Beruflich Dokumente
Kultur Dokumente
A Report of
The Center for Construction Industry Studies
The University of Texas at Austin
Austin, Texas
July 2000
EXECUTIVE SUMMARY
This report is the first of two reports on implementation, improvement
and validation of the Construction Industry Institutes Owner/Contractor
Work Structure (OCWS) process, published in 1997. It covers three case studies
conducted by the Owner/Contractor Organizational Changes Study Team of
the Center for Construction Industry Studies funded by the Alfred P. Sloan
Foundation. The primary purpose of the three case studies was to implement
the OCWS process with the objective of identifying deficiencies in the process,
if any, and developing ways to improve the process. Specifically, the following
tasks were accomplished:
1. Selected owner companies were surveyed to determine the use and
the level of interest in using the OCWS process.
2. Three different applications of the OCWS process in three different
companies were documented and developed into case studies. These
three applications were:
This report describes these tasks and their findings in detail. Chapter 1
provides the background of this study and the methodology adopted for
conducting the research. Chapter 2 provides an overview of the existing OCWS
process and the findings of a survey that examined the extent to which it was
being used in the industry. Chapter 3 includes detailed accounts of the three
case studies and Chapter 4 discusses the findings from those case studies.
Chapter 5 compares the existing OCWS process and the changes that were
deemed necessary based on the knowledge gained from the case studies. It also
provides a concise description of the modified OCWS process. The conclusions
of this research effort are provided in Chapter 6.
ii
TABLE OF CONTENTS
EXECUTIVE SUMMARY ....................................................................................................... i
TABLE OF CONTENTS........................................................................................................iii
LIST OF FIGURES ...................................................................................................................v
LIST OF TABLES ................................................................................................................... vi
CHAPTER 1: BACKGROUND AND SUMMARY OF ACTIVITIES.............................1
1.1 BACKGROUND ................................................................................................................1
1.2 PURPOSE OF THE RESEARCH ..........................................................................................2
1.3 RESEARCH METHODOLOGY ..........................................................................................2
CHAPTER 2: OWNER-CONTRACTOR WORK STRUCTURE PROCESS..................5
2.1 OVERVIEW OF THE OCWS PROCESS .............................................................................5
2.2 SURVEY OF POTENTIAL USERS OF OCWS ..................................................................13
CHAPTER 3: CASE STUDIES .............................................................................................15
3.1 CASE STUDY 1 COMPANY A.....................................................................................15
3.1.1
Methodology .........................................................................................................15
3.1.2
3.1.3
3.1.4
3.1.5
3.1.6
3.1.7
3.1.8
Conclusions ..........................................................................................................29
Background...........................................................................................................30
3.2.2
Company Bs Organization..................................................................................31
3.2.3
iii
3.2.4
3.2.5
Conclusion............................................................................................................36
Background...........................................................................................................38
3.3.2
3.3.3
3.3.4
Workshop Results.................................................................................................47
3.3.5
3.3.6
Post-implementation Review................................................................................51
3.3.7
Conclusions ..........................................................................................................56
5.1.2
5.1.3
5.1.4
5.1.5
5.1.6
5.1.7
5.1.8
5.1.9
iv
LIST OF FIGURES
Figure 1.
Figure 2.
10
Figure 3.
11
Figure 4.
Figure 5.
11
12
Figure 6.
18
Figure 7.
26
Figure 8.
27
Figure 9.
Project Organization
32
34
35
36
42
43
46
48
64
LIST OF TABLES
Table 1.
Table 2.
13
Table 3.
22
Table 4.
33
Table 5.
50
Table 6.
50
Table 7.
Table 8.
OCWS Process
63
67
vi
Background
Organizations respond to the changing business environment by
1.2
1.3
Research Methodology
Among the data collection options considered for research design, were
surveys,
site
interviews,
workshops,
and
telephone
interviews.
Other issues
Another approach emerged out of discussions with the companies
interested in using the OCWS process. This approach was much more time
consuming, since it involved assisting these companies in using the original
OCWS process to develop optimal owner-contractor work structures. It was
not possible to rely on standardized interview instruments for this purpose,
because of the richness of the data to be collected. Therefore, company-specific
proposals were developed with the objective of addressing the companys
3
particular problem using the OCWS process. The methodology used for each
case study was as follows:
Company A: This large oil company invited the OCWS research team to
assist their management team in the evaluation of an owner-contractor
work structure for a proposed strategic alliance with an EngineeringProcurement-Construction contractor. This company had not used the
OCWS process prior to this effort. The process application was carried
out over a period of about two months.
Company B: This chemical company had already used the OCWS
process in the development of a large overseas capital project in Europe.
An interview instrument was used to study this process application in
retrospect, over a four-hour interview.
Company C: This large power company invited the OCWS research
team to assist their management team in evaluating the role of their inhouse capital projects division (CPD) in owner-contractor work
structures at their electricity production facilities. This company had
also not used the OCWS process prior to this effort. The CPD had
traditionally been responsible for developing and implementing capital
projects in the company, and it was felt that CPD needed to change its
role from doing to managing.
The following chapter provides an overview of the OCWS process that
was published by the CII in 1997.
2.1
worksheet was developed to help the owner and the contractor(s) check the
alignment of their work relationships.
Table 1. Capital Project Competencies
NO.
COMPETENCY
Alliance/Partnering
Benchmarking/
Metrics
Business
Development
Commissioning/
Startup/Performance
Testing
Conceptual Cost
Estimating
Constructability
Construction
Construction
Management
Convert Research To
Project/Scale Up
Definitive Cost
Estimating
Detail Design
9
10
11
12
13
Environmental/
Permits
Field Quality Control
14
Financial Approval
15
Legal/Contract
Administration
Lessons Learned
16
17
18
Maintenance &
Operability
Preliminary
Design/Scope
Development
DEFINITION
Utilizing long term relationships with two or more
organizations for the purpose of achieving business
objectives.
Benchmarking - process of assessing and establishing
standards to achieve excellence in performance; metrics
process of measuring progress of project performance against
established standards.
Conversion of owner business needs into project goals.
Front line development, management, and coordination of
operations and/or contractor personnel to proceed toward
and prove commercial operation.
Preparation of estimates at various stages of scope
development for purposes of project option selection.
Incorporating construction knowledge and experience into
project development and execution.
Installation of permanent facility equipment and materials
including all support required to do so.
Management oversight of field construction operations and
startup.
Defining project requirements based on new or improved
products or processes.
Preparation of estimates for purposes of procurement and
project control.
Completion of design drawings and material and equipment
specifications.
Ensuring compliance with environmental laws and
regulations, filing permit applications, and site assessments.
Conducting inspections required to achieve the specified
level of quality.
Development of appropriation requests, risk analysis for
corporate strategy, and project funding approval and
decision-making at owner level.
Contract negotiation and interpretation to include change
order management and dispute resolution.
Knowledge gained through the collection and analysis of
experiences, successful or otherwise, to be applied to future
projects for purpose of improving performance
Incorporating input from maintenance & operations during
project development and detail design phases.
Conceptual preparation of overall project design and scope.
Table 1 (continued).
NO.
COMPETENCY
19
Process/Conceptual
Design
20
Procurement
21
Project Controls
22
Project Management
23
Project Management
Oversight
Project
Planning/Scheduling
24
25
Risk Management
26
Safety
27
28
29
30
Technical Expertise
Total Quality
Management
DEFINITION
Process definition and feasibility analysis congruent with
overall project objectives, including owner proprietary
process know-how.
Corporate procurement buying strategy, contractual
arrangements, and vendor inspections.
Identification and reporting of actual and potential cost and
schedule deviations.
Management and coordination of project development and
execution.
Leadership of owner effort of project development and
execution including decision-making authority.
Determination of project development and execution
strategies such as contracting plan and material management
plan.
Assessment, analysis, planning, and control of risks on a
project.
Ensuring or supporting compliance with operating facility
and OSHA regulations and requirements including
construction safety.
Establishing key project requirements and prioritizing these
requirements to meet the business/developed needs for the
project.
A project-focused process that builds and develops shared
goals, interdependence, trust and commitment and
accountability among project team members.
Specific equipment, systems, or technological specialization.
Provide continuous work process improvement
methodology during project development and execution.
Functions: the activities and tasks that describe the work involved in
performing a competency.
to
the
cost,
schedule
and
operational
compliance
100%
Owner's
Level of
Involvement
0%
Inter-organizational boundary
0%
Contractors'
Level of
Involvement
100%
The
0%
Owner's
Level of
Involvement
Contractors'
Level of
Involvement
Inter-organizational boundary
0%
OP
OP/CI
OL/CP
CP/OI
CP
100%
The
10
CONTRACTOR
COMPETENCY
Inter-organizational boundary
for the competency
OWNER
Evaluate
Sourcing of
Competencies
A2
Identify
Key
Competencies
A11
Evaluate Use
of In-House
Resources
A21
Classify
Capital Program
Competencies
A12
Evaluate Contracting
Community
Resources
A22
Review
for
Completeness
A13
Select Corporate
Sourcing
Approaches
A23
Corporate
Review for
Alignment
A24
Evaluate
Sourcing of
Competencies
A2
Determine
Owner/Contractor
Work Structure
A3
Identify
Key
Competencies
A11
Evaluate Use
of In-House
Resources
A21
Evaluate Potential
Project Execution
Strategy
A31
Classify
Project
Competencies
A12
Evaluate Use
of Contractor
Resources
A22
Document
Owner/Contractor
Work Structure
A32
Review
for
Completeness
A13
Select Best
Sourcing
Approach
A23
Review
for
Alignment
A33
12
existing CII owner/contractor work structure process, this was the first formal
research effort that addressed the issue of optimal work structures on capital
projects.
2.2
the OCWS process since its publication by CII, an owner survey for Phase I
was conducted in the summer of 1998. The objective of this survey was to
determine the use and effectiveness of the OCWS process in assisting owner
companies to establish optimal owner-contractor work relationships for capital
projects. A total of 62 owner companies were contacted, 42 of which were
members of the CII. The survey instrument was a short one-page questionnaire
that asked owner companies questions about the process that they use to
determine work structures with contractors on capital projects. The findings of
this survey are presented in Table 2.
Table 2. Results of the Owner Survey
Companies
Contacted
Respondents
62
23
Responses Received
Users of
Process
Process
CII
Reviewed
Not
OCWS
Though
Reviewed
Process Not Used
3
11
Considering
Pilot
Implementation
Assistance
4*
Interestingly, nine respondents had not even reviewed the process, even
though each CII member company was given a copy as soon as it is published.
The respondents cited a variety of reasons for not using the OCWS
process, including the following:
practicality and ease of use established the premise to undertake a more indepth, exploratory research through case studies. Those companies that were
considering a facilitated pilot implementation were contacted for this purpose.
The following chapter provides detailed accounts of each of the three case
studies, and the findings from each.
14
15
the worksheets that would be completed as part of the process. They were also
given an agenda for the interview, identifying the key areas of discussion.
These key areas were as follows (Patil, 2000):
1. Nature of operations at the plant site
2. Current approach to organizing projects
3. Human resources at the plant site
4. Current owner/contractor arrangements
5. Organizational relationship between the plant and the corporate office
The on-site interviews typically lasted between three and four hours.
This information provided the study team with an understanding of the
owners operations and their expectations for the alliance. This understanding
enabled faster implementation of the OCWS process during the workshop
conducted in the second task.
The workshop took place during one working day, in January 1999. The
agenda for the workshop was as follows:
1. Overview of objectives, expectations and scope
2. Overview of the OCWS work structure process
3. Determination of key competencies and core versus non-core
classification
4. Evaluation of sourcing and work relationships
5. Determination of most appropriate work relationships
6. Discussion of relevance of the OCWS process to the request for proposal
(RFP) to be sent to potential contractors
A discussion of background information and the workshop results are
provided in the following sections. It was proposed that Company A would
include the results of the OCWS process application in their Request For
Proposal as a mechanism to solicit responses from potential contractor(s) on
the work structure for the alliance.
16
3.1.2
17
Project Manager
Project
Clerk(s)
Procurement
Representative
Operations
Representative
QA/QC
Expediting
Purchasing
Maintenance
Representative
Construction
Manager/
Inspector
Project
Engineer
Field Engineer
Field Inspector
S/C Administr.
Safety
Process
Engineer
Controls
Coordinator
Electrical
Engineer
Instrumentation
Engineer
Environmental
Representative
Safety
Representative
Reliability
Representative
Loss Control
Representative
Civil
Engineer
Mech./Piping
Engineer
Cost Engineer(s)
Sched. Engineer(s)
Cost Estimator(s)
changes in the structure of their project teams, although some of the team
members could be drawn from the alliance contractor once the alliance was in
place. The following expectations for the alliance were identified. The
expectations were divided into three categories Project level, Capital Program
level and Relationship level. The project level expectations from the alliance
were identified as follows:
1. Quality design, including low rework due to engineering efforts and
effective turnover and start-up.
2. Meeting business objectives.
3. Meeting or exceeding stretch cost and schedule targets.
4. Disciplined scope management.
5. Innovative and creative designs to meet business needs.
6. Use of CII Best Practices and Value Improvement Practices.
18
20
3.1.4.2 Plant 2
The capital projects group at Plant 2 has an average annual capital
budget of $32 million and is expected to increase over the next five years.
Nearly 90 percent of the capital project budget is typically outsourced.
Individual capital projects typically range from $25,000 to $40 million, with
about 50 projects undertaken each year. Project personnel at this site include 8
project managers, 22 project engineers, 5 process technicians, 3 reliability
technicians and 9 inspectors. Although the projects group at this facility has
had no experience with a formal alliance in the past, they have used
continuously renewable agreements with some contractors in the past.
3.1.4.3 Plant 3
Plant 3 has an annual capital budget of $60 million, more than 90
percent of which is outsourced. Individual capital projects typically range from
$25,000 to $30 million, with about 50 projects undertaken each year. Project
personnel at this site include 5 project managers, 12 project engineers, 3
construction representatives, 1 safety representative, 1 environmental
representative and 8 draftsmen. Although the projects group at this facility has
had no experience with a formal alliance in the past, they have had outline
agreements (similar to evergreen agreements) with some contractors and
strategic sourcing agreements with suppliers (three years or evergreen with
annual review).
3.1.4.4 Summary
A comparison of the key characteristics of the organizations at the three
refinery sites is shown in Table 3.
21
Plant 1
320,000 bpd
$120 million
Plant 2
170,000 bpd
$ 32 million
Plant 3
160,000 bpd
$ 60 million
12
10
9
6
Terminated
one alliance
26
9
12
Evergreen
Agreements
5
12
3
10
Evergreen
Agreements
The capital projects organizations at each of the plant sites include two
groups. One group is responsible for large projects that justify the allocation of
dedicated staff, and the other group is responsible for developing and
implementing smaller projects. These groups are organized within a
department called the Technical Services and Engineering department. The
capital project development and execution process is quite similar across the
three facilities. It involves the following key steps:
1. Engineering work request
2. Project study basis
3. Project study
4. Project design basis
5. Detailed engineering
6. Procurement
7. Construction packages
8. Construction
9. Commissioning and start-up
10. Operations acceptance
11. Financial closeout
12. Project performance evaluation
22
The owner does not have a centralized engineering group at this time.
As a part of the strategic plan, a new Corporate Engineering and Projects (CEP)
group is proposed, to perform the necessary coordination and oversight after
the alliance is in place. An important issue to be resolved by the CEP will be a
scheme for the simultaneous utilization of alliance contractor resources by each
of the three plants for their respective projects.
3.1.5 Preparation for the OCWS Workshop
Information obtained during the site interviews was synthesized in
preparation for the OCWS workshop. The CII list of 30 competencies (see Table
1) was used as a starting point for competency evaluation and classification in
the workshop. The existing competency listing was modified and additional
competencies were defined, based on feedback from the site visits. As a result,
the number of capital project competencies used in the workshop increased to
38. The CII competency list was also re-organized from the existing
alphabetical list of competencies, to four categories of competencies, namely
Project Management Competencies, Engineering and Project Competencies,
Project Functional Competencies and Project Business Planning Competencies.
This was considered necessary to enable the stakeholders to better relate to the
definitions of each individual competency. Competencies that were considered
not applicable were deleted or modified. Competencies deleted or modified
included the ones involving conversion of research to project/scale up,
constructability, and definitive cost estimating. The first of the three was not
relevant to the owners business. Constructability was not separately identified
as a competency, since it is included in the value improvement practices (VIPs)
adopted by the company. Definitive cost estimating was replaced by control
cost estimating. In all, eleven competencies were redefined, some of which
were new and others were spin-offs of the original CII competencies. The
additional competencies were defined as follows:
23
25
WORK STRUCTURE
No.
COMPETENCY
CORE
NONCORE
CP
COMMENTS
Project Management
Competencies
2 Conceptual Cost
Estimating: Preparation of
estimates at various stages
of scope development
through project option
selection.
3 Control Cost Estimating:
Preparation of estimates for
purposes of procurement
and project control.
4 Project Controls:
Identification and reporting
of actual and potential cost
and schedule deviations.
26
3.1.7
32%
28%
28%
24%
18%
13%
10%
10%
5%
OP
OP/CI
OL/CP
CP/OI
CP
competencies, which are either owner performed or owner led. Since the
objective of the workshop was to develop the work structure for the company
as a whole, the impact of target work relationships on the human resources at
each plant site was not evaluated.
While assigning work relationships to each of the competencies, the
workshop participants acknowledged the need to clearly define what the
input would be in case of OP/CI and CP/OI relationships. An attempt was
made to document the inputs in the comments section on the worksheets.
One way to address this problem is by defining the functions involved in
carrying out each competency. Adequately defining the functions and,
perhaps, the associated critical capabilities prior to the use of OCWS
worksheets would, therefore, be a critical requirement for potentially
successful use of the OCWS process.
After completing the application of the process, it was felt that the
rationale behind core/non-core classification of competencies and subsequent
work relationship assignments should have been documented in some form.
This was accomplished by first identifying the factors that drive core versus
non-core decisions. The following factors were identified and agreed upon:
1. Level of ownership and accountability.
2. Risk of poor performance affecting the ability to meet project objectives.
3. Achievement of employee morale.
4. Extent of experience that the owner may have, and contractor may not
have.
5. Protection of owners business interests.
6. Degree of financial stake involved and legal liability.
7. Certainty of business unit buy-in.
8. Long term impact of capital project stakeholders contribution.
9. Implications of cost trade-offs.
28
Conclusions
This study provided the OCWS study team with a valuable opportunity
to test the CII OCWS process in a practical setting. Based on this experience,
the following conclusions were drawn:
1. The process provides a useful approach for generating a discussion on
core/non-core competencies, appropriate sourcing approaches, and
work relationships for project competencies.
2. The process serves as an effective internal alignment tool with respect to
competencies, and the work relationships assigned to competencies,
when several entities are involved in capital project execution.
3. The results of the process can be used to solicit information from
potential contractors on how they can best meet the non-core
competency requirements of the owner organization as well as
providing input for core competencies.
4. Overall, the process is a useful tool in the development and execution of
capital projects.
This exercise also identified several areas that have the potential for
improving the OCWS process. The specific elements of the process that can be
improved upon are as follows:
1. The current design of the process order could be improved by making
core/non-core decisions and work structure assignments concurrently
for each competency. Although this is different from the existing
process, it is deemed necessary since part of the discussion pertaining to
core/non-core decisions seems to be repeated during the discussion on
work relationships. Moreover, from the point of view of understanding
the process, the project management personnel were better able to relate
29
3.2
the owner used the OCWS process in conjunction with the contractor, after the
project development phase was completed and before project execution
commenced. In this case, Company B worked with a new contractor with
whom the company had not previously worked. When the contractor was
brought in, the owner had already completed Process & Instrumentation
Diagram work. The key objectives of the application of this OCWS process
were as follows:
Ensure that the owner and the contractor were well aligned and did not
work at odds.
A negotiated target price contract with a bonus/penalty clause was
used, owing to the nature of the project and the prevailing contracting
practices in that part of Europe. The contractors work began in early 1997, and
manufacturing from the new facility began in late 1998.
3.2.2 Company Bs Organization
Company B is a large chemical company in North America, with
worldwide operations. The owners central engineering organization is located
in North America, with closely integrated working relationships between the
plants, central engineering, and their contractors. Four phases that are typically
identified in the life cycle of a project are project development, design,
construction and start-up. The contractor is primarily involved in the design
and construction phases. The focus of Company Bs engineering organization
is on total installed cost, as opposed to engineering man-hour costs. Therefore,
contractors incentives are generally tied to the total installed cost.
31
3.2.3
Project Organization
Company Bs project organization for this project was primarily
Owner
Project Manager
(Acrylic Emulsion Expansion Project)
Project
Engineer
1
Project
Engineer
2
Central
Engineering
(USA)
Process Control
Engineer
Contractor
Project Manager
Discipline
Engineers
Contracts
Construction
Management
Procurement
Safety
32
Cost estimating
Process design
Project Management
Reliability
Civil/structural
Construction management
Detailed design services
Planning/scheduling
relevant
because
an
existing
process
was
being
used.
Similarly,
No.
Competency
5
6
Core
NonCore
x
x
x
x x
x
IBL
OBL
responsible for the IBL detailed design. The OBL detailed design was non-core.
Legal/Contract Administration was considered non-core, excluding the
engineering contracts. A partial project assignment worksheet that was used to
assign work relationships to each of the project competencies is shown in
Figure 11.
OP
OP/CI
OL/CP
CP/OI
CP
Benchmarking/Metrics
Construction
Construction Management
XIBL
Detail Design
Technical Expertise
X
XOBL
X
10
8
4
1
OP
OP/CI
OL/CP
CP/OI
CP
36
work
relationships
based
on
project-specific
circumstances.
2. The process provides an excellent tool for communication when project
participants come from diverse backgrounds and their understanding of
the project development and execution process differs significantly.
Some potential changes/improvements in the OCWS process that were
identified in this study were as follows:
1. Addition of a step to define the support role in a relationship (the
Input in OP/CI or CP/OI) would add value to the process.
2. Addition of a step to determine estimated owner work-hours for each
competency based on the work relationship assigned to the competency.
3. Use of the alignment worksheet for annual review at the capital
program level and for a post-completion review at the project level.
4. Development of metrics to test the effectiveness of the OCWS process.
5. Reduction in number of phases in the project work structure worksheet
to three key phases: development, detail design/construction and startup.
3.3
company was more involved than necessary in the doing part of construction
than managing part of it. Therefore, management decided to restructure the
capital projects division, with the objective of focussing on the companys core
business of electricity production. The product of this effort provided a basis
for restructuring their capital projects division (CPD), intended to offer project
management services to all plant sites. The OCWS study team assisted
Company Cs team in using the process to accomplish this goal. The effort was
streamlined by a champion of the process on Company Cs team, who
understood the company and the OCWS process very well, and took keen
interest in implementing the process.
The following sections provide a summary of the OCWS process
application and the recommended path forward.
3.3.1 Background
This study was conducted at a time when Company C was in a state of
transition, with a long-term objective of adapting to a more competitive
business environment by refocusing on its core business of electricity
production (EP). Company C owns over 50 hydroelectric power plants and
several fossil fuel based power plants, with a total installed capacity of 32,000
megawatts. Depending on the size of the plant, a plant manager or plant
superintendent is responsible for managing anywhere from one to five plants.
The capital projects at each plant typically consist of major repair work
focused on facility improvements in the plants and increased production
capacity. The capital project phases identified in the EP project management
process model were: identification of opportunity, project initiation, project
definition and project execution. Although construction work on large projects
was normally outsourced to contractors, the CPD had traditionally played a
major role in construction activities on plant sites and the CPD was typically
accountable for managing the execution of the project on behalf of the plants.
38
However, the plants could choose to execute a project with plant staff. The
CPD would not own the project, though corporate policy dictates that CPD is
the plants only alternative when seeking outside project management
assistance for managing capital projects.
According to Company Cs business plan, the CPD is expected to play
an increasingly significant role in the early phases of capital projects in the
future. In the project initiation phase, the CPD would perform work
predominantly with their staff. In the project definition phase, this group
would still perform much of the work. However, the extent of outsourcing
portions of the work to external contractors or consultants will be much greater
than the initiation phase. In the project execution phase, work would be
predominantly outsourced and CPD would manage the work executed by
external resources, in the capacity of the owners representative.
From an annual capital program budget of approximately $300 million,
Company C expects a progressive reduction in the program by about 50
percent over three years. In line with these and other goals defined below, the
new CPD organization would be in-place after a transition period of two years.
An overall objective of the exercise was, therefore, to reduce the utilitys
dependence on its own personnel for activities that are outside the core
business of electricity production. The specific goals of the sourcing strategy
for the immediate future were defined as follows:
Transfer
primary
responsibility
of
Engineering,
Procurement,
41
100%
0%
Owner's
Level of
Involvement
Contractors'
Level of
Involvement
Inter-organizational boundary
0%
CPDP
CPDP/CI
CPDL/CP
CP/CPDI
CP
100%
42
Non-core to CPD
Electricity Production
(EP) Plants
Contractors (C)
Capital Projects
Division (CPD)
The
The
contractor
performs
most
functions
using
the
contractors work process with input from CPD. The majority of the
work is performed using contractor resources.
4b. EPP/CPDI: EP (the plants) performs most functions using a work
process developed by the plant, with input from CPD. The majority of
the work is performed using plant resources.
43
45
4 Commissioning/ Startup/
Performance Testing: Front line
development, management and
coordination of operations and/or
contractor personnel to proceed
toward and prove commercial
operation.
CORE/
NON-CORE
Core
PMD-CONTRACTOR RELATIONSHIP
CORE
NON-CORE
CPD CPDP/CI CPDL/CP CP/CPDI CP
COMMENTS
No "as is"
relationship for this
competency.
Core
Non-core
Non-core
Business
Development
provides resources
and work
processes, CPD
Provides the
necessary input.
Core to the Plant
Groups and stations
because they
provide the staff.
46
1. Define the supporting roles of Input and Lead in OP/CI, OL/CP and
CP/OI type of relationships, in terms of the functions that are involved
in providing the Input or the Lead.
2. Estimate CPD resources in terms of Full-Time-Equivalents required for
performing each competency.
3. Use the Alignment Worksheet for a periodic check of the alignment of
work relationships.
A summary of workshop results is provided in the following section.
3.3.4
Workshop Results
A summary of the results of the OCWS process application to the CPD
is shown in Figure 16. The histogram shows a movement from the owner end
to the contractor end of the CPD-contractor work relationship continuum
illustrated earlier in Figure 13. This was consistent with CPDs objective of
focusing on Company Cs core business by outsourcing non-core capital
project competencies.
An important observation that was critical for correct interpretation of
the results and their potential implications was that the increased outsourcing
of capital projects competencies is predominantly for those competencies that
require substantially higher resources. These included non-core competencies
such as detailed design, construction, construction management, and field
quality control. The resource implications for CPD were clearly in the direction
of reduced numbers of in-house personnel.
47
41%
37%
25%
23%
17%
14%
16%
13%
9%
6%
CPDP
CPDP/CI
CPDL/CP
CP/CPDI
CP
Target relationships
the workshop to classify the competencies into core and non-core. The drivers
for core competency decisions were displayed on a board to help team
members remain focused on the rationale behind classifying the competencies
as core. The CPD proposed to deviate from its traditional style of operation for
detailed
design,
definitive
cost
estimating,
construction,
construction
49
EP
(Plants)
1.
2.
3.
4.
5.
6.
7.
Business
development
Commissioning/
Startup/
Performance Testing
Community/public
affairs
Financial approval
Maintenance/
operability
Project investment
management
Setting project goals,
objectives and
priorities
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
Outside Contractors
Alliance management
Benchmarking/Metrics
Conceptual cost estimating
Contract management
Convert new technology to
project/scale up
Divisional management
Document and record
management
Engineering oversight
Labor relations
Lessons learned
Preliminary design
Process design
Project management
Project
planning/scheduling
Risk management
Safety and Health
Team building
1.
2.
3.
Constructability
Construction
Construction
Management
4. Detail design
5. Definitive cost
estimating
6. Environmental
compliance
7. Field quality control
8. Procurement
9. Project control
10. Technical expertise
11. Total Quality
Management
CPDP/CI
CPDL/CP
EPP/CPDI
CP/CPDI
CP
Post-implementation Review
Company Cs application of the OCWS process was the most extensive
effort among the three case studies, since the implementation team made every
effort to use all elements of the process. The results of the process
implementation were presented to their management, and were also made
available to the OCWS study team. The OCWS study team was also invited for
a post-implementation review in which lessons learned from the effort were
discussed. The first part of this discussion focussed on lessons learned from
OCWS process implementation, and the second part focussed on strategies to
update the existing CII OCWS implementation resource. The review served as
an excellent opportunity to generate ideas on how best to use the process in
future applications.
3.3.6.1 Lessons Learned Review
The objectives of the lessons learned review were to discuss the overall
application of the process at Company C to determine if it was successful or
otherwise, and to highlight the benefits and difficulties in using each
worksheet or step in the process. In addition to the OCWS study team, the
51
Director of CPD, the champion of the process in Company C and three other
individuals representing various groups in the organization attended the
meeting.
Overall, the attendees agreed that the application of the OCWS process
was a successful and worthwhile effort for Company C. The only area where
the implementation team had encountered significant problems was in the
estimation of full-time equivalents for each competency. It was not possible for
the team to estimate human resources at the level of each competency, since
the company was not set up to collect work-hours or work-days for each
competency. Therefore, no historical data was available for such estimates.
Other than this problem, the team agreed that the process constituted an
effective tool to conduct a gap analysis between where the company is and
where it wants to be. It was also suggested that the process could serve as a
vehicle to convey information to contractors. Some attendees did, however,
feel that the OCWS project process would be more amenable to large projects
or to ones that are developed and executed through an alliance contractor. The
other lessons learned regarding the application of the process are described in
the section on conclusions.
The majority of the discussion in the post-implementation review
focussed on the benefits and difficulties in using each worksheet and the
corresponding steps in the process. The team was of the opinion that
computerizing the worksheets or the entire logic of the process and the
worksheets would eliminate much of the repetition in updating the worksheets
and making changes. It would also reduce the possibility of the accumulation
of errors as one moves forward with implementation. The key findings specific
to each step and each worksheet are as follows:
1. Competency Definition: Defining competencies on the Competency
Definition Worksheet facilitates discussion and understanding of what
is required for successfully developing and executing capital projects.
52
(ii)
(iii)
(iv)
alignment
immediately
54
after
completing
process
55
Conclusions
This application of the OCWS process within the capital projects
common
language
that
56
facilitates
an
understanding
of
organization. The case studies also underscored the need to modify the process
as necessary to include the additional tasks that were carried out during
Company Cs implementation. The following chapter discusses the key
findings from the case studies.
58
dialogue
on
the
factors
that
drive
competency
61
62
4
5
63
Competency
Functions
Capabilities
Competency
PROJECT LEVEL
APPLICATION
ESTIMATE
OWNER RESOURCES
CORPORATE
LEVEL
APPLICATION
FULL-TIME-EQUIVALENTS WORKSHEET
PROJECT LEVEL
APPLICATION
EVALUATE PROJECT
EXECUTION STRATEGY
Competency
Project Phases
DETERMINE PROJECT
PHASE-WISE WORK
RELATIONSHIPS
ALIGNMENT WORKSHEET
OWNER-CONTRACTOR
WORK STRUCTURE
1
1
1
1
2
2
2
2
3
3
3
3
4
4
4
4
64
5.1
understanding
of
competencies
and
the
associated
work
66
Environmental
compliance/
Permitting
5.1.2
Functions
Capabilities
1. Determine estimate
basis (scope) for facility
components
2. Review estimates with
team
3. Determine historical
basis
4. Convert estimate basis
to costs
5. Check key cost ratios
1. Determine what
permits are required
and when
2. Identify regulatory
agencies and establish
communication
channels with them
3. Acquire and maintain
knowledge of
requirements
4. Conduct
environmental
assessments
67
5.1.3
objectives of the owner company, and the capital project(s) program. The
drivers that lead to classifying a competency as core to the owner are evaluated
in this step. Typically, such drivers include: i) considerations of proprietary
technology; ii) how closely the competency relates to the owners core
business; iii) owners ability to sustain competitive advantage; iv) risk and
liability considerations; and v) the cost, schedule and quality implications.
5.1.4
69
5.1.8
step. It is only necessary to carry out this step at the project level. It enables the
user to incorporate the time element into the project level process, by making
changes in work relationships where necessary, during the project life cycle. It
is important to consider the impact of the potential project execution strategy
while deciding on an optimal owner-contractor work relationship for various
phases of a capital project. Project execution strategy consists of three major
elements. They are the organizational relationship (one-off, repeat business,
alliance/partner), project delivery approach (design-build, design-bid-build,
single or multiple contractors) and the type of contract (lump-sum, cost plus
incentive/fee). The decision regarding project execution strategy is based on
the relevant company policies and procedures, strategic objectives of the
capital program, project scope, project objectives and project success factors.
The Project Work Structure Worksheet is completed in this step, based on the
Competency Classification Worksheet and the Work Relationship Assignment
Worksheet, and the project execution strategy. The completed Worksheet
serves as a framework for assigning roles and responsibilities to individual
project team members in the project execution plan. The assignment of phasewise work relationships must, therefore, take into consideration that one
individual/team may perform several competencies that are related, or require
the same skill-base.
5.1.9
development, and at the completion of the project, as part of the postcompletion project evaluation. The alignment index is calculated separately by
each stakeholder, by completing the Alignment Worksheet. The variation in
the index calculated by each stakeholder gives an indication of the agreement
or disagreement among the stakeholders, on the sourcing and the work
relationships that were used. This information constitutes valuable input for
future determination of competency sourcing and work relationship decisions.
5.2
71
72
CHAPTER 6: CONCLUSIONS
The following conclusions of the case study phase of the research are
indicative of the readiness of the modified OCWS process for a detailed
validation, to be performed in a subsequent research effort.
1. The process provides a useful mechanism for generating discussions on
strategic classification of capital project competencies as core and noncore, and for determining the most appropriate sourcing strategy and
work relationship for each competency.
2. In order to increase the effectiveness of process implementation, it is
important to define and document the Input and Lead roles in
terms of functions and capabilities required of the organization that
provides the input or lead.
3. The process works very well for creating a common language based on
project competencies, functions and critical capabilities. Therefore, it
provides an excellent tool for communication when the project
participants come from diverse backgrounds and their understanding of
project development and execution process differs significantly.
4. The process is particularly suitable for assisting management when
structuring a capital projects organization, since it helps decisionmakers conduct a review of the organizations competencies and align
them with the strategic objectives of the company and the business
units.
5. The process provides a mechanism for assessing alignment within the
owner organization, and also between the owner and other
stakeholders.
6. The effort required for successful implementation of the process varies
depending on the expectations of the user from each implementation.
73
74
REFERENCES
Gibson, G.E., Davis-Blake, A., Broschak, J.P., Rodriguez, F.J. April 1999.
Owner/Contractor Organizational Changes: Phase II Report, Center for
Construction Industry Studies, University of Texas at Austin, Report 1.
Construction Industry Institute (CII). April 1997. Owner/Contractor Work
Structure Process Handbook. CII Implementation Resource 111-2.
Drucker, Peter F. September-October 1994. The Theory of the Business.
Harvard Business Review.
Patil, Shekhar S. August 2000. Optimal Owner Contractor Relationships Based
on Capital Project Competencies. Doctoral dissertation (In Print), Texas
A&M University.
Sullivan, G.R., Yupari, M.A. and Anderson, S.D. 1996. Owner/Contractor
Work Structure: A Process Approach. Report to the Construction
Industry Institute, University of Texas at Austin, Research Report 11111.
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