherwise, disparate leadership will disable cooperation.
Apart from the first uncertainty, as participants focus on a solution and start to detail it, the innovative project will progress. Solutions will be tested and approved or reworked as necessary. This may lead to regression, resulting in intense interaction among process and mechanical engineers to advance and solve new challenges in the project—this interaction may include teams responsible for controls and piping, as well.
Issues may also pop up late in the project, even during commissioning. Scale factors may not work out as expected, leading to additional fixes, scheduling challenges and additional financial pressure to finish the project on time and on budget. Relying on executing a project within a strict functional framework and schedule to solve issues is counter-effective.
Ammonia cracking: An example of uncertainty, cooperation and challenges. Several technological developments (such as ammonia cracking) fall into the previously mentioned categories of uncertainty, government support (cooperation) and challenges. An ammonia cracking process is known and tested, and catalysts have been developed; however, the plant must still be designed and tested for the best way to insert and control heat. These items are mutually dependent; they involve many choices, and their impact cannot be modeled with 100% certainty.
The cracker is the heart of the installation, but other units/aspects are also important parts of the project. These include:
The non-cracker components are not impacted by uncertainty, and mutual dependencies are minimal; that part of the project can be executed in a functional way. Therefore, the entire project has parts that are processed as usual in a controlled way and one innovative part: a subsystem that requires different tuning (FIG. 1).
Making a split is key. However, how can organizations apply two solutions under one project roof? The best solution is not solely a mathematical one. Making the correct choice of people who can successfully execute and lead is essential. During the design process, organizational tuning may be needed over time, oscillating between efficiency and solving challenges and issues. One option is to tune during execution by monitoring evolving events with insight into the functioning aspect (i.e., does it work, or does it need further tuning?).
The dual mission of the project organization. Similar projects with unknowns and new solutions can be found in the “greening” of refineries and chemical plants, or in new low-carbon or zero-carbon power stations. The following will discuss further details that relate to these situations: designing with uncertainty, cooperation among organizations and anticipating issues when executing.
The project structure should fit two domains. The first domain consists of the subsystems that 1) encounter no uncertainty, 2) are not under the umbrella of cooperation, and 3) do not anticipate issues. For this domain, EPC firms have a proven process in place. If more parties are involved, strict definitions of boundaries and structure are understood. No revisions are expected or supported. A functional organization with strict project controls should advance well, and resources and procurement are predictable.
The second domain is the innovative subsystem, enhanced by resources from at least two organizations. These should house talented and driven engineers, eager to explore beyond their expertise and to work in teams—with evolving insights on how to advance together, insert unplanned tests, design the work, and be willing to drop non-working ideas. This implies that work processes are in place but are not limited to each individual. Process and mechanical teams must be willing to shift their work if it benefits progress. That need can be led by a mission coordinator who will track what is mutual and what data is needed. This requires the exchange of information, followed by discussions on issues and fundamental design choices, and a willingness to iterate relentlessly to achieve a working solution.
These two domains—one based on predictability and non-iteration, and the other on the opposite—will come together on well-defined interfaces. The tension between the two must be resolved. A classic solution to keep both domains apart is to appoint someone to act as a liaison in charge. An alternative to this is to assign a temporary tandem team from both sides that will work together on a proposed interface aspect. This is more flexible and tuned to the need at that moment. Exchanging information, scheduling meetings to make decisions and setting alignment should be done for each occasion. In addition, a special path should be set to execute revisions that touch both domains—this is a special and temporary sub-process that is kept away from the functional organization. A special review staff should be included to ensure that the itemized process is progressing.
The team that is working on the innovative subsystem works best if the team members are all in one location. These innovative team members should work only intermittently with a broader task structure so they can focus on individual items vs. larger tasks that involve others. This ensures that team members only switch from a narrow focus to a much wider focus on project delivery, when needed.
Tuning task structures to adjust to varying needs. The design tasks are well mapped. What is less structured is how the specifics traits are to be set. Should the task structure inform the team members on a specific focus (F), or on a level of information sharing (I), decision-making (D), iteration (I) and alignment (A) and communication (C)? These are also building blocks in functional knowledge.
Part of these tuning tasks are ensuring the FIDI and ACT levels. If these traits are static, they are covered in process layers such as data sharing, communication, scheduling and other practices. In general, the level of these traits is defined by the goal of the process—i.e., efficiency, lead time, quality and innovation. However, what if an issue on this project requires an unforeseen innovative solution? Then, the task structure must be tuned to that new situation until it is solved. For such tuning, one can rely on available weekly data and tune the settings to each person. This tuning mitigates the risk of failure and enables project partners to perform well, while recognizing the two domains.
Leadership. The two distinct domains in a green project—one being functional and guided by project controls, and the other being a second team where members may have various innovative assignments—point to two leadership settings. Leadership for the first domain uses scheduling to assign tasks to personnel and ensure production. Quality processes further regulate everyone’s contribution. Since these processes can be costly, revisions should be avoided or reviewed, and other quality steps should be in place to ensure that. The number of decisions should be limited and taken on a weekly basis so that issues will not linger throughout the project. One manager can oversee larger groups and assign junior-level personnel to senior-level workers within each functional department. This option provides an easier path to manage larger groups (e.g., > 100).
Leadership for the second innovative domain is different. The leader is one among equals and can work on the same development questions and provide solutions among peers. Leadership may be based on experience in similar settings, which may help in solving issues. For example, decisions can come in many forms (e.g., one or many solutions), and quick decisions are not always the right ones, since not all information may be known. Secondly, the team should accept such decisions, as going against informed engineers will drive the team apart. Leadership must facilitate the team, including utilizing specialists, so they can execute their tasks and ensure that the team avoids outside distractions to complete tests and simulations in a timely manner.
Combining these two types of leadership is not easy. Still, the goal is the successful delivery of the project. To accomplish this, one principal leader is needed. This can be an individual or a commission with the power to make choices if the domain leaders cannot agree. This leadership should also take charge when different organizations are not satisfied that the goal has been met. It is their task to monitor and resolve challenges that could otherwise hamper the support of one of the project partners. Such challenges may arise when resources are unevenly drawn, or if one project partner is running out of funds or the lead time is slipping. At this point, a principal leader/commission needs full power to address such questions and issues regarding the project.
Takeaways. A project’s progress can be well controlled when functional engineers work with a high degree of certainty. Since project personnel react to uncertainty by solving challenges that arise, one should monitor the project on several fronts:
Moreover, the organizational functionality should be monitored for the different domains, including:
Weekly monitoring can help ensure tuning during execution. This relies on indicators on the organizational functioning where efficiency and innovation should be matched. This active tuning is part of green innovative projects, even if larger parts of such projects are hardly impacted by innovation. Tuning on weekly updated intelligence does the trick. This tuning is needed, especially with EPC firms’ portfolios that contain new and challenging projects. HP
Maurits J. Van Wagenberg is President of IBASC, an engineering management and research firm, and has extensive experience in tracking the health of engineering organizations and of the engineering execution on complex plants. Dr. Van Wagenberg has worked for more than 30 years in the field of improving engineering performance and on project risk analysis. He has performed comparative analysis among organizations and developed ways to fine-tune engineering execution toward specific project needs. Dr. Van Wagenberg has written papers on design performance, owner/EPC relationships, developments in industrial areas, and energy transformation. He completed his PhD in industrial organization from Radboud University in the Netherlands.