IMPORTANCE OF COMMUNICATION IN EPC
PROJECT MANAGEMENT
INTRODUCTION:
The name EPC stands for Engineering
(design- consisting of various disciplines), Procurement and Construction.
Process discipline, the background of which is chemical, is usually takes the
lead role among the disciplines. Piping and Equipment disciplines are
mechanical based. Electrical & Instrument are from Electronics and Electrical.
Civil is supporting role to Piping and Equipment.
The process outlines a plant and
input data to other disciplines (Piping, Equipment, Instrument and Electrical),
such as Design basis, Process Flow Diagram (PFD), Process Datasheet, Equipment List,
Piping and Instrumentation Diagram (P&ID) and Utility Flow Diagram (UFD).
MATRIX ORGANISATION:
Project 1
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Project 2
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Project 3
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Project 4
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Project N
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Engineering
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-----------------------------------------------------------~------------>
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Process
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Piping
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Civil
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Equipment
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Instrument
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Electrical
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Procurement
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Construction
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v
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The EPC organization operates by
matrix system. The above chart shows that the projects (horizontal) and
functional departments (vertical) are running in parallel. Practically, one
project team may handle a few projects under the same client. Engineering
disciplines serve all projects, providing projects with drawings,
specifications, bill of material / quantities, technical bid evaluations, etc.,
and attending to site problems. They are EPC’s main work force and also the
main source of revenue. Therefore, it is vital to set budget and control
man-hours spent.
Procurement is to get equipment and
bulk material supplier, negotiating cost and shipment. Construction deals with
sub-contractors, site management, field progress monitoring safety and QC. The
project functions as the center point to control the cost, coordinate the
engineering disciplines, procurement and construction and thereby drive the
entire project forward.
EPC
CONTRACTING:
It is a common form
of contracting arrangement within the construction industry. Under an EPC
contract, the contractor will design the installation, procure the necessary
materials and construct it, either through own labor or by subcontracting part
of the work. The contract has to consider the various stages and the work flow
of the project.
The following chart illustrates the overall work flow of an oil
and gas EPC company.
Fig.1: Work Flow in EPC Projects
The main advantage
of EPC is to overlap the design, procurement and construction stages and
therefore reduce total project duration. It also caters to the client’s
on-going changes during the project life cycle. EPC integrates the discipline’s
specialities. All resources are under the project and revenue is also generated
from the project. Information in an EPC company may be fragmented among
disciplines and departments. It relies heavily on disciplines and other
departments to support its operation. Therefore, communication among the
project, disciplines and departments are very important.
AREAS WHERE PROPER
COMMUNICATION CAN MAKE BIG POSITIVE IMPACTS:
EPC
projects are facing serious problems like crew idleness, rework and management
dilemma which lead to cost overrun and schedule delay.
Let us examine major factors contributing to schedule delay
and cost overrun in EPC Project & how the best communication practices can
make big impacts:
Ø Material and equipment-procurement,
transportation – well defined scope need to be properly communicated & need
to ensure that the receiver has understood it clearly & complying with the
requirements.
Ø Lack of EPC contractor’s experience – at
the time of selection, criteria for selection to be well defined, communicated
& monitored thoroughly. This can avoid misrepresentation & wrong
selection.
Ø Poor coordination and communication between
Client & within the organization, contractor and suppliers resulting to
late approvals – Well defined Communication Management Plan to be implemented
within the organization at all levels & need to ensure that the plan is
strictly followed.
Ø Poor planning techniques, unrealistic
project scheduling and controlling – Need to ensure that all inputs need at the
time of development of plan are clearly communicated, understood & brought
in to the plan. Consistent monitoring is another aspect need to be looked in
to.
Ø Lack of top management commitment – Top
management commitment is most important thing. Without this no plan will work
to its full potential.
Ø Wrong attitude & egoism – this badly
impacts the two-way communication flow between the team members & team
leader resulting in delay, conflicts, confusion and low morale & high
attrition levels.
Ø Employment of incompetent personnel at key
positions – This can create lot of problems like misguidance, wrong
interpretation of information, poor communication & wrong communication
with the team & client. This will also lead to low morale level of the team
members that may result in attrition of the best available resources.
Ø Interpretation of local codes, statutory requirements,
hiring of supervisory personnel, hiring of local and global engineering
services - demands timely & effective communication.
Ø
Vigilant
coordination, follow-up & communication are necessary to reduce chances of
errors at site.
Ø
Progress Review
Meetings – All relevant queries, clarifications must be raised, presented &
addressed in such a manner the concerned persons will get a clear picture in terms of what will be the forward path
& how to complete the task in time.
Ø
Health, Safety
& Environment –HSE Management – should get paramount importance while
planning & execution of the project, especially when the project location
is remote where the health care facilities are less. Proper communication
protocol must be set & monitored. All site personnel should have proper
communication devices to contact with the main control team to take care of any
eventualities. Awareness & training another important aspect that need to
be taken care off.
Some of the above cases are examples poor project management
practices and need to be addressed for controlling cost overrun and schedule
delay. Adoption of proven & the best communication management practices
will play a key role in addressing them effectively.
COMMUNICATION
& CONTRACT MANAGEMENT:
An important factor that can affect the EPCC's performance is
cost variation - An EPC contract normally has no price escalation clause. So,
any variation in prices from the contract stage is on the account of the
contractor. In an EPC contract, cost variation can mainly occur due to scope
change. Change in scope of work either addition or omission will result in cost
variation. This must be properly communicated through timely variation orders
and claims.
The following points will be helpful to the owner for
monitoring the potential contract issues:
Ø Define & communicate guarantee clauses.
Ø Define & communicate scope and quality requirements.
Ø Define & communicate milestones
meticulously.
Ø Define & communicate the LD/penalty
clauses.
Ø Payment terms must be very specific &
effectively communicated.
Ø Terms and conditions regarding quality,
guarantee etc with various subcontractors must be similar to the one demanded
by owner.
HOW TO IMPROVE PERFORMANCE, MITIGATE & AVOID
PROBLEMS/RISKS:
Problems & risks outlined above can be avoided or
mitigated by implementing the following measures coupled with the best
communication management practices:
Ø Adopting the best Subcontractor management
and control mechanisms.
Ø Lesson learnt practice – maintaining a
well-built database of lessons learned from all previous projects, revisiting
them frequently during the different phases of new projects, avoiding wrong
practices.
Ø Involvement
of construction and operational personnel during conceptual phase & FEED
phase.
Ø Better interface management and control.
Ø Integrated
team management.
Ø Real-time reaction/response.
Ø Dispute management.
Ø Risk management (Identification,
Measurement & Control).
Ø Stakeholder management.
Ø Continuous and dynamic detailed planning
and monitoring during execution.
Ø Being proactive to issues.
Ø Incentive approach.
Ø Clear roles and responsibilities.
CONCLUSION:
EPC
projects are highly schedule driven where phases are overlapped to complete the
project as early as possible. Moreover, these EPC projects are massive, utilize
high skill and well trained employees, acquires complex and complicated
methodology/technology, needs fast information flow between different phases
and close collaboration of multidiscipline as well.
The owner must clearly define the project in terms of scope,
cost, quality & schedule as any changes at a later stage will be costly. The
selection of right EPC contractor & third party will be detrimental is
timely completion of the project.
EPC contractor is liable for completing the project according
to the conditions mentioned in the contract. The EPC contractor, in turn, may
hire several sub-contractors or sub-vendors to complete different portions of
the project. The major risk for owner in such a contract is delay by the
contractor. EPC contractor takes all the risk and attempts to complete the
project at the earliest. The involvement of various agencies and
characteristics makes an EPC contract a complex phenomenon.
In such cases, coordination among the contractors &
subcontractors should be of paramount importance & focus. The owner or the
project consultant has to continuously monitor and maintain the progress of the
work and clear up differences or coordination issues, if any. This underscores
the requirement of effective communication to ensure the success of the
project.
NOTES:
1.
EPC – Engineering Procurement & Construction
2.
FEED – Front End Engineering & Design
3.
FA –For Approval
4.
FC – For Construction
5.
BM – Bill of Materials
6.
BQ – Bill of Quantities
7.
PO – Purchase Order
8.
FOB – Freight on Board
9.
QC – Quality Control
REFERENCES:
2.
Problems and Practices in EPC Project Management: A case
study on Petrochemical & Oil and Gas EPC Projects in Thailand – by Raman
Awale
3.
The Importance of Communication in Project Management – By
Simon Buehring (http://www.projectsmart.co.uk)
4.
Communication – the Project Life Blood
(http://www.maxwideman.com)
Profile:
PS
Babu, B.Tech, MIIChE, PMP, MIE, CEng experienced
in construction, design & manufacturing projects in India & abroad.
Currently working as a Planning Engineer with Hyundai Heavy Industries, Abu
Dhabi, UAE, for their Oil & Gas EPC projects.
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